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FINANCING CAR LOANS
Do you think 0%
financing means you’re already saving all you can? Is 0% financing,
or lower interest from the dealership, always going to save you
money? Actually even if you qualify for the 0% rate, you can still
save even more money by negotiating your vehicle’s final price and by
taking advantage of any additional offers. If you are prepared with
alternative financing options before you walk through the showroom door, you’re
already ahead of the game. Watch your bottom line and don’t leave
money on the table.
What does 0%
Financing really mean? In most cases, when
you choose to take advantage of low or 0% interest from the dealership, you
give up the option of a rebate. Choosing the rebate instead and
adding it to your down payment can make credit union financing a much
better deal by reducing the amount financed and reducing the total amount
you pay for the vehicle. If you are like most people, you trade in
your vehicle before the term of your loan is up. A rebate is all up front and you receive the full benefit
immediately. With 0%, it takes years before you realize the full
savings.
Although we agree
that sometimes 0% financing can be a good deal, credit unions believe that
consumers are not being informed of all the hidden costs involved with
dealer options. Members should be careful to read the fine print and
make sure they completely understand all the details of dealer financing
vs. credit union lending options.
Sometimes dealer
financing is not a “simple interest” loan, so be sure to ask about this if
you are financing your vehicle with a dealership. Also, many dealer
financing options include large late fee penalties for payments not made on
time, and they can even raise your interest rate if you make a late
payment.
Dealers’ 0%
financing and low rate loans are almost always available only on
slower-selling models, which usually have a lower resale value.
Dealer financing plans are also limited to dealer stock. Unwanted
options can add 25% to 30% to the sticker price of a car.
What is a Loan
Processing, Loan Origination Fee, Document Processing Fee, or Loan
Application Fee? These
are payments associated with the establishment of an account at a bank or
other company providing services for the processing associated with taking
out a loan. When members bring in the paper work to refinance loans
originated at the dealership, we have noticed these fees listed in the fine
print of their loan contract. We have seen fees of 2% of the total
purchase price. These fees are added to the total cost of the amount
financed. In other words, this amount is being added on to the purchase
price of the vehicle.
As a credit union
member you are already aware of the many benefits your credit union offers,
including low interest rate auto loans and great service that is tailored
to your needs. By researching your auto financing options before you visit
a dealership, you may find that using your credit union's low percentage
rate could be your best deal!
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