When a Rebate May Be Better Than Dealer Financing


Shopping for a new car? If you're in the market and have decided to purchase rather than lease, you'll find several financing options. More and more dealers are offering low-rate loans or cash-back rebates around $2,000. While it's nice to have choices, they can often be downright confusing--and expensive. In the final analysis, you may be better off with auto financing from Provident.

Did You Know?

  • The low rates most dealers advertise are for short-term loans. For example, one dealer offers 1.9% financing, but that's only available on two-year loans. A new $20,000 car with a $2,000 down payment (10% down) will require financing $18,000. For a two-year loan, this translates to an astounding $765 monthly payment.
  • The same dealer offers more options, which become less attractive as the loan term lengthens. The dealer's three-year loan has a 4.9% rate, while its four-year loan has a 5.9% rate, and its five-year loan has a 6.9% rate.
  • Financing $18,000 on your $20,000 car at the dealer's 6.9% rate for five years results in a monthly payment of $356.

Provident Credit Union Offers New & Used Auto Loans as Low as 3.375% APR 1

Now, use that same scenario as above with financing from Provident: a $20,000 car with a $2,000 down payment, but now with Provident's low rate of 3.375%. Your payment on this $18,000 loan for five years would be $327 (a savings of $29 a month, compared to the dealer scenario above).2 Plus, this may allow you to take advantage of a dealer rebate that could take care of your down payment.

The Rebate Saves You Even More!

If there's a rebate offer, we say "take it!" With Provident's low auto loan rates, you'll not only receive a break on the price of your vehicle, but also the combination of the low rate and lower purchase price will make your monthly payment more affordable. Our range of terms--up to 84 months--gives you the flexibility to choose the length of your loan to determine a payment that will fit your budget. Plus, the lower purchase price you get from the rebate means less sales tax, giving you even more savings.

Even if the dealer offers zero percent financing for 3 years and 2.9% for 5 years, look at how taking the rebate and a Provident Credit Union loan can save you money on your payment and on your total cost on a $20,000 vehicle:

Annual Percentage Rate (APR) Manuf. Rebate Vehicle Price after Rebate Loan Term in months Monthly Payments3 Total Repayment3
Manufacturer's 0% $0 $20,000 36 $556 $20,000
Provident's 3.375%$3000$17,00036$497$17,901
Savings $ 59 $ 2,099
Manufacturer's 2.9% $0 $20,000 60 $358 $21,509
Provident's 3.375%$3000$17,00060$308$18,503
Savings $ 50 $ 3,006

Regardless of the route you take, consider the following "hidden costs" in dealer financing options:

  • First: Dealer's advertised low-rate loans are typically only available on slower-selling models. These cars may have lower resale values.
  • Second: Dealer's advertised low-rate loans can have larger prepayment penalties and can require larger down payments.
  • Third: Dealer financing plans usually are limited to dealer stock. That means you may have to sacrifice the color, style, and/or options you want. Unwanted options can add 25% to 30% to the sticker price of your car.
  • Fourth: You may leave the dealership thinking you have one rate, and when you get your loan coupon book the rate may be different. Always check your written contract to see what your actual rate is.

Let Provident Help

Prior to buying your new vehicle, have your loan pre-approved with us first and check our current rates. Ask the Provident Credit Union loan officer to run a few scenarios for you, including different payments for different loan amounts. We are here to help you make the best decision to meet your financial needs. You'll be well informed when you walk into the dealership, and if you decide on Provident financing, you can be ready with a pre-approval. You have nothing to lose and everything to gain.

Before you shop, come to us. Apply for pre-approved financing online today, visit your local Provident Credit Union community branch, or call (800) 632-4600 and press 3 for loans.

1. APR - Annual Percentage Rate is subject to change and may vary depending on credit rating. All Provident Credit Union loans subject to credit approval. A valid driver's license/identification is required.
2. Actual payment varies based on credit score, loan amount, term, model year, and type of vehicle. See rates for more details.
3. Dollar amounts are approximate.