For Your Benefit

When you're looking at rates, what's better than zero?

While considering an auto purchase, a zero percent rate is not always the best rate, according to many financial analysts. After taking a closer look at loan rates and the deals offered at local dealerships, there may be times when zero percent financing costs consumers more in the end.

According to personal finance site bills.com, zero percent financing is not just an extra loyalty benefit or reward offered by dealerships. To the contrary, bills.com president Ethan Ewing says that the purpose of zero percent financing is to "generate foot traffic for dealers" and increase the number of people who visit the dealership and consider purchasing vehicles. He also reminds consumers that zero percent pricing is not provided based on the dealer's goodwill, but instead to create the potential for car sales, especially if there are models that are moving more slowly off the lot.

But, as long as you can get zero percent, you should still save money, right? Not always. There are a few reasons that zero percent financing may not really be the best deal for you.

Short-term pricing. When you secure a zero interest loan, you may be given a shorter length of time to pay off the loan, which of course, means your monthly payments could be much higher. If you have a specific monthly budget amount you can allocate toward your vehicle, the shorter term may not work for you.

Ineligible applications. While zero percent financing may entice many people to visit a local dealership and check out its offerings, not everyone will qualify for the ultra-low financing that's heavily promoted. Instead, the lowest rates will go to those consumers who have the highest credit scores. What about the rest of the auto buyers out there whose credit histories aren't immaculate? They may end up with a higher rate than they bargained for.

Rebate options. If you receive zero percent financing, you may not be able to claim a rebate on the vehicle you purchase. Make sure you calculate your options to see whether you'd save more with a zero interest loan than with a rebate from the manufacturer and a low rate loan from your credit union.

Consider this example:

Using a low interest rate loan can actually save more than the zero interest option if you are able to take advantage of dealer rebates. The best way to finance your car may not be to rely on the dealer for your financing but to secure independent financing for your vehicle so you will have additional leverage when negotiating your purchase price.

If you select RBFCU to finance your car, we can provide auto loan rates as low as 1.9% APR when applying online, a rate that, as you can see from the example above, may just beat the zero percent offered by the dealer.

Our website has loan calculator tools available to you to help determine the best purchasing scenario, so you can get the car your family needs and the best possible bargain at the same time.

Example does not include sales tax. Loans are subject to credit approval. The 1.65% APR is our best rate available when applying for an RBFCU Auto Loan to finance a new or used vehicle purchase, or refinance an existing auto loan from another financial institution over to us. Payment per $1,000 is approximately $17.38 per month for 60 months at 1.65% APR based on deferment of first payment for 60 days. Auto loan rates and terms are subject to change without notice and are based on your credit rating, your relationship with us and other factors. Loan term will be based upon amount financed, collateral and mileage. Longer loan terms are available at different rates. Contact our Consumer Lending Center for more details. Some restrictions may apply.