Understanding Manufacturer Incentives

Nothing gets a potential auto buyers attention more than when the manufacturer announces special auto financing or rebates to get people in the door

. With the new model year units filling up dealers lots, manufacturers are anxious to clear away old inventory. The manufacturer will often time offer financing as low as 0% to entice auto buyers. Buyers feel that they have it as good as it gets when they are offered the option to finance without having to pay any interest and quickly are ready to sign up. But don't be so quick to put your signature on the dotted line. In some cases you can do better than) 0% financing, here's how.

Not all peoples credit rating is created equal, so I will just tell you that people with the best credit are the ones who can benefit from this advice the most. When dealers offer incentives you are usually looking at a special annual percentage rate A.P.R. in place of accepting a rebate or rebates. At that point most people think that naturally paying no interest back is the very best one can do, but it's important to look at the amount of rebates the manufacturer is offering. This is where its time to do a little leg work and check out your options.

Financing rates are currently at an all time low. Individuals with good credit can find rates in the 2- 3% range for terms as long as 60 or 72 months. Remember this would mean excellent credit and not financing more than the cars value. Depending on how big of a rebate the manufacturer is offering and how low of a rate you can qualify for you may end up saving more money by paying some interest on the money you borrow. The secret lies in finding a finance rate that means you pay back less in interest than you are receiving in rebates. Check out the following example.

If you are financing $20,000.00 for 60 months at 0%, you can expect a payment of about $417 per month. Now let's say that instead of 0% you can choose a rebate of $3000. The same $20,000.00 minus $3000.00 in rebates financed for 60 months at 4% interest gives you a payment of $405.00. That a savings of $12.00 per month and a total savings of $720.00 over the space a five year loan. The secret is the finance charges from the lender only total $2288.00 in this rebate scenario.

Not only can taking the rebate lower your total cost of driving, it also puts you in a more equitable position. Owing less on a auto is important if you plan on trading out of it before your loan term expires. When you take the rebate it also gives you the option to apply additional money to principle, which can save you even more money.

Take time to research the options the manufacture is offering. A large car rebate backed by a low interest rate can often time be the best deal available.

by: Mike McDonnell

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