Wednesday, January 5, 2011

She's Buying a Car, What's Better a Rebate or Low Interest? Help Dad.

My daughters car finally went to heaven. After 10 years of life, 200,000 miles and puddles of oil on the driveway, she needs a new  car. I advised her to use the $5,000 dollars she has saved and buy used. But no. She wants a new one. She's just not going to listen to the old man. 


She's been looking around for a while because her car has been on life support for the last 3 months. I went with her down to the dealer for technical and moral support. 


Now if you know me, you would know of my absolute love of going down to the dealer to talk to car salesmen. Talking to car salesmen or getting root canal, which would I rather do,  I think the later. Our salesmen was an elderly gentleman, his fire had long gone out, but he was interesting to talk to. Everything went well for a while until he had to throw a curve ball. He advised us there was a rebate. Then he said instead of the rebate she could have 0% interest. What to do? 


When buying a car you have a choice between low or no interest and a rebate. How do you know which is better. It's a matter of doing the math. Huh! Do math? I know. Why not get some online help!

Several websites have online calculators that will help you decide. AutoTrader.com and Cars.com each have one, as does Bankrate.com . It's simple, just enter the loan amount, the rebate amount, and the interest rate if you take the rebate, and the interest rate if you don't take the rebate.

Lets put in some numbers and try it out. Say you have a 48 month loan for $25,000; the rebate is $3,000, and if you take the rebate the interest is 6%. If you leave the rebate you get zero percent financing. The answer: "It's a Wash", the calculator tells us. But if the interest rate was 8% instead of 6, you would come out $1,000 better by taking the zero percent loan and no rebate. One other deciding factor is if you are short on a down payment, you can use the rebate to help with that.



Now we had the facts to make an informed decision. I thought finally we were going to be done with this car hunt. Yet it was not to be. My daughter was starting to get cold feet, thinking about that long commitment of payments every month. We went home to think it over. To be continued........

10 comments:

  1. Dave,
    Good thing for those cold feet. Do you think she is starting to consider your advice? She can actually buy a pretty sweet car with $5,000!

    Looking forward to the next installment.

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  2. Your advice is beginning to rub off on her! Cold feet is good in this case!

    Now I have to know if your daughter decided to buy used or new! Please post the conclusion!

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  3. It's better to take the rebate if the deals are good enough. Interests are interest low or not.

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  4. That's good that you were able to step out of the situation and do the math on your own! Making rushed decisions like that are probably just what the dealership wants you to do! haha

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  5. Its hard to slow the process down with the pushy salesman.

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  6. I am more interested in auto loans with low interest rates for the reasons you mentioned, and the fact that some car finance companies offer bad credit car loans.

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  7. I cannot agree more, Dave. Pushy salesmen are so annoying. Instead of convincing me to make the purchase, I tend to look the other way.

    auto finance

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  8. "Pushy salesmen are so annoying." To be fair, it's not their fault. They are trained to be pushy, and their attitude is important in order to make profit in their trade.

    used car loans

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  9. It is really very exciting and watchable. I love to share it with all my love ones and I know that they will definitely like it.

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  10. I think you can go for rebate as I feel it to better an option

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