Which is better?  Do you take the $1,250 rebate or the 2.9% financing?

If you have less than perfect credit:

Do you qualify for the 2.9% financing?  If the 2.9% financing is not available to you because you have
less than perfect credit, then you will take the rebate.

If you have excellent/good credit:

If you do qualify for the 2.9% financing, then you have a decision to make.

The first consideration is:  How long do you expect to own this vehicle?  If you typically trade for a new
vehicle every two years and the 2.9% loan is for 48 months, you will not be taking full advantage of the
lower rate.  As a result, the rebate could be a better choice.

If you are not sure how long you will own your vehicle, taking the rebate is probably the wiser choice.

Here’s an example:
                                                        Deal with Rebate   Deal with 2.9% APR                
Purchase Price                                         $22,250                 $22,250                
  $1.250                         $0                
Purchase Price after Rebate                     $21,000                $22,250                Higher
Down Payment                                          
  $1,000                  $1,000                Same
Amount Financed/Loan Amount                $20,000                $21,250                Higher
Number of Months                                              48                         48                Same
Interest Rate (APR)                                            6%                    2.9%                Lower
Monthly Payment                                             $470                    $470                Same
Total Payments                                           $22,560               $22,560                Same
Although your down payment, monthly payments, and total payments are the same and your APR is
lower, are you better off the lower APR?

In this example, if you keep the loan for the entire 48 months you have neither lost nor gained.  Your
cost is the same.

However, if you payoff the vehicle before 48 months (due to trade-in or totaled vehicle), the remaining
principle amount due will be higher with the 2.9% APR than it would have been with the rebate applied
to your initial loan balance.

In this example, taking the rebate (and the lower initial loan amount) is a better deal.

However, if you were offered a rebate of only $750 (rather than $1,250) or the APR was 1.9% (rather
than 2.9%) taking the lower APR may be the better deal.

1)  Estimate how long you will own your vehicle
2)  Calculate the “Total Payments” with the rebate and the “Total Payments” with the lower APR

If it is close, consider taking the rebate.

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