The Truth About Dealer Financing
Because we want you to get the best deal possible, UECU wants to make sure that you are fully informed on all the hidden costs involved with 0% financing and other dealer options. Most importantly, make sure you read the fine print and completely understand all the details of dealer financing. There are a few important points to consider when weighing the benefits of dealer financing vs. credit union lending options. These points are:
In most cases, when you choose to take advantage of low or 0% interest from the dealership, you give up the option of a rebate. Choosing the rebate instead and adding it to your down payment can make credit union financing a much better deal. Our Loan Comparison Calculator can show you what the difference could be in your monthly payments.
Dealers' 0% financing and low-rate loans are often only available on slower-selling models, which usually have a lower resale value. These same financing options can have bigger prepayment penalties and can require larger down payments.
Dealer financing plans are also often limited to dealer stock. This means you may have to sacrifice color, style, or other option you may want. Unwanted options can add 25% to 30% to the sticker price of a car.
Many dealer financing options include large late fee penalties for payments not made on time, and they can even raise your interest rate if you make a late payment. Also, sometimes dealer financing is not a "simple interest" loan, so be sure to ask about this if you are considering financing your vehicle with a dealership.
Fewer than 10 out of 100 people who want to take advantage of 0% offers actually get the 0% rate, according to a Consumer Task Force for Automotive Issues survey. Based on credit, the auto manufacturer can decide that you do not qualify. Those without perfect credit, who don't qualify for 0%, are charged a higher rate.
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