Bad Credit Car Loans: Rebate And Incentives |
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An auto dealer rebate for bad credit car
loans is a form of a factory-to-dealer incentive payment that the factory gives to the car dealer for each car sold. The car dealer can either pass this money to you as a price reduction or use the money for advertising, employee bonuses, extra profit, or many other purposes. The automobile dealers are encouraged to give this money, which could be in the range of $500 to $2000 or even more, to you as a price reduction. One type of automobile rebate is a factory-to-customer auto rebate for bad credit car loan wherein either you can have the rebate for bad credit car loans paid directly from the manufacturer or the rebate for bad credit car loan can be applied by the car dealer to your purchase price, thus dropping the price of the car further. There are financing plans of the automobile manufacturers as an alternative to customer cash rebate for bad credit car loans. The factors determining whether the car purchase-financing plan is a better deal than the cash rebate for bad credit car loan, are the size of the rebate for bad credit car loan, the manufacturer-offered annual percentage rate (APR), the APRs available from other auto bad credit car loan lenders, the amount you will be borrowing, and how long a period you will be borrowing for. When you buy a car, to determine whether cash rebate for bad credit car loan or reduced interest rate is the better deal, the calculations that can help you reach a decision are as follows: On a 60-month (5 year) bad credit car loan, each percentage point you cut your APR is the equivalent of a car price discount of about $19.00 per $1,000 of bad credit car loan. On a 48-month (4 year) bad credit car loan, each percentage point you cut your APR is the equivalent of a car price discount of about $17.00 per $1,000 of bad credit car loan. On a 36-month (3 year) bad credit car loan, each percentage point you cut your APR is the equivalent of a car price discount of about $14.00 per $1,000 of bad credit car loan. As an example, if you can get a $13,000, 48-month bad credit car loan from a bank at a 10% APR, as against a manufacturer's special plan where the rate is 5.9%, you can compute the savings of using the factory plan as follows: (10 - 5.9) x 13 x $17.00 = $906. If the bad credit car loan offers a rebate of $2000, then it is obvious that this rebate is the better deal. In most circumstances, the ideal thing to do is to take the cash rebate for bad credit car loan and obtain financing from wherever you can get the lowest rate, be it your bank, credit union or the dealer. The most important criterion is your credit score and you must try to improve it so that you qualify for the lowest interest rate or even a 0% interest rate and avoid paying $2,000 to $4,000 in finance charges. The more you borrow, the more likely it is that the reduced interest rate will be a better deal than the rebate for bad credit car loan. Taking the same terms as before, except that the buyer borrows $33,000, he would save roughly $2,300 [(10 - 5.9) x 33 x $17.00], which is more than the $2,000 rebate for bad credit car loan offered. The decision to take the rebate for bad credit car loan in cash or add it to the down payment is a tricky one. If you assume that you're planning to buy a $22,000 car with a 4-year (48 months) term bad credit car loan at 8%, calculations will show that the total price with rebate will be $21,678.72 as against a price of $23,436.48 without rebate. Thus applying the cash rebate for bad credit car loan to the down payment would result in a saving of [$23,436.48 - $21,678.72] = $1,757.76 |
