Calculate Your Interest – How A Pre-Approved DECU Auto Loan Helps Lower Your Sticker Price

Buying a new or used car with an auto loan from DECU has advantages that respect both your budget AND your time, but before you go taking the plunge and make a big purchase, there is a lot to learn. Especially now, as flashy sales and headline offers from auto dealerships begin to flood your email inbox.

First, buying a car is often a family’s second biggest financial obligation after the home. The need to purchase reliable, safe transportation for adults and children often requires serious study and stable preparation.

It is important to say that if you are in the market for a new or used car right now, do yourself an enormous favor by visiting DECU first, before even deciding which make or model to test drive. When working with Deere Employees Credit Union, the first question our team will ask you is “in order to fit your budget, what’s the maximum payment range you can afford?”

DECU offers Best In Market interest rates for all of its loan products.  We can help guide you to the best options in order to fit your budget, and our own additional products like Gap and Warranty can be added to your loan without paying taxes on them like you would at a dealership.

But what happens when you go to a dealership? Without a pre-approved auto loan from DECU to guide your way, there is a potential to get lost in the wilderness of sales incentives.[/vc_column_text]

family checking out car

Free money in the form of cash rebates on new cars is just one way that dealerships create consumer interest to bring prospective shoppers out for a visit. With so many variables and many more contrasting options, a $6,500 rebate is often just enough to convince an unsure buyer to take the plunge.

To sweeten this deal, some dealerships provide an alternative to rebates by offering 0% financing over 84 months. That is, for qualified applicants only, seven years of monthly car payments with no interest until the title is completely yours.

However, the proposition of a $6,500 rebate or 0% financing is for one or the other, and never both. You can have money AND a new car right now, or you can have a new car AND pay no interest on your dealership loan. You can’t have both. Consumers are subtly made to choose between two seemingly favorable options that are in fact decidedly uneven.

Quite naturally, most car buyers take the rebate and choose a dealership loan, often at an interest rate that falls outside budget limits. The promise of 0% financing, even over the full 84 months, is usually reserved only for those with excellent credit scores, and even then, not an automatic process.

But even for folks who do qualify, zero-percent offers on long term loans typically work against a consumer’s advantage for automobiles because of a drop off in trade-in values. At DECU we have compiled statistics that fall broadly in line with overall national trends showing most owners trade in a vehicle after just three years on the road, or 36 months.

To illustrate the advantages of a $6,500 cash rebate at time of purchase, let’s assume that our car-buying family has wisely called in to DECU beforehand, spoken and consulted with the friendly folks at the credit union, and secured a Deere Employees Credit Union auto loan for 72 months at 2.75%APR.

The table below illustrates three options available to our family:

DECU Financing Dealer Financing Dealer Financing
Rebate $6,500 $6,500 na
Vehicle Price $40,000 $40,000 $40,000
Amount Financed
Purchase price minus rebate
$33,500 $33,500 $40,000
Rate 2.75% 4.45% 0%
Term 72 72 72
Payment $505 $531 $556
Total Interest $2,878 $4,733 0
Total Amount Paid $36,375 $38,233 $40,000

You can see the figures for yourself here, at our online financial loan calculator, to compare loan terms and interest rates available at DECU.

Note: Rates and payments shown above are for illustrative purposes only and vary due to individual creditworthiness and or loan term.  Payments shown may vary from final loan payment provided by DECU staff.
family with car salesman

A new car is a big deal, and buying one takes time, effort and energy. Contact your DECU representative before heading to the dealership and  you find yourself choosing between cash rebates and 0% dealer financing. We can guide you to your best options, including pre-approval and provide our personalized and friendly member service. The next time you are in the market for a new or used auto, give us a call, we’re here to help.

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Written by:

Brian Steuer

Brian Steuer

AVP, Branch Operations DECU

Devin Hanssen

Devin Hanssen

AVP, Branch Operations DECU

Note: All loan issued subject to credit approval and rates are determined by individual credit history, 2.75% APR rate is for credit scores of 700+ or higher. The above payment example is for illustrative purposes only and assumes automatic electronic repayment of loan. If electronic automatic repayment is not used; ie.,coupons, cash repayment or check mailed to DECU for repayment, 1% is added to rate.