New Car Loans – Always Do the Math, Here’s How


image: jeep

There are some signs that the car market in 2023 will improve from last year. While I don’t want to get too excited yetsome automakers are reviving rebates and special financial offers to help move inventory. .

Inventories appear to be improving for some automakers, but interest rates remain high. The days of 60+ months of 0% funding are unlikely to return any time soon. In fact, some of the currently advertised financial “specials” are downright awful, and buyers would be wise to do the math themselves.

Jeep, for example, has an amazing 60-month financing offer of 7.26% that applies to most models. In some cases, automakers even offer rebates to encourage customers to take out higher interest loans. It’s a mystery to me why anyone would jump at the offer.

Image from an article titled Always do the math before accepting a car dealership loan application

screenshot: Jeep.com

Let’s dig into the numbers for this $37,565 gladiator sports offer. After a $2,500 rebate, the net price drops to $35,065. Running the numbers, over the course of the loan, the buyer would pay her $6,853 in interest!

Image from an article titled Always do the math before accepting a car dealership loan application

screenshot: calculator.net

Jeep is also offering a $2,500 “cash” rebate to the same Gladiator. From a dealer’s perspective, “cash” doesn’t necessarily mean walking into a showroom with a suitcase full of dollar bills. Persons receiving funding from organizations other than dealerslike credit unions and private banks.

lenders like Navy Federal Credit Union When bank of america advertises new car rates of 4.74-5.39%. For example, let’s say you secure a loan with an annual interest rate of 5% and the same guy on that Gladiator gets a $2,500 rebate. Here’s how the numbers swing.

Image from an article titled Always do the math before accepting a car dealership loan application

screenshot: calculator.net

This is an interest cost of $4,683, which translates to $2,170 in savings over the course of the loan. And this comparison is against the base model Gladiator — it’s not unheard of for anyone to drop $50,000 or more on a well-equipped Jeep. would pay a total of $9,772 in interest using the Jeep financing.

It may be obvious that the higher the APR, the higher the loan cost, but too many buyers only care about monthly payments and not the total cost over time. That $50,000 of For Gladiator, the April 7.26 monthly note is $996 compared to $943 for a 5% APR loan.those numbers Seem That’s a lot closer than the $3,000 difference we’ve accumulated over five years. Your best defense against overpaying for your car is a calculatorand now more than ever, buying a loan really helps.


Tom McParland is a contributing writer for Jalopnik, AutomatchConsulting.comHe saves us the trouble of buying or leasing a car.Questions about buying a car? Send to Tom@AutomatchConsulting.com


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