On a new car, why would I pass on a 0% or 1.9% financing at the dealership and finance with the credit union?
October 24, 2025 at 7:00:00 PM
On a new car, why would I pass on a 0% or 1.9% financing at the dealership and finance with the credit union?
When you buy a new vehicle, manufacturers often offer two incentives: a low interest rate or a cash rebate. Usually, you can choose only one.
The low interest rate is meant to encourage financing through the manufacturer’s lender. They hope you choose it because the low interest rate gets spread over the life of the loan. But many people trade in, pay off early, or total their car before the loan ends, meaning the lender doesn’t pay the full incentive.
If you take the cash rebate you get the full incentive at the start. Taking a cash rebate immediately lowers your loan balance. This is smart because:
You start with less debt overall.
If you pay off the car early, your payoff is lower.
If your car is traded or totaled, you owe less relative to the insurance payout.
In practice, most car buyers and even dealership professionals take all available rebates and then find the best financing from a credit union or bank. Starting with a lower balance is the smarter choice.
