The Truth Behind Dealer Incentives

As the 2011 models continue rolling in to local dealerships, we’re starting to see more ads for cash rebates and low dealer financing.  Some of the more popular ones we’ve seen lately are:

-Lease your vehicle for just $199 a month.
-Finance your vehicle as low as 1.9% APR.
-Get $250, $500, or $1,000 cash back.

Automobile manufacturers use incentives like these to lure you in. That doesn’t mean they’re not real, and it doesn’t mean they’re not a good deal. You just need to put your “buyer beware” hat on before you head out to the dealership.

Leasing a vehicle for $199 a month may be a very affordable option for your budget. Just know there’s a balloon payment on the back of that lease. Once your lease is over, you either turn your car in, or you pay the balloon payment, which is usually thousands of dollars. If you turn the vehicle in, you have the option to lease another, but there’s no guarantee you’ll get a lease for the same low monthly payment. If you finance the balloon payment, you may be paying on the car another three to five years. How much more money are you willing to pay on a car you’ve already been driving for several years?

Dealer financing is tempting, as well, but it’s not always as it appears. In most cases, when dealers offer low-rate financing, there are conditions attached. The low rate usually applies to specific models, or for specific terms – usually 36 months or less. If you’re in the market for that specific model, or you can afford to pay off the loan in three years, this could be a good option for you.

Cash back incentives can either stand on their own, or they can be tied to a condition like purchasing a specific model or financing with the dealer. Ask before you get your heart set on a different model.

If you have the choice between cash back or dealer financing, think about taking the cash rebate and financing your vehicle with Neighborhood Credit Union. That puts money back in your pocket and gives you an option for affordable financing. And remember, we’re still offering rates as low as 3.49% APR for up to 72 months, with no payments until 2011, through October 31^st. Click here for more information.