TOO GOOD TO BE TRUE

TFCU Member Jack C. with his new car!

Recently one of our members, Jack C., came to our Plantation office to apply for a new auto loan.  Whenever a member comes in for an auto loan we like to take the time to find out the kind of car they are looking for, the dealership they are going to, whether or not there is a trade in, and what kind of down payment they are looking to make.  This quick assessment helps us find the very best loan to fit their needs and make sure the loan fits into their overall financial picture.  We found out that Jack was not only looking for a specific type of vehicle, but because he had recently been in an car accident, he wanted a vehicle that would also provide a high level of safety.

While Jack continued to search for his vehicle, the TFCU Financial Services Specialist, Janet, continued to stay in touch just to make sure that Jack was secure in the knowledge that we at Tropical Financial were here when he needed us.  Jack had been approved for a loan and was happy with what the credit union offered, knowing that the loan was tailored to meet the payment that Jack could work comfortably into his monthly budget.  Everything was set to go, all that was left was for Jack to go get his new car!

When Jack arrived at the dealer, he found the car he wanted and negotiated the price with the dealer.  Before closing the deal, though, the dealer was aggressive and offered Jack a financing deal that was “too good to be true” - one that sounded like he wouldn’t have to pay any interest for a full 72 months.  When he called to tell Janet that he wouldn’t be financing through the credit union she was disappointed but only wanted the best for the member so congratulated him on his new purchase. 

Whenever we see this type of scenario, it always raises the concern of what the member may be giving up to get that 0% financing that some dealers love to talk about.  We looked at a chart once back in January in terms of how much 0% financing can actually cost you, but it’s so important it bears repeating.  Let’s take a look at that real simple example – you find the perfect car and negotiate the price to be $20,000. There is a manufacturer rebate of $2,500 OR 0% offered AND you qualify (congratulations you must have pretty good credit). You also have a trade-in valued at $1,000 and you even have an extra $500 to put down. For simplicity sake we’ll keep the term the same – 36 months, here’s how it breaks down:

	0% Dealer financing	Credit Union financing
Price of car	$20,000	$20,000
Down payment	$500	$500
Trade-in	$1,000	$1,000
Manufacturer rebate	$0	$2,500
Amount financed	$18,500	$16,000
Number of months in loan	36	36
Loan interest rate	0%	3.00%
Monthly Payment	$514	$465
Total cost	$18,500	$16,751
Total interest paid	$0	$751
SAVINGS	$0	$1,749

 

As you can see the 0% financing actually ends up COSTING you money in the end, so although it may sound tempting, but sure you get all the facts and know what you're giving up to get that deal.

As it turns out in Jack’s case that’s exactly what was happening. He found out that he was misinformed about the details of that “too good to be true” deal, so he came back to the credit union to get the REAL deal.  When he told the dealer what the rate his Credit Union was offering, the dealer didn’t even try to re-negotiate.

Now Jack is driving in the car he wanted with financing from a lender who really cares about him, Tropical Financial Credit Union…and we couldn’t be happier!

^Steve