by Clint Burgess

There are what seems like a never-ending run of commercials that announce some sort of fantastic finance rate on new cars or a huge cash rebate -- sometimes even both. But is it all too good to be true, or does the consumer really make off with a good deal in the end? The truth lies in the crunching of the numbers. Right now, auto manufacturers are offering great incentives in an effort to clear out their current inventory to make room for the 2005 models.

Of course financing, refinancing and interest rates all hinge on one thing: credit. As consumers make their way through the plastic-friendly world, they acquire credit points. It's these points -- and whether our credit is considered good -- that determine if we are let in the club. The club, that is, of low interest rates and big cash rebates. To play, you have to qualify for financing.

No matter what kind of deal you're getting, the number of months that you carry your vehicle financing plays a big part, too. On average, the maturation point of an auto loan is 60 months, or five years. This number is important because it factors into your total cost for a vehicle, not just the sticker price. No matter what interest rate you get -- aside from zero -- your vehicle is costing you much more than what the sticker price says.

So the interest rate is the key element of any vehicle loan. The majority of dealerships have in-house financing and can find many ways to make a purchase work, but watch out for excessive interest rates. Many consumers finance through their personal bank, credit union or other lending agencies. When you combine these term and rate, that's where the numbers start to work for -- or against -- the consumer.

Kevin Parker, finance manager at Wendle Motors, broke the digits down for me in a plain and simple manner. "It really varies on a case by case basis," Parker says. "Some people might put more money down, or pay more on their monthly payments, and then you have to take the interest rate points into account."

Typically a good deal can be had if you look carefully at what all three factors combined are going to add up to. For example, Ford is currently offering $5,000 rebates on the Explorer SUV and the Ranger pickup. With additional rebates for military personnel and college graduates, these rebates can really add up.

"The last three out of four customers I had went with the rebates rather than a lower interest rate," says Parker. "In the long run, they still save more money and especially on the Ranger. If you have a $16,000 truck and you're getting a $5,000 rebate that you can put down, that's only about $11,000 for a brand-new truck. That's a pretty good deal."

Even if you get a good interest rate -- say, 2.9 percent -- that is still 2.9 percent you are carrying for the duration of the loan. Make you're money work for you. If it works out that you can get a good rebate, put the cash on the vehicle, bring your loan duration down and make more than the minimum payment. These are keys to getting your money's worth out of a new vehicle.

As for Parker, he says obviously the dealership is in the business of making some profit on every sale. "But we're here to get the customer the best deal," he adds, "and right now business is working out for everyone."

Publication date: 09/09/04

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