Toyota Rebate vs. Special Financing

What is the best way to get the best savings when buying a car? Toyota Motor Sales and Toyota Financial Services  have announced huge savings on rebates or special financing rates.  The question arises, which one do I choose? When trying to figure this out, you first need to know how you are paying for the vehicle. Are you a cash buyer or would you prefer payments? Something else to consider is what type of vehicle you are buying and how good are the incentives? Let’s face it, an automobile is a depreciating asset which you want to purchase at the least cost.

We’ll take a 2008 Toyota Tundra for an example at an average MSRP of $35,000.00. Right now you can take a $3,000 rebate from Toyota right off the top and any off the MSRP you can negotiate. So we make a deal and we give you a $1,500 discount on top of the rebate which allows you to buy the truck for $30,500. Adding Boulder city tax as an example for a grand total of $33,592.58. If you were going to write a check for this truck, you may be done and down the road, but in financing, there are many other factors to consider.

Using an average interest rate of 6.5% your payments would $659.00 for 60 months, your finance charge is $5,949.22, and your total amount paid at the end of 60 months is $39,541.80.

Using the same sales price with Toyota’s 0.0% interest, your payments are $610.00 for 60 months, and your total of payments comes to $36,592.58. Your total savings is $2949.22 even though your amount financed is higher, thanks to 0.0%! Even if you are a cash buyer earning only 1% on your money in the bank, it makes more sense to borrow Toyota’s money for free and keep your money from depreciating. In this case, it is better to take the 0.0% financing.

When is it a good time to take the rebate instead? It is a good question considering the average vehicle will depreciate around 50% after 3 years of ownership. The simplest answer would be that if the rebate(s) were enough to lower the price of the vehicle to less than the total amount of payments by using the special rate, take the rebate. If not, the lower financing rates would be the better choice.

These are just several scenarios. There are many other situations that may work for you or other people. If you have any comments, we appreciate them and welcome any opportunity to help you through any situation you may have.