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Man Goes To Dealership. Then He’s Faced With The All-Too-Common Decision About Price

"Avoid going into negative equity."

Man goes to the car dealership.jpg

Photo by: @collinscardeals/Tiktok

Chad Swiatecki

By: Chad Swiatecki

Sep 27, at 8:00am ET

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A car salesman says there’s one question buyers should answer before deciding between a low annual percentage rate (APR) and a big rebate: How long are you actually going to keep the car?

Addressing that question is a useful place for prospective buyers to start their negotiation process, but it’s not the hard-and-fast rule the salesman's video makes it sound like.

Alabama car salesman Collin Bentley (@collinscardeals) argues that buyers who cycle through cars every few years should generally grab the biggest rebate, while those planning to keep a vehicle for six, seven or eight years should favor the lower interest rate.

“If you're someone who likes to keep a vehicle for, say, two to three years and kind of churn out vehicles, trade and all, I would definitely take the most rebates to avoid going into negative equity,” Bentley, who works for Long-Lewis Auto Group, said in the clip that’s been viewed more than 2,700 times.

Running The Numbers

In layman's terms, rebate cuts the amount financed immediately, which can give a buyer more protection against becoming upside down as the car loses value. A lower APR saves money more gradually by reducing borrowing costs over the life of the loan.

Bentley acknowledged in an interview with Motor1 that his TikTok advice is more of a rule of thumb than something buyers should follow blindly.

“Some of it's just like a financial education,” he said, describing customers weighing something like $2,000 off against 2.9% financing instead of a rate closer to 7.5%.

A large enough interest rate difference can outweigh a relatively small rebate. And a large enough rebate can beat even very cheap financing. Attractive promotional rates may also only be available to buyers with strong credit or on shorter loan terms.

Cars.com cautions that incentives can obscure what a buyer is actually paying, while the Consumer Financial Protection Bureau advises shoppers to compare the amount financed, APR and loan term together.

Bentley cautioned that there are situations where even 0% financing isn’t automatically the cheapest option. Edmunds agrees, showing cases where taking a cash rebate and financing the smaller balance at a conventional rate produced a lower overall cost than taking the zero-percent loan with no rebate.

For people who cycle through cars frequently, though, Bentley said the bigger danger is what happens when they come back.

He estimates that about half of the short-term car owners he sees are underwater on their loans. Sometimes, he said, being upside down is part of what brings them back to the dealership in the first place, especially if they are trying to get out of a large monthly payment that has become uncomfortable.

Gallery: Ford Transit Terracamper (2024)

Ford Transit Terracamper (2024)

Source: Terracamper

Battling Depreciation

Bentley said customers can also get surprised by how they think about trade value.

If someone sees three estimates of $25,000, $26,000 and $27,000, he said, they tend to remember the highest one. Months later, they may still have that $27,000 figure in mind even though added mileage, age and changing market conditions have pushed the value lower.

That’s where his advice about taking the rebate can make sense. Knocking thousands off the purchase price at the start reduces the amount financed and gives the buyer more room before depreciation pushes the loan underwater.

For someone planning to keep the same vehicle much longer, Bentley flips the recommendation.

“If you're planning to pay off the entire loan of the vehicle, right, so keep the vehicle for six, seven, eight, whatever years, I would definitely take the best interest rate because you're gonna be paying less overall for the vehicle,” he said.

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Even then, he said, buyers should not treat the rule as automatic. Year-end incentives, unusually aggressive financing offers and private manufacturer rebates can all change the math.

“You wouldn't want to go by that rule blindly,” Bentley said, with his initial advice working best as a starting point rather than absolute truth. He said length of ownership matters, especially when negative equity is a concern. Also important are the size of the rebate, the interest-rate spread, and any additional incentives a buyer qualifies for.

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