Dealer Financing “Deals” Explained

Auto dealers are more than happy to not just sell you a car, but finance it too. The first thing to remember is that auto manufacturers and dealers are for-profit. At the end of the day, they want to make money. So why do dealers sometimes offer financing rates that are at, or below, credit union rates?

Dealers use financing as another way to leverage each sale and ensure the best deal for them to move inventory. When a dealer is offering loan rates lower than credit unions’, it’s not because they aren’t making money. They can offer remarkably low financing “deals” when they are able to make up the difference in the sale price. That’s why dealers will sometimes let you choose to take a low financing rate or cash back off of the purchase price. Is it beneficial to take dealer financing or cash back? Let’s do the math!

Financing or Cash Back Scenario*

A dealer is offering 2.90% APR financing for 60 months
or $3,500 cash back on a vehicle purchase. Which deal is better?

Cash Back &
Capitol View Financing
Dealer Financing
Vehicle List Price $50,000 $50,000
Dealer Cash Back $3,500 $0
Optional Down Payment $5,000 $5,000
Interest Rate (60 Months) 5.49% APR 2.90% APR
Monthly Payment $743.93 $806.67
Purchase Price + Financing $47,558.26 $48,399.81


In the example above, taking the cash back and financing with Capitol View instead of the dealer results in a lower monthly payment and a lower total cost for the purchase and financing. Plus, Capitol View offers extended warranties and GAP protection for less than many dealers.

The choice is clear. Take the money (cash back) and run to Capitol View Credit Union!


*The financing or cash back scenario does not include the cost of tax, title, and license. Purchase price and financing totals assume paying the loan to maturity. Capitol View offers no pre-payment penalties however dealer financing may differ. 5.49% APR represents Capitol View’s best rate as of March 21, 2023. Rates are subject to change daily. Contact Capitol View Credit Union for additional information comparing current dealer promotions.