Case study: Best pickup truck end-of-year deals, how to choose the right finance deal

Consumer Reports News: December 21, 2010 09:30 AM

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Determining how you will pay for your next new car can be just as important as choosing the right model. With both decisions, you will likely have to live with the choice for years. But with so many finance options available, sometimes it's hard to determine the best deal. And by the time you sit down in the finance manager's office, your heart is devoted to the new car and your mind is dreaming of exciting drives--neither may be equipped for making tough, on-the-spot financial decisions. So, we decided to analyze the offerings on a vehicle segment to highlight the options on real deals and illustrate what combination would save you the most money in the long run. The principles explored here apply to any vehicle type.

There are a variety of year-end deals currently available for pickups that include low-rate financing, rebates, or a combination of the two. For comparison, we also used a national average interest rate of 5.42 percent for 48 months and 6.19 percent for 60 months, from BankRate.com, reflecting what you are likely to find if you choose to finance outside the dealership.

The details for the Chevrolet Avalache in the chart below include the destination charge and assumes a price of 3 percent above the Consumer Reports Bottom Line Price (which we think, in general, is a good deal on a new vehicle). The analysis also includes a 5-percent tax rate, as well as a trade-in valued at 20 percent of the purchase price. (Yes, the math can get complicated, and this is why we recommended penciling out your options at leisure before committing to a purchase.)

Vehicle	MSRP	Dealer financing	Months	Customer rebate	Purchase price with tax	Financed amount (Purchase-trade-in)	Monthly cost	Total cost	Total interest paid
2011 Chevrolet Avalanche 4WD LT	$42,265	0.0%	36	$1,500	$40,543.27	$32,434.62	$900.96	$32,434.62	$0
2011 Chevrolet Avalanche 4WD LT	42,265	3.9%	48	1,500	40,543.27	32,434.62	730.89	35,082.84	2,648.22
2011 Chevrolet Avalanche 4WD LT	42,265	4.9%	60	1,500	40,543.27	32,434.62	610.60	36,635.78	4,201.17
2011 Chevrolet Avalanche 4WD LT	42,265	5.9%	72	1,500	40,543.27	32,434.62	536.01	38,592.40	6,157.78
2011 Chevrolet Avalanche 4WD LT	42,265	0.0%	60	0	42,165.52	33,732.42	562.21	33,732.42	0
2011 Chevrolet Avalanche 4WD LT	42,265	3.9%	72	0	42,165.52	33,732.42	526.21	37,887.43	4,155.01
2011 Chevrolet Avalanche 4WD LT	42,265	5.42%	48	3,000	38,891.02	31,136.82	723.00	34,703.90	3,567.08
2011 Chevrolet Avalanche 4WD LT	42,265	6.19%	60	3,000	38,891.02	31,136.82	604.72	36,283.00	5,146.18

Chevrolet Avalanche deal options
Looking at the Chevrolet Avalanche, we can see that for the first four financing rates, the amount to be financed is the same at $40,543.27. The faster a consumer is able to pay off the car, the lower the rate GM is willing to offer the consumer. Our first four examples are 0 percent at 36 months, 3.9 percent at 48 months, 4.9 percent at 60 months and 5.9% at 72 months. Each of these offers also comes with a $1,500 cash rebate that has already been applied to our $32,434.62 amount to be financed.

The consumer who elects to pay off the car with a 72-month loan at 5.9 percent will have the lower monthly payment of $536. However, due to the higher interest rate and longer loan term, this consumer will have paid $6,000 more on the same deal as the consumer who makes $900 payments over the course of 36 months.

However, all is not lost for the consumer who needs the lower monthly payment and longer loan term. Let's take a look at the next two financing offers that are available through GM: 0 percent at 60 months and 3.9 percent at 72 months. The difference between these two offers and the first four we looked at is that these do not come with the $1,500 cash rebate. So now with these deals, our amount to be financed is $ $33,732.42, almost $1,300 more than in our first four deals. However, despite the lack of a cash rebate, the consumer who elects to take the 3.9 percent offer will have paid over $700 less than the consumer who takes the $1,500 cash rebate and 5.9 percent interest rate.

Finally, GM is also offering a $3,000 cash rebate that can not be combined with a GM financing offer. To analyze these deals we used a national average interest rate of 5.42 percent for 48 months and 6.19 percent for 60 months. Because we have elected to take the largest cash rebate, in these deals we have the lowest amount to be financed, $31,136.82. Comparing this 48-month term to our original one at 3.9 percent with $1,500 cash back, we see that if a consumer can obtain a private loan at 5.42 percent or less, they will end up paying $350 less than the consumer who takes the lower interest rate and lower cash back.

As we've illustrated above, there are a number of choices when financing a car, so it's important to weigh the options and look at your budget.

In our next blog, we'll list all the current finance deals for pickup trucks, plus offer tips on finding the best loan rate.

For more tips on buying a new car, see our guide. To work out your own financing scenarios, see our online calculators and worksheets. Full pricing information including current cash and financing incentives is available to subscribers.

—Liza Barth and Mike Dempsey