Car loans can be very tricky with dealers having various offers in terms of financing. I will break down a couple options you can get when purchasing a car.
This is a payment plan with no interest on the principal. The downside to this is the sticker price may be higher than what it would be with a 3% interest rate. On paper it sounds like a good deal, but dealers may just increase the price of the car so that it would be no different than paying a low price with a minimal interest rate.
$X Credit with higher interest rate
Don't immediately write off a high interest rate combined with a large cash credit at signing. This ends up lowering the principal on the loan, if combined with the higher interest rate this could even end up being lower than a 0% loan.
$X Credit with lower interest rate
The dealer may attempt to give you a smaller credit at signing combined with a lower interest rate. Again with the other options you may be able to save money with this deal depending on how low the interest rate is in comparison to how much credit you receive at signing.
Cash Purchase - Bank Loan
Another option, depending on how good of a credit and bank history you have. If you can negotiate a low enough cash price and are able to get a loan from your bank this may be the cheapest option. Again it varies on what interest rate you get and low of a cash price you can get.
Dealers will also try and modify the loan length. Typically the longer the loan the more interest you will be paying. Once again you will have to evaluate based on the principal and interest rate.
Get the best deal
When you go to the dealership to get your car get the dealer to give you multiple options. The options should all include varying principals, down payments, interest rates, loan terms and cash credits. Use the calculator on the right side of the blog to type in the variables and see what will give you the lowest monthly payments.