Loan from Financial Institution vs. Loan from Dealer Chart

What if you are buying a model that come with zero percent annual percentage rate financing from the dealership? Zero percent APR financing may sounds like an amazing bargain – after all, how can you beat no interest? – but it isn’t always. You can’t get the rebate if you take zero percent APR financing, and the dealership may not be willing to negotiate the price of the car. Often the length of the loan is shorter too, resulting in high monthly payments. Consider this example:
 
  Loan from Financial Institution Loan from Dealership

Purchase Price

$20,000 $20,000
Down Payment - $2,000 - $2,000
Manufacturer's Rebate – $2,500 No Rebate
Amount Financed = $15,500 = $18,000
APR 5% 0%
Loan Period 60 months 36 months
Monthly Payment $293 $500
Total Interest Paid $2,050 $0
Total Cost $17,550 $18,000
 
In this case, you will actually save $450 by taking the five percent loan, with much more reasonable payments.