If you're in the market for a new car, you'll find several financing options. It's nice to have choices, but they can be confusing or downright expensive. In the end, you may be better off with conventional auto financing from Northwest Georgia Credit Union.

These days, more and more dealers are offering low-rate loans or cash-back rebates. Most low rates dealers advertise are for short-term loans. For example, one dealer offers 1.9% financing, but only on two-year loans. A new $20,000 car with a $2,000 down payment will require $18,000 financing. That translates to an astounding $765 monthly payment--way out of reach for most buyers.

Or, if you choose the dealer's rebate plan, you forego the low interest rate loan but get a $1,500 cash rebate. Adding the rebate to your down payment can make NWGACU financing very attractive, because the larger down payment reduces the amount you need to finance. Which alternative is best?

Calculate your total finance charge and monthly payment after you deduct your down payment plus the rebate. Then compare your results with the same figures if you take the dealer financing but finance the higher amount.

Or, if you own your house, a Northwest Georgia Credit Union home equity loan might look even better. The reason, of course, is that home equity loan interest payments can be 100% tax deductible (consult your tax adviser to see if you're eligible).

To calculate the after-tax loan rate, multiply the home equity loan interest rate by one minus your marginal tax rate. For example, if your combined federal/state marginal tax rate is 33%, and the credit union's home equity loan rate is 9.0%, your after-tax loan rate would be 6.03% (.09 x (1-.33)). That drops your effective interest rate nearly to the dealer's 5.90%. And the $1,500 cash rebate is
gravy!

So, don't be smitten by auto dealer low rate advertising--visit or call Northwest Georgia Credit Union first to explore financing options.

Copyright 2007 Credit Union National Association, Inc.