Why Can Two People Get Different Interest Rates on the Same Vehicle?

FROM THE MANAGER’S DESK

Why Can Two People Get Different Interest Rates on the Same Vehicle?

By Adam Pirman, Sales Manager at Apple Chevrolet

One question I hear from customers when we’re discussing financing is:

“How can someone else get a lower interest rate than me when we’re buying the same vehicle?”

It’s a fair question.

I’ve been in automotive sales for more than 18 years, and I’ve seen customers purchase the exact same Chevrolet model, sometimes even at the same selling price, but receive different financing offers.

It can be confusing, especially when you see an advertised interest rate and assume that’s the rate everyone receives.

The reality is that your interest rate is based on much more than the vehicle you’re buying.

Let me explain what goes into it and what I recommend customers consider before making a decision.

Your Credit Score Is Important, but It’s Not Everything

Most customers know that their credit score plays a role in financing a vehicle.

Generally speaking, a stronger credit history can help you qualify for more competitive interest rates.

But here’s something I explain to customers all the time:

Two people can have the same credit score and still receive different financing offers.

That’s because lenders look beyond the number itself.

They may consider your payment history, how much debt you’re carrying, the length of your credit history, previous automotive loans and other factors.

For example, someone with a 720 credit score who has successfully paid off several auto loans may have a different credit profile than someone with a 720 score who has never financed a vehicle.

The scores might be identical, but the overall credit histories aren’t.

That can affect the financing options available.

Your Income and Existing Debt Matter

Another factor lenders consider is your ability to repay the loan.

This often involves looking at your income and your existing financial obligations.

Let’s say two customers are purchasing the same $40,000 vehicle.

One customer has a mortgage, a relatively small amount of additional debt and a consistent income.

The other customer has a similar income but significantly more monthly debt obligations.

Even if their credit scores are close, a lender may evaluate those applications differently.

This is one reason I encourage customers not to compare their financing offers directly with a friend, family member or coworker.

Your financial circumstances are unique, and the lender evaluates your individual application.

The Length of Your Loan Can Change Your Interest Rate

The loan term also makes a difference.

A customer financing a vehicle for 36 or 48 months may qualify for a different rate than someone financing the same vehicle for 72 or 84 months.

Longer loan terms can make the monthly payment more manageable, but they can also mean paying more interest over the life of the loan.

For example, consider a $35,000 loan with two hypothetical financing options:

The longer loan has a lower monthly payment, but the total interest paid is higher.

These are illustrative rates, not current Apple Chevrolet financing offers.

When I’m helping a customer evaluate financing, I don’t want them looking at the monthly payment alone.

I want them to understand the term, interest rate and overall cost of borrowing.

Manufacturer Financing Offers Aren’t Always Available to Everyone

You’ve probably seen advertisements offering special financing rates on certain Chevrolet vehicles.

These can be excellent opportunities for qualified customers.

However, manufacturer-sponsored financing programs typically have specific eligibility requirements.

They may depend on credit approval, the vehicle model, the model year and the length of the loan.

A promotional rate advertised on one Chevrolet model may not be available on another.

And even when two customers are buying the same vehicle, one may qualify for the promotional rate while another receives a different offer.

That doesn’t automatically mean anyone is doing something wrong.

It means the financing programs and approval requirements may be different.

Sometimes a Lower Interest Rate Isn’t the Best Overall Deal

This is something I think more customers should understand.

Depending on the current manufacturer programs, you may have a choice between a special financing rate and a customer cash rebate.

Sometimes those offers cannot be combined.

Here’s a hypothetical example.

A customer purchasing a new Chevrolet might have two options:

Option A: Special low-interest financing without a $2,000 rebate.

Option B: A $2,000 rebate with a standard financing rate.

Which one is better?

It depends.

The amount you’re financing, your down payment, your loan term and how long you plan to keep the loan can all affect the answer.

In some situations, the lower interest rate saves more money.

In others, taking the rebate could be the better financial decision.

That’s why I believe customers should compare the complete numbers rather than focusing on one advertised rate.

At Apple Chevrolet, our finance team can help customers review the financing options available to them and understand how the numbers compare.

Does Your Down Payment Affect Your Interest Rate?

It can.

Putting more money down reduces the amount you’re borrowing relative to the vehicle’s value.

Lenders often consider this relationship, commonly called loan-to-value.

A larger down payment can sometimes improve the financing options available, although it doesn’t guarantee a lower rate.

It can also help reduce your monthly payment and the total amount of interest you’ll pay.

But I don’t believe every customer should automatically put as much money down as possible.

You still need to consider your savings, other financial obligations and how much cash you want to keep available.

The right amount depends on your situation.

Why Your Friend’s Interest Rate May Not Be Your Interest Rate

I understand why customers compare notes.

If your neighbor purchased a Chevrolet Equinox last month at a certain interest rate, it’s natural to wonder why you’re being offered something different.

But there are several things you may not know about that transaction.

Your neighbor may have financed for a shorter term, put more money down, qualified for a manufacturer promotion or purchased during a different incentive period.

They may also have a different credit profile.

Even a small difference in the details can change the available financing options.

Rather than comparing your approval to someone else’s, I recommend focusing on the best available terms for your individual situation.

My Advice After 18+ Years in the Business

When you’re shopping for a vehicle, don’t make your decision based solely on an advertised interest rate.

And don’t assume that someone else’s financing offer should automatically be available to you.

Instead, take the time to understand the complete transaction.

Look at the vehicle’s selling price, available incentives, interest rate, loan term, monthly payment and total cost of financing.

If you have a financing offer from your bank or credit union, bring it with you.

There’s nothing wrong with comparing financing options.

In fact, I encourage it.

My goal is for customers to understand the numbers before making a commitment.

The best financing decision isn’t always the one with the lowest monthly payment or even the lowest advertised rate. It’s the one that makes the most financial sense for your situation.

Have a Financing Question? Ask Me.

If you’re shopping for a new or used vehicle in Tinley Park, Orland Park, Frankfort or anywhere in the south Chicago suburbs, and you’re confused about interest rates or financing options, feel free to reach out.

Whether you’re purchasing your first vehicle or you’ve financed several over the years, I’m happy to help you better understand the process.

You don’t have to have perfect credit to ask questions, and you don’t have to purchase a vehicle just to have a conversation.

Adam Pirman
Sales Manager | Apple Chevrolet
Phone: 708-429-3000
Email: apriman@applechevy.com

Apple Chevrolet
8585 W 159th St
Tinley Park, IL 60487