If you are in the market for a new car this year, you are probably pouring over consumer reports, considering projected mileage and even re-sale value. But what about financing? Automakers and dealerships are encouraging people to buy environmentally-friendly hybrid or even 100% electric cars with attractive financing options, commonly called “green car loans.”
If you are thinking about a new Chevy Volt or Nissan LEAF, a green car loan will help you save both money and the environment. Compared to traditional auto financing, you can expect: (1) lower interest rates; (2) lower or no down payment; (3) waived loan origination fees; and (4) greater flexibility in repayment (i.e. no prepayment penalties, the option of paying more frequently and dividing up payments into smaller amounts.) Some green car financing options even allow you to set a date each month on which your payment will come directly out of your account – never worry about a missed payment again!
Of course, you need to be a well-qualified buyer with a good credit history to receive the best terms on a green car loan. But generally speaking, you’ll pay less over the course of an auto loan for an eco-friendly vehicle than if you took out a loan for the same amount for a “traditional” car.
The types of cars that are eligible for a green car loan have:
1. A Greenhouse Rating of 7 or above
This factor speaks to the CO2 emissions of the car. With a greenhouse rating of 7 or higher (for cars manufactured after 2008), the vehicle must emit less than 375 grams of CO2 per mile.
2. Two Years Old or Less
While green car loans are available for both new and used vehicles, used cars can only be 2 years old or less at the time of purchase.
3. Other Factors
It should go without saying that you must be able to generally qualify for a car loan, in order to be eligible for a green car loan. This includes monthly income, residence, proof of income, etc.
Green car loans will vary depending on the financing company and auto manufacturer. Be sure to ask about financing incentives when you shop for an eco-friendly car!