Car advertising shows that hot brand new car just begging you to buy it. The ad also says the dealer will give you 0% financing on it. Is that a good deal? Here is what you need to know about 0% financing on your auto loan.
Car dealers are out to make money - like any business. This means that they have to work to constantly get a new turnover of clients all the time. 0% financing is just one of many tools used to get the general attention of the public so that they will come and take a look. And if you are wondering - yes, there is a catch that may make their more regular offers a little more enticing - once you understand the actual offer.
Since everyone likes to think they can get something for nothing - it works to draw people to their car showroom floors. This ends up actually being an either/or situation.
0% financing allows you to make a quick discount on your car financing but only under certain conditions. For instance, in most cases it will require that you pay for the car in three years or less. This causes there to be a pretty hefty monthly payment - even without the interest. In fact, the payment on this kind of auto loan may be still be more than $100 to $150 higher than another loan even with the interest added!
Other possible subtractions from the new vehicle price most likely will not be allowed. Rebates and other dealer incentives may not be added to the deal on a 0% financing auto loan package. This places you in a position of having to make a choice. You can either get the 0% financing or the package that has the interest plus the possibility of rebates and other offers.
In order to see which deal will work best, you need to do some searching and find auto loan calculators. These will quickly enable you to see the difference between the two loans, enabling you to see which on will best fit your situation.
Some offers require that you also need to put down up to 25%, in order to qualify for the 0% auto loan. This is a pretty steep price - but certainly there are those who can afford it. With this kind of “deal,” however, many people will not even care to qualify.
If you are looking for a low monthly payment, then the choice seems to be rather obvious - 0% financing is probably not for you. For others who can afford it, it can be a great way to have the car paid for in a short time - without interest (or incentives).
Before you do any financing for an auto loan, however, it is always a good idea to shop around. Someone else may have a better deal and you do not want to pay more than is necessary for your new car. Get several quotes, do the calculations, and compare them carefully to find your best deal.