Advertisements for cars show that hot, new car begging you to buy it. The ad also says that the dealer will let you pay for it for free. What do you think? Here's what you need to know about getting a car loan with 0% financing.
Just like any other business, car dealers want to make money. This means that they have to work hard to get a steady stream of new clients. Zero percent financing is just one of many ways to get people's attention and get them to come and look around. And if you're wondering, yes, there is a catch that may make their regular offers a little more appealing once you know what the real offer is.
Since everyone likes the idea of getting something for free, it works to bring people into their car showrooms. This ends up being a choice between two things.
With 0% financing, you can quickly save money on your car loan, but only under certain circumstances. For example, you'll usually have to pay for the car in three years or less. This means that the monthly payment is pretty big, even without the interest. Even with the interest added, the payment on this kind of auto loan may still be $100 to $150 more than another loan.
Most likely, you won't be able to take anything else off the price of a new car. Rebates and other dealer incentives can't be added to an auto loan package with 0% interest. This puts you in a place where you have to choose. You can either get financing with no interest or a package with interest and the chance of rebates and other deals.
Find auto loan calculators and do some searching to find out which deal will work best for you. These will help you quickly see how the two loans are different, so you can decide which one will work best for you.
Some offers require you to make a down payment of up to 25% in order to get a car loan with no interest. This is a pretty high price, but there are certainly people who can pay it. But with this kind of "deal," many people won't even try to see if they qualify.
If you want a low monthly payment, it seems like the choice is pretty clear: 0% financing is probably not for you. For people who can afford it, it can be a great way to pay for the car quickly and without paying interest (or incentives).
The best thing to do before getting an auto loan, though, is to shop around. You don't want to pay more than you have to for your new car because someone else might have a better deal. To find the best deal, get several quotes, do the math, and compare them carefully.
