Is 0 Percent Really Going to Save You Money?Credit: www.sherwooddodge.ca
You have heard before in advertisements or read it on billboards, a loan with zero interest! The first possible reaction is wondering how that is possible; hence approach to the idea with skepticism. Why would any company offer financing on new cars and offer no interest?
Although it is very hard to come by these days, zero percentage financing plans are one of the most popular incentives for the automobile industry. It is offered by well-established automotive dealers through their finance departments. In other words, it is a form of dealer car financing whose primary purpose to attract new customers.
The same way they offer cars with cash discounts; car dealers pump funds into their finance departments and in essence pay the loan’s interest for particular models. The model of zero financing will differ from one dealer to the other based on the cost of the vehicle and the term for repaying the loan.
This mode of incentive came into being after the automobile industry faced a decline in sales after the catastrophic 9/11 incident. It was meant to bring back the customers and rescue the dwindling fortunes of the automotive industry. Since then, it has become a prominent feature in the industry with offers popping here and there occasionally.
Does 0 Percentage Financing Work?
Largely, it does work. As a matter of fact, industry players see it as one of the most efficient way of inviting customers to get new car deals. When you look at it keenly who wouldn’t be enticed by a plan for financing on new cars where another party caters for the loan interest?
The dealers get what they want when launching the program; customers milling into their business premises. Although zero financing is applicable to particular models, it is an innovative way to increase sales on the dealer’s part and an incredible opportunity to get an expensive car at a cheaper price on the buyer’s part.
Separating the Facts and Fiction on Zero Percentage Car Financing
Zero percentage financing somehow set new car loan rates for specific models across the industry. For instance, if a particular model has a 0 percentage offer by its manufacturer, other models in the same class will sell at a price that nears the offer by competitors. With that mind, here are important facts you should know about zero percentage car financing.
You will be required to pay the loan in a shorter period, a fact that translates to higher payments. One of the main differences with zero percentage financing and other conventional loans is the fact that the repayment period is shorter. This can be attributed to the fact that the dealers want their money back relatively fast, so the customer has to deal with paying huge installments. However, this rule is not cast in stone, and there are exceptions to it where customers are allowed to pay in the long term.
Your credit history has to be perfect if you have to qualify for this financing program. This could be a way of owning the cheapest new car, but your credit history has to be flawless. Again, there are exceptions to this rule but even then the dealers have categorized the plan into different categories. If your credit history is blemished, you may qualify for the offer but may not enjoy some of the benefits that are contained in premium packages.
Zero percentage financing is only available to a selected number of models depending on the dealer. The models on which to offer this incentive is determined by the manufacturer thus you cannot order for any model and hope that it will have a 0 percentage finance plan on it.
Zero percentage financing plans are available in an either or situation with a cash repayment, and the customer must opt between the two. This is the formula in most cases irrespective of the car dealership you are transacting with.
You don’t have much negotiating room. The 0 percentage car financing is one of the easiest ways to get the best new cars but you should also acknowledge the fact that once you qualify for this offer you your chances of negotiating for a better deal are almost nonexistent. However, the most well established and reputable dealer may be willing to cede ground. You can negotiate for a better rate, but the financing on new car deal must be sealed before the zero percentage financing is applied to your purchase.
There are other financing options for buyers who don’t meet the minimum qualification requirements for this type of car financing. In fact, there are new car loan rates offered by some dealers that can rival the earlier mentioned financing plan in terms of interest. The most important thing to do is shop around for the financing options whether you want to buy or lease a car.
With the above-outlined facts, it is not surprising to see why many people are attracted to 0 percentage car financing. While this financing plan has been in the industry for some time now experts believe that its sustainability is limited, and it’s only a matter of time before dealers do away with it. There are any financing institutions offering low-interest rate on loans and most buyers who can’t afford the 0 percentage financing plan opt for them. In addition, there is an advent of new innovative lending options being created each day.
Financing on new cars is taking exciting turns as dealers try to entice customers to buy from them. If you can afford to pay the huge installments that zero percentage car financing is associated with, it might not be a bad option after all. However, you need to be aware of that fact that even though the plan is labeled as “zero”, the possibility of hidden costs still exists.
It is recommended that you do your mathematics correctly before heading into the dealership. As mentioned earlier on, 0 percentage financing is not all there is to getting your car purchase funded. There are many options available, and the fact that you can’t qualify for this plan doesn’t in any way mean you can't own a car of your choice. In fact, conventional car loans are much affordable due to the low repayment amounts.