You’ve all heard and seen the car ads lauding the magical zero percent financing offer from all corners of the automotive industry. It targets our consumer instinct that lower is always better. Run to the dealership and sign a deal before it’s gone!
Is zero percent financing always the best option? No, not always.
Where does the offer fall short? How does it change the terms of negotiation?
For starters, taking the zero percent offer inhibits you from attaining a price well below the manufacturer suggested retail price.
In most cases, cash rebates are not available on zero percent loans. Going to a bank rate when interest rates are relatively low (currently about 4.24%) and taking advantage of a $3000 dollar up front rebate could actually save you money and make your monthly payment lower.
With a small down payment, and no rebate, zero percent financing can leave you falling behind the depreciation rate of your shiny new ride. In two years you’re looking to trade it in, and you wind up having a big financial gap to pay off or you will have to roll the negative equity in to the new vehicle loan.
Less than excellent credit? You may not get approved. This special rate is often only available to those that have favorable credit ratings.
Are you able to actually get in the vehicle you want at zero percent? Perhaps not! Popular models in a manufacturers line up often are not offered at this rate. Are you going to compromise on getting your dream ride if you cannot get zero percent financing?
Now, I’ve told you some of the cons of the zero percent financing program. But, when could it be favorable?
When you have a high down payment and are financing a smaller sum of money over a shorter period of time, zero percent can be really advantageous.
Rebates offered on the vehicle may not compensate for the interest payed over a long term finance. Stretching out your payment to 7 years, the zero percent deal may save you more money than the bank rate with the rebate factored in.
You’ve researched models, colors, engine sizes, technology upgrades, etc. How well did you investigate the financial options for your new or used vehicle? Being more informed will always help you make the right decision and not get taken advantage of.
I always look to find the best deal for my customers. We run the numbers and always try to get you the long term best monthly payment that saves you the most money.