Imagine, that you’re shopping around for a new car, and then see some dealer offering an extremely low interest rate – for example, 0%. Should you consider signing this contract? Or is it just a sales tactic or even a scam? There are some details that you should consider.
- 1 Is a 0% Car Loan a Scam?
- 2 Why Do Dealerships Offer a 0% Car Loan?
- 3 Is a 0% Car Loan Cheaper Than the Regular One?
- 4 What’s the Difference Between 0% Car Loans and Rebates?
- 5 Where Do I Get 0% Financing?
- 6 Do I qualify?
- 7 What Are the Advantages of 0% Car Loan?
- 8 Can I Apply for 0% Financing with No Down Payment?
- 9 Is 0% Financing a Bait-and-Switch Sales Strategy?
- 10 How to Get the Most of a 0% Car Loan
Is a 0% Car Loan a Scam?
It might not be, but agreeing to one, you should keep in mind some key questions:
- Is this interest offered for a whole term?
- Is your credit good enough for approval?
- Are you ready to pay the settled price without negotiating?
- Is this rate offered on a vehicle model you need?
- Are you willing for the loan structure to be set in stone?
If everything goes smoothly, you’ll get your new car at the agreed price and then make payments every month without any additional interest or fees (the latter may vary, though).
Why Do Dealerships Offer a 0% Car Loan?
From first glance, it doesn’t seem like a good deal for the dealer, but there’s more to this strategy than meets the eye. Offering a non-existent interest rate get potential customers into the store, so then a salesperson can work their charm on them. Also, if some vehicles have been on the lot for too long and don’t seem to sell very well, a combination with a 0% car loan might help get rid of them.
Is a 0% Car Loan Cheaper Than the Regular One?
It may be if you make all the repayments on time and get a good price on the car. It is most likely that the monthly payments will be higher because such loans usually have shorter terms.
Remember, that if a dealership accepts your application for a 0% car loan, it means your credit history is very good. With such, you’ll be able to get the best deals with private providers as well.
If your credit is not up to par though, you’ll have bad luck with the dealerships and private lenders alike. Check out Bad Credit Loans in Idaho to solve this problem.
What’s the Difference Between 0% Car Loans and Rebates?
Sometimes a dealer might give you the option to choose between a 0% car loan or a cashback rebate to be used to lower the purchase price of the car. 0% financing is usually better, but never take anyone’s word for it and always make the calculation of your budget yourself.
Where Do I Get 0% Financing?
As was mentioned earlier, such offers are made out of sales strategy – not altruism – so you’re not likely to find them through online lenders or banks, because they are not interested in selling you the car itself. Those are good places to find sufficient amount, say, a $5,000 loan fast. While looking for a car loan, check out dealer or manufacturer websites to find good deals on financing. Start with the one you’ve set your eyes on and work from there.
Do I qualify?
Always check the requirements before you come into the store – visit the website or call a dealership first. Without this, you might be attracted by the deal you have no chance to get, and then tricked into agreeing for the less-than-beneficial terms. Keep in mind, that to get a 0% financing you’ve got to have nearly perfect credit, usually a score of 700 or higher.
What Are the Advantages of 0% Car Loan?
Besides the obvious benefit, that you’re not paying any interest, there are some other pros to getting 0% financing:
- Fast repayments. This type of financing usually implies shorter loan terms, which means you’ll break free from monthly payments quickly.
- Potential add-ons. The financing might cover the cost of alloy wheels, a custom interior, a sunroof or any other luxury items, just be sure to check and negotiate the terms.
Private lenders don’t give such advantages, therefore it’s best to utilize them to borrow cash, for example, if you need a $4,000 loan or more.
Can I Apply for 0% Financing with No Down Payment?
It is sure possible, but not recommended, unless it a case of an emergency. By signing up for something like this, you’re risking to end up with an upside-down car loan, which means you’ll have to repay more than your vehicle’s worth. Therefore it’s best to make some savings a couple of months in advance.
Is 0% Financing a Bait-and-Switch Sales Strategy?
There are many dirty sales tactics, and bait-and-switch is one of them. Of course, some people do qualify for a 0% car loan and get it – no scam. These people, however, are not the majority of borrowers. They typically have high income and stellar credit, so can walk away with no interest due on their loan.
That’s why before going into the store you must be prepared: know your credit score, apply for preapproval and get a general idea of the interest rate you might qualify for. Even if there’s no chance of getting 0% APR you might still be eligible for a below-market rate. Always check the offers from banks and private lenders first, so then you can compare the rates and terms and have some negotiating power with the dealer.
How to Get the Most of a 0% Car Loan
Knowing some tips and tricks will equip you with the power to make the most of 0% financing:
- Don’t be fooled by the attractive terms of the long car loans that extend over five years. You’ll pay much more in interest than your vehicle is actually worth.
- Pay more upfront. This way you’ll be able to lower the principal and get a shorter term, so you’ll get your new car faster.
- Get preapproved. It’s a good tactic to use in further negotiation with the dealer, and it also gives you an idea of what to expect.
- Don’t rush into buying a vehicle you didn’t plan on, just because it has a good deal attached. Pick out the car you love and then calculate the finances, so you won’t regret your decision.
- If you’re getting a 0%APR you might as well get an extended warranty. It’ll give you peace of mind which is worth paying for, especially without interest.
In any case, the most important thing you can do to get the best deal is to analyze the loan market before signing into anything. Check out all the offers from banks, private lenders and dealerships and make an informed decision.