Zero Percent and Low-Rate Auto Financing. What is Fact, and what is Fiction?
When purchasing a vehicle with 0% financing, an automaker loses on average about $2,200 of interest on a three-year loan compared with a standard 6.5% low rate financing loan, unless he is able to get top dollar on the price of the car. When a customer enters into a 0% financing loan he loses if the loan is not paid-off within the incentive period, because when there is still a balance owed on the original auto financing of the vehicle, that balance usually qualifies for a “used” car rate, which is as much as three points higher than a “new” car rate using standard auto financing. The better alternative if you know up front that you will not have the car paid off when the incentive comes to a close would be to use online low-rate financing with a “cash voucher” or standard dealer financing.
0% Financing For Excellent Credit
0% financing for people with excellent credit who plan to pay their new car purchase off within the term of the incentive is nothing less than perfect. But, people with credit dings will find that 0% financing is usually not doable. Having your loan secured with a “letter of approval” or “cash voucher approval” gives you the opportunity to negotiate your best price prior to deciding if taking 0% financing is your best alternative. Weigh all of the options available to you equally to determine if 0% financing on a new or used vehicle is right for you.
Auto Makers Offering Great Incentives
Many Automobile Dealers can entice prospective buyers with attractive incentives to use dealer low rate financing. Please do your homework before you buy into any auto financing. Before you even think about the auto financing portion of the deal, figure out the fair price of the car and negotiate that price.
If you have excellent credit, and you can qualify for 0% financing, you must first make a decision, do you want 0% financing or do you want a rebate if available? You will not get both!
Compare what your total costs would be at 0% to the type of financing you could get if you chose the rebate and used standard dealer low rate financing or (online auto lender “cash voucher” financing). The larger the amount that you finance or borrow, the more advantageous the 0% would become once you are certain that you can pay a 0% financing off in the required time period. Ultimately, the decision is yours to make!