The Truth Behind 0% Financing
My father once told me, "If it is too
good to be true...then it is".
Have you ever seen the commercial on
TV or the ad in the newspaper that reads '0% FINANCING FOR EVERYONE!'.
The 'too good to be true' is dead on for the 0% financing offer
made by dealers offering financing directly from the
manufacturers. This type of advertising is more to get you into
the dealership, not provide you with the zero-percent financing
Zero-percent financing deals are
not what they seem!
There are always catch 22s to every type of 0% financing offer
made by auto manufacturers. First off, you will need perfect
credit to even be offered this type of deal. Secondly, most
interest-free loans require financing terms of three years or
less. Think about the monthly car loan payments you will have with
a three year loan.
Here is an example of what kind of costs you will be looking at
with a three year 0% interest loan. Suppose you borrow $15,000 to
pay for your new car. With a three year loan with 0% interest, you
will be looking at a payment of around $425/month. A five
year loan for the same amount at 3.9% would cost you a much
more convenient $297/month. However, if you can afford the $425
payment, go for it!
calculate what payments would be on
three year loan with 0% financing.
0% financing calls for big down payment!
Most of the time, you will be required to leave a down payment of
as much as 25% when you finance a car at 0%. If you buy a car with
standard interest rates, you may not even be required to leave a
down payment. If you are, it will be minimal, the most 10%.
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