Tips and Tricks
Is Zero Percent Financing Worth It?
by Elizabeth Hensley
Buying a car is a big purchase. Whether you saved for years or you need a vehicle quickly due to an accident, it can cause a lot of stress. Auto dealers realize there are two little words that can make any customer go weak in the pocketbook – “zero percent.” The allure of zero percent financing is tough to beat. Or is it?
It’s important to look closely at all the facts, because 0% or low-rate financing may not always be the best deal for buyers. Generally, zero percent financing comes with a lot of disclosures that explain what you may have to give up to get that rate in the first place.
Typically, zero percent is only offered on certain types of cars. The choices can be greatly limited by the dealer. You need to do your research to see whether it is available on the car you want.
Your monthly payment may also not be what you expected. Although there are some exceptions, usually the length of the loan is much shorter when you get zero percent, meaning your monthly payment could increase above what you would be paying with a low interest rate loan. Being able to have an affordable payment sometimes means your term needs to be longer.
Discounts and rebates will usually be forfeited with a zero percent loan. This basically means that all the wiggle room with the dealer disappears. Auto dealers are in the business of making money and if it isn’t in the financing with the interest rate, it will be in the cost of the vehicle. There are many times that cost will be inflated to make up for the money they are losing on the financing end of the deal. So, forfeiting your option to negotiate a better price usually doesn’t save you any money in the end.
Even if you find the car you want with a monthly payment you can afford and an overall price you are willing to pay, you then need to qualify for the loan by applying. Unfortunately, with the dealer’s “best offer,” only people with the best credit history will be approved. Which puts the customer in a position to be offered less than favorable terms on a different loan, paying more than what you wanted.
If you’ve already been shopping and receive a zero percent offer, our loan officers would love to look at it to determine whether the CU’s financing might be even better. And if we simply can’t beat the offer, we’ll be honest and tell you. Then we will congratulate them on their new car anyway because we are here to make sure you get the best deal. Period.
There is no one better to help you through the car buying process than ACU. Call today at 800-245-8112 and speak to a loan officer about your options.
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