0% Financing — Great Deal or Not?
With an excellent credit score, 0% financing on a new car can indeed be yours. Something to strive for? Maybe, maybe not.
You may find you can get a better deal on an auto loan by going to your local bank or credit union. (Better than 0%, you ask? Read on...)
Here’s the thing: Before you sign on the dotted line, you need to be aware of the caveats (not to mention all the fine print details) associated with 0% financing.
1. Limited Models. 0% financing is normally offered on vehicles that have a very low demand. These vehicles typically depreciate faster and have a lower resale value than higher-demand vehicles. Another negative is that some dealers force you to choose vehicles that are in stock, so you can’t choose color or options or other features that you may want.
No-Nonsense Way to
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2. Factory Rebates Don’t Apply. Generally, consumers must forfeit the factory rebate on their new vehicle in order to take the 0% financing deal.
3. Shorter Loan Periods. Most 0% offers are for short time periods — usually 12, 24, or 36 months. As a result, your monthly payment may be higher than you had originally planned.
4. You May Not Be Eligible. Dealers often restrict 0% financing to those buyers with immaculate credit records and/or may require a large down payment. If you don’t qualify for 0% financing, you’ll likely be bumped up to a much higher interest rate.
In general, it’s important to carefully analyze all components of your dealer’s offers and compare them to other lenders. Take a look at things such as annual percentage rate (APR), length of loan and vehicle cost, because ALL of those factors will affect the final price you pay.
The following illustrates the advantages of an outside auto loan at 3.99% compared with a 0% dealer loan. When the rebate is used as a down payment on the vehicle to reduce the amount financed, the savings are clear.
Because of that $2,000 rebate, the loan amount was knocked down to $23,000 from $25,000. At 3.99%, interest only amounted to $1,442 over the life of the loan, saving the buyer $558 more than the buyer who took the 0%, no-rebate deal.
Our advice? Look at ALL options, including 0%, but also different loans and rates where you can keep all of the dealer perks and incentives.
Good Credit Gives You OPTIONS
We hope you’ve enjoyed this report...and we hope that we have convinced you that you CAN clean up your credit and save money on more things than you may have even realized.
If you are serious about conquering your credit, you may want to read more free credit advice at Dolans.com, including:
This may sound corny, but we consider it our mission in life to help people like you not only SAVE more money — but MAKE more money, invest more wisely, and build the kind of lifestyles that only the wealthy dream about!
Imagine being able to wake up every day with the comfort of knowing you have plenty of money in the bank...zero debts...stellar credit...a rock-solid investment portfolio...a secure financial future. It can all be yours!
Stick with us at Dolans.com and we can help you make that dream a reality. Dolans.com is chock-full of easy to understand, proven advice you can trust on all your important money matters. Visit us regularly and let us help you save more, conquer your debt, invest wisely and make smarter, more confident money decisions each and every day.
Ken and Daria Dolan
Dolans.com: Money Made Simple
P.S. Before we close out this credit piece… we thought that you might be interested in seeing an e-mail that we often get from our dolans.com family and our answer:
If I negotiate a settlement on the debt on my credit cards, how is this perceived by the Credit Bureaus and by banks if I attempt to purchase property in the future?
Unfortunately, credit card companies don't negotiate settlements with consumers who are able to keep up with their minimum monthly payments.
In order to settle your credit card debts for less than the full balances, you are going to have to stop paying each month and fall behind on them.
So, at a minimum, your credit reports are going to list late payments for the accounts you stop paying.
In addition, once you settle a credit card debt it will typically be reported to the credit reporting agencies as either a charge-off or as "settled for less than the full balance." As you can imagine, be seriously negative remarks will dramatically affect your credit scores.
If you do decide to settle your debts, it will take time for you to rebuild your credit in order to qualify for new loans. How long it will take will depend on many factors, including how pro-active you are about rebuilding your credit. But you probably shouldn't anticipate that you will probably be able to buy property in the next couple of years if you go this route.
Of course, if you are having trouble paying down your debts, then the alternative - continuing to chip away slowly at the debt - may make it difficult for you to qualify for loans as well. Ultimately, you need to make a careful financial choice here and not just base your decision on your credit reports and scores.
Super book:
A very dependable source of actionable information on matters of credit is available both at www.UltimateCredit.com and in an excellent book written by our friend and credit expert, Gerri Detweiler..."Reduce Debt Reduce Stress: Real Life Solutions For Solving Your Credit Crisis" available at UltimateCredit.com and on Kindle.