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0% Car Finance – What’s The Catch?
Recently many car companies have been suggesting zero percent car finance rates on fresh vehicles. But is it such a good deal?
If car dealers are not charging interest on their finance deals they will have to make up the difference in other ways.
One way is through price. If you walk into the showroom wanting the zero percent finance deal the price of the car will often be non-negotiable so you’ll be paying utter retail whereas you can almost certainly negotiate a better price when not asking for zero percent finance.
Another way they make up the brief fall is through trade in value, so if you’re looking to trade in your old vehicle and get a zero percent finance deal expect a much lower price on the trade in.
The final area that could be effected is loan plasticity. The structure of the finance such as term of deal, balloon payments etc. will be less nimble if you’re seeking a zero percent finance deal.
So you’ve been warned, you can end up paying more for your fresh car than if you had shopped around and maybe even financed your fresh wheels through an independant broker like Aussie Car Loans.
The main manufacturers like Toyota, Holden, Ford and Nissan all suggest these deals. But be warned! You may well end up paying more for your fresh car than if you had shopped around and (maybe even) financed your fresh wheels through an independent broker like Aussie Car Loans.
Why Shouldn’t I Take Advantage Of A 0% Car Loan?
Well, if car dealers are not charging interest on their finance deals, they have to make up the difference in other ways. In fact, there are lots of ways they can do this that you need to be aware of.
1.The Price
If you walk in to the showroom and ask for the 0% car finance deal, the price is often not negotiable – you’re paying utter retail. You can almost certainly negotiate a better price with the dealer if you’re not asking for the 0% finance option.
Two. Trade In Value
If you’re trading in your old vehicle you’re likely to be suggested a much lower price.
Trio. Loan Plasticity
The structure of the finance is also likely to be less supple (term of the deal, balloon payments etc).
Okay, But What About “Ensured Price On Future Trade In”?
Another option suggested by some dealers is a “assured price at future trade-in” against your next fresh car. From a psychological (and sales) point of view, this is the same as locking you in to buying your next car from them as well – very clever!
Again, the problem is that the cost of suggesting this ensured buyback price is generally an upfront loading to the cost of the car. And often these deals come with limitations that may preclude you from taking up the suggest anyway when it comes time to upgrade.
Do Your Homework & Save $$
It’s significant that you have done your homework on car values before you go into the dealership. You need to have a clear idea of the value of your current vehicle if trading it in, as well as the price you should be paying for your fresh car. Half an hour researching car prices on a few of the online car sales sites will pay dividends here.
You can also use our car finance calculator to get an idea of your repayments and the current comparison rate to better inform yourself about what a standard finance arrangement might cost you.
Also shop around and get some car finance quotes from a finance broker (like us) before going into the showroom. At least if you do determine to take the 0% car finance option, you will have done so having taken all factors into account.
For more information you can talk to us about car finance to make sure you’re putting the best foot forward.