Before you get excited about a 0% auto financing offer, there are some things you should be aware of. You may be skeptical and wonder if there’s a catch; but you should know, many times, there isn’t. You just have to do your homework before stepping foot in the dealership. Here’s what you need to know about these low or 0% auto financing deals.
Not everyone qualifies
This kind of offer is not for anybody. In fact, most people won’t qualify. These offers are usually reserved for those with near-perfect credit scores. If you have bad credit, and are being offered a very low or no interest rate on the car you need… there may be a catch that could cost you.
It may cost you more
Before agreeing to a zero percent financing deal, make sure you know what you’re getting into. Some contracts state that if you are late with even one payment, you could have a huge rate increase, and be stuck in a high-interest loan because of one forgetful moment. With this kind of loan, you may need to be even more diligent in making your payments on time or early.
They’re usually from the manufacturer
An offer for extremely low, or zero percent interest usually come from the manufacturer, and is only for specific models. Also, many times, you’d need to purchase a brand new car to get the low financing offer.
It will be tough to get the car’s price down
Because dealerships make money on the interest of the car, a 0% rate won’t get them anything. Because of this, they may be unwilling to negotiate the price of the car down, seeing as they will already be making less because of your lack of an interest rate. If you know you qualify for the manufacturer’s zero percent financing, negotiate the dealership’s price first. Then, once you’ve agreed on the price, you can bring up your zero or low-interest financing.
You’ll probably have a very short term
To accept a 0% financing, you may have to agree to a very short loan term, which would make your monthly payments very high. If you can afford it, that may be the way to go. But if the payments are out of your price range, then you don’t want to put yourself in a situation where you can’t make your payments… regardless of how much you would save in interest. You don’t want your incredible credit score tarnished by agreeing to a loan that you aren’t certain you can afford.
Still, if you can afford it, it’s probably worth it to take the interest-free loan. If you agree to a loan with an interest rate and a longer term, you will be paying more in the long run. Even though your monthly payments will be lower, you could be paying hundreds, or even thousands, of dollars to interest.
A cash-back rebate may be the way to go
Sometimes a manufacturer will offer zero interest financing or a cash-back rebate. You’ll want to calculate how much you would spend in interest if you accept the rebate instead of zero percent financing, and subtract that number from the amount of cash you received from the rebate. Sometimes, the money you received will outweigh the interest you would pay. In this case, take the rebate.
Even without a great credit score, you could still get the car you need
That’s where FederalAutoLoan.com may be able to help. If you are in need of a car, but are unsure of whom to work with, we would like to try to connect you with lenders and dealers in your area who may be able to get you approved for a loan. After you fill out our free, no obligation application, we will send it off to our network of lenders and dealers to fight for your business. The ultimate goal is to connect you to one or more of these lenders and dealers who may help you get approved for a bad credit car loan. And with these lenders and dealers fighting for your business, you may end up with a better rate than you thought possible.