What Does Zero Percent Financing Mean to You?

It’s more than simply a great deal

We’ve all seenZeroPercent_Featured the advertisements on TV, whether for your local automotive dealer or a national auto brand: no money down, zero percent financing or some similarly unbelievable deal. Typically, as with all things that seem too good to be true, there is a catch. In the case of zero percent financing, it’s the ambiguities explained thoroughly in the fine print.

To avoid all that over-defined jargon, find out here what zero percent financing really means:

You’ll probably have higher payments – According to Kelley Blue Book, these zero percent deals usually require a shorter-term loan, so monthly payments end up being much higher than they would be with a conventional auto loan. Many people opt to keep their monthly expenditure lower and go with a longer-term loan, even if they end up paying more in interest in the long run. KBB.com also notes that there are exceptions in which zero percent financing is offered for longer terms, so make sure you do your research before signing on any dotted lines.

You don’t need perfect credit to qualify – Jaded adults who think they know the “credit game” likely believe they could never qualify for zero percent financing with a less-than-stellar credit score, but that is not always the case. Some finance programs are trying to go after an expanded audience of buyers, so unblemished credit is not required in all cases.

It applies to only a limited number of models – To receive zero percent financing, you typically must buy a car right off the dealer lot—no special orders—and there is likely a predefined model and package that qualify. In other words, with zero percent financing, beggars can’t be choosers.

You can usually choose between zero percent financing and a cash rebate – The financing deal is usually offered in an either/or situation with a cash rebate, and you must choose between the two.

You can still negotiate a lower price – Some think that because you are already seemingly getting a steal on your financing, a dealer will not negotiate the price of the vehicle with you. However, that is not always the case.

“A reputable dealership will be open to negotiating the deal before applying the zero-percent financing to your sale,” KBB.com says. “As always, we recommend you do your homework before buying.”

There are other great interest rates available to you – If the car you have your heart set on does not qualify for zero percent financing, or you had a very rough year in the credit department, there are lenders that offer interest rates lower than most dealers can offer. For that reason, again, explore all your options before making any decisions.

With all these facts in mind, many people will be attracted to zero percent financing. Although the zero-percent trend has been around for a couple of years, most industry experts believe it can’t last forever. With the advent of lower interest rates and flexible terms, today’s car buyers are finding more creative financing options than ever. And with today’s economic challenges, these programs will continue to bring buyers into dealerships.

Your best bet is to stop in to your local financial institution and speak to them about the rates they have so you know what kind of deal you can handle before you head to the dealership.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

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