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Is 0% Financing Right for You?

By September 10, 2014 No Comments

The time has come for you to replace your vehicle. You’re sick and tired of pouring money into the one you’re driving and still having it break down.As you pull into the dealer’s lot, you see signs displaying 0% financing. Wow! What an awesome deal, you think to yourself. Put on the brakes! This 0% financing may not be as good as it looks. While it works for some people, it may not be the best option for you. Here’s why:

The 0% financing helps the dealer attract customers, but they know that the vast majority of the people who come in will not qualify for the special offer. When you find that awesome vehicle you’ve been looking for and realize you do not qualify for the 0%, you may still decide to go with dealer financing because it’s easy to do when you’re right there.

Watch out! If you don’t compare rates, you may be getting hosed. Check with local credit unions (we’d recommend Best Advantage, Lakeview, or CitizensFirst!)  before you step foot on the dealer’s lot. Shop prepared with the knowledge of what rate is competitive and what payment you can afford.  Check out our website for pre-approval options

If you qualify for 0% financing, you may have a much harder time negotiating a lower price on the vehicle. We recommend negotiating the price of the vehicle ahead of any financing discussion to ensure you get the best price on your new vehicle.

A down side to the 0% financing is that a shorter loan term is usually required, which increases your monthly payments. Even though you may pay more in the long run with a conventional loan, your monthly payments may be more affordable. And, with lower loan payments you’ll be able to put some money aside to save for a retirement fund or future vehicle repairs. The 0% loan may not leave you any money to spare.

TAKE AWAYS

1)    Compare everything! Make sure you’re getting the best deal on rate and vehicle price.

2)    Know what type of payment you can afford based on your budget before you go vehicle shopping.