What do I need to look out for with 0% for very low % Dealership loans?
Recently many of the car companies have been offering low interest or 0% interest rates on new vehicles – which at face value of course looks like a great deal. But is it? The main manufacturers, like Toyota, Holden, Ford and Nissan all offer these deals, but be warned, you may well end up paying more for your new car than if you had shopped around or financed your new wheels through Ask 4 Finance.
Why?
Well, if car dealers are not charging interest on their finance deals, they have to make up the difference in other ways. And there are lots of ways they can do this that you need to be aware of.
Let’s look at price first. If you walk in to the showroom and ask for the 0% finance deal, the price is often not negotiable – you’re paying full retail price for the car, and let’s face it, who pays full price anymore. You can almost certainly negotiate a better price with the dealer if you’re not asking for the 0% finance option.
Secondly – trade-in. If you are trading in your old vehicle, you’re likely to be offered a lower price, plus the structure of the finance is also likely to be less flexible. For example, the loan term may be over a shorter period than you originally anticipated which could drive up your weekly loan commitment.
Another option offered by some dealers is a guaranteed price at future trade-in, against your next new 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 for the dealer, but they may not have the car you are looking for next time you want to buy a car.
Again the problem is that the cost of offering this guaranteed buyback price is generally an upfront loading to the cost of the car. Generally there are many hoops to jump through for you to qualify for one of these loans, so the dealerships just use these offers as a hook to get you in the door and more often than not end up offering you a “normal” loan anyway.
It’s important 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 you are going to be trading it in, as well as the price you should be paying for your new car. Half an hour researching car prices on a few of the online car sales sites will pay dividends here.
It’s in your best interest to always shop around and get some car finance quotes from a finance broker (like us) before going into the showroom. We have many different lenders and loan structures that we can offer you to make sure that you are getting the very best loan for your own situation. At the very least if you do decide to take the 0% finance option, you will have done so having taken all factors into account and know exactly what you are in for.
