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0% Car Loans – whats the catch?

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Many car dealers are now offering 0% finance deals when you purchase their car. Sounds great, but is there a catch?

These deals are often promoted to hook buyers in, but if car dealers are not charging interest then they will need to profit somewhere else, usually to a greater advantage to the dealer.

Much the same as a mobile phone deal. You can get the latest $1000 iphone for free, whilst paying on a monthly plan contract, but if you read the fine print you actually end up paying over $3000 over the term.

As with cars, if you take the 0% plan, you will often the price of the car is not negotiable, you will be paying full retail price. The usual negotiable discount may far outweigh the savings on interest, so its important to do the maths.

Your vehicle trade-in value may be much lower, same rule applies.

And the structure of the finance is also likely to be restrictive (term of the loan etc).

Okay, But What About “Guaranteed Price On Future Trade In”?

This is another option offered by various dealers, a “guaranteed buy back price at future trade-in” against your next new car.

At first glance this may seem appealing, but this is the same as locking you in to buying your next car from them also – very clever!

Again, the problem is that the cost of offering this guaranteed buyback price is generally an upfront loading to the cost of the car. And often these deals come with restrictions that may preclude you from taking up the offer anyway when it comes time to upgrade.

Save Money

The best way is to do your homework. Negotiate the best price on your car purchase using online tools,  websites, and comparing quotes. And compare the various finance quotes available by using a broker (us) before buying your next car.

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