0% Auto Loan Financing: Is It Really Free Money?
Who doesn’t love a good deal? Everyone! So, it’s no wonder that people get excited about 0% auto loan financing. Many questions abound about this almost mythical loan option.
What is it? How does it work? We dive in and answer the most common questions.
What Does 0% Finance Mean?
It means that you’re borrowing money to buy the vehicle but paying no interest on the money borrowed. Essentially, you’re paying the same amount a cash buyer would but with the privilege of spreading payments out over a set term.
Who Offers 0% Financing and Why?
Automakers generally offer this type of loan to sell more of a particular vehicle. For example, 0% financing typically occurs during the summer to grow more sales for outgoing models.
What is the Catch with 0% Financing?
There isn’t one. The carmaker picks up the tab just as it does with traditional cash back rebates.
How Hard is it to Qualify for 0% Auto Financing?
It all comes down to your credit rating. You’ll need to have an outstanding credit score as well as a long history of having good credit.
That means you’ll most likely need a credit score of 700 or above.
You can check your credit rating on our site.
What are the Terms of a 0% Auto Loan?
Terms vary. Some terms can be as short as 36 months. Others can be as long as 72 months. While you won’t pay interest on this type of loan, you want to be careful about stretching out payments for that length of time.
If the car you buy depreciates faster than you can pay off the loan, you’ll owe more than the vehicle is worth. No one wants to get upside down on their loan!
If you need to make lower monthly payments, choosing a new car loan with a relatively low interest rate may be the better option than zero percent financing.
Which is Better, 0% Loan or Bonus Cash?
Sometimes you have a choice between a loan with a very low interest rate or getting bonus cash. That choice is sometimes offered with zero percent loans. Which is the better option to take?
It depends.
The cash incentive must be sufficient to offset the finance charges. Take this scenario, for instance. Let’s say you’re buying a $30,000 car and you have $3,000 to put down.
Additionally, you’ve qualified for a car loan with a 5% interest rate. Which financing route should you take?
In this situation, you would need a cash incentive of $3,575 to make the 0% loan a better option. Here at Joe Bowman Auto Plaza, we’ll work with you to find the very best financing option for you!
Some Do’s and Don’t’s for 0% Percent Loan Options
Remember, just because you qualify for a zero percent loan, doesn’t mean the vehicle is right for you. Make sure you buy the car you really want.
Always test drive the vehicle to make sure it suits your lifestyle and your needs. Do get pre-approved for a car loan before you go car shopping. It’s always good to have a backup plan.
Don’t skimp on the down payment. Yes, you may have the option to put nothing down, but always put something down. If you can, go for 20% down to offset depreciation.
Don’t get a loan for more than 60 months. Why go longer? With a shorter term loan, you can drive a car you still love without the additional payments and depreciation will be less.
Choose a Reputable Car Dealer
No matter what loan you qualify for, always choose a reputable dealer. Our Harrisonburg dealership has been serving the area for 60+ years.
Whether you qualify for 0% auto loan financing or for one of our other competitive loans, we will clearly explain everything to you.
We want your car buying experience to be a good one!
