Credits and Loans
Should I Get 0% Financing?
You constantly see advertisements for 0% financing. But oftentimes, it seems too good to be true. You think to yourself, “there must be a catch.” Essentially, 0% financing is when lenders allow you to purchase on credit without charging you a fee for that credit usage. There are a variety of cases when the offer is worth it, but there are some potential costs of 0% financing.
Lets take a look at some common 0% financing offers when purchasing an automobile:
0% Financing or Take the Cash Back Offer. In many auto loan 0% financing offers, the lender will present you with a scenario – You can take the 0% financing or a special cash back offer. So, the first thing you must do is figure out which option is better for you in the long run. For example, if you save $3,500 in finance charges by getting a 0% rate, but forego a $5,000 rebate, you are actually coming up $1,500 short on the deal. It’s important to take your time, ask questions and do your homework before you choose one option or the other.
Higher Purchase Price. In some instances, you’ll pay a higher price for your car or truck if you go with the 0% financing offer. If you pay a higher price for the purchase, you may be giving back some of your 0% financing savings. Before you discuss financing terms, it’s important to nail down the exact cost of your purchase. By doing this, you ensure that you are getting all the benefits a 0% financing deal can offer you.
Read the Fine Print. Fine print in any contract can be a killer. In some 0% offers, you may have a contract clause that adds fees or surcharges for late payments or even adds an interest rate to your loan. For example, if you make a late payment or two, you may end up losing the money (and possibly even more) you saved by accepting the 0% finance offer.
Check Out the Contract Term. In many 0% financing offers, the contract term is shorter than traditional financing offers. With a shorter contract term, you will typically encounter higher monthly payments. So if you are striving to minimize your monthly payment, you will typically want a long term loan rather than agreeing to something shorter.
In the end, 0% financing may be a good deal for you. However, you must remember to do your homework and determine the cost associated with taking the financing option. We’re happy to answer any questions you may have about this sort of financing or auto loans in general. Simply click here or call us at 800.763.4444.