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What could possibly be wrong with a
zero-percent auto loan? Plenty, particularly if you
can't get the zero-percent deal or if you get so excited
by the financing offer that you forget to negotiate
a good price for the vehicle.
Whenever dealers sweeten their deals for
auto buyers, consumers should evaluate the offers carefully.
Even a zero-percent loan doesn't automatically mean
it's a good deal or that it's the right one for you.
Interest-free deals are reserved for customers with excellent credit. Just how good your credit needs to be varies by automaker. Each automaker has its own financing company with its own credit qualifications.
Most interest-free financing offers require
financing terms of three years or less, so you'll have
to shell out some pretty hefty monthly payments if you
qualify.
Let's say you're borrowing $20,000 to
pay for your new car. With a three-year term at zero-percent
interest, your family would have to shell out more than
$555 per month in car payments. A five-year term at
3.9 percent with monthly payments of $367.43 may be
more manageable, even though you'd have to pay interest.
Compare loan rates
As tempting as a dealer's discount financing may seem,
don't overlook deals from local banks and credit unions.
The Bankrate.com
auto rates search engine will help you compare car
loan rates in your area.
It's wise to have an auto loan ready to go before you set foot in a dealership. That way if a dealer wants your financing business, he's going to have to beat the best rate you've found on your own.
By shopping ahead, you'll learn what kind
of financing deals you qualify for. The dealer won't
be able to talk you into signing for a loan with a higher
interest rate than you deserve.
Whether you land an incentive or not,
it's important to negotiate the price of the new car,
as well as the price of your trade-in vehicle.
Intellichoice.com,
Autoweb.com,
Edmunds.com,
AutoSite.com,
Autopedia.com,
KelleyBlueBook.com
and CarPrice.com
are among the sites offering timely pricing information.
Do your homework.
"A consumer has to be very, very well-informed," says Robert Holb, owner and general manager of Consumers Auto Consultants. "Carefully, carefully research it. Be prepared to leave if you're not absolutely certain that's the vehicle you want and the best price."
Be sure to visit several Web sites when researching pricing information. Everything from sticker price to customer rebate information may vary. It's wise to cover all the bases. When in doubt, contact an auto manufacturer directly.
Be sure to ask about regional incentives.
You could save hundreds, maybe thousands more, by snapping
up a local incentive.
Don't forget to negotiate the price
Too many people equate landing a big incentive with landing a good auto deal. They're not the same thing. A big incentive can help you land a good auto deal, but it's no guarantee.
Lots of new-car buyers learned that lesson the hard way in past years. They nabbed zero-percent financing, but failed to negotiate the price of the car.
"There were many, many people who paid much more than they needed to," says Holb.
Many folks would have been better off negotiating the price of the car, snapping up a cash rebate and taking a loan from a local bank or credit union.
Not sure how to choose between discount
financing and a hefty cash rebate? A calculator
from Bankrate.com will help you crunch the numbers.
Keep in mind -- anyone who purchases a vehicle with a cash rebate gets the rebate. But not everyone qualifies for discount financing, especially those zero-percent deals.
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