What You Need To Know About Zero-Percent Car Loans | Edmunds.com


What You Need To Know About Zero-Percent Car Loans | Edmunds.com
Interest-free financing can make new cars even more attractive to shoppers. Here are some factors to keep in mind.
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2015 Subaru Outback 3.6R / 2024 Kia Sportage Hybrid SX Prestige
Zero percent loan is offered in lieu of discounts on the MSRP.
Instead of giving ten percent off on MSRP, the dealer gives Zero percent financing on the full MSRP.
One has to run the maths to see which is more beneficial .
As the article states, it may be true that you can have an incentive in the form of a rebate or the 0%, but not both. Doesn't mean you have to pay MSRP, however.
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2015 Subaru Outback 3.6R / 2024 Kia Sportage Hybrid SX Prestige
Sounds good though. With bank rates as low as they are now they can do this without having to ropll too much of that money into the price of the car.
I fail to understand why all these so called "experts" always advice putting at least 20 percent down? Making a large down payment is generally only wise if a person has bad credit. For a person with good credit, putting money down on a zero percent loan is not usually the wise choice.
Let us say you buy a $30,000 car at zero percent and put 20 percent, or $6,000 down. Your car is totaled and the insurance company pays you $27,000. The net cost to you was $3,000.
On the other hand, you buy that $30,000 car and put nothing down. Your car is totaled and the insurance company pays you $27,000. The net cost to you is also $3,000. No difference.
However, not putting the $6,000 down means you could leave the money in an interest bearing account. This would mean not putting money down lowers your net out of pocket payment to a bit less than $3,000 due to the interest your $6,000 would earn.
In addition, auto loans are usually very inexpensive for folks with good credit. Other sources of money, such as credit cards and personal loans, do not have such low interest rates. Should an unexpected situation arise, having the money available could result in a person not having to access more expensive sources for the cash.
Other than interest, not an issue with zero percent financing, or a situation where a down payment is required to obtain a car loan, there is no compelling reason to put money down when purchasing a vehicle. In fact, not putting money down can often be the wise choice as it is always better to leave the money in your possession.
I always take and recommend taking a zero or .9 percent auto loan for the maximum period allowed. As stated, you can always pay the auto loan off quicker and have the loan paid ahead. A paid ahead loan will also free up cash should a situation arise where cash is needed.
There is no increased cost taking a zero percent loan for 72 months. For a $30,000 vehicle, the cost is $30,000 regardless of whether you pay cash, finance for 36 months, 60 months or 72 months. Once again, it is almost always better to retain the cash.
GAP insurance can be wise, but not if purchased at the dealership. That will cost you money. Why, because of the several layers of profit. The provider of the GAP coverage knows what the average payout will be. Probably not more than $100. The GAP provider will sell the product to the dealer for $200. The dealer will add its profit and a profit for the F&I manager. The dealer will gladly sell the GAP product to the buyer for $600. So, the buyer pays $600 for a product which should cost them $200.
Many insurance companies provide a GAP like product for $180 to $200, far less than a dealer's price.
GAP, like any product sold by an F&I manager, is a huge profit maker for dealers. Fact is dealers make more profit in the F&I office than they usually do from selling the new vehicle. The smartest advice any car buyer can heed is to just say NO to any product offered by that smiling F&I manager, who is simply the dealer's top sales person.
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Think how good you would be feeling now if the rates had gone up?
And, as our Host said...Just enjoy your new Outback!
Sometimes Zero percent interest rate is seems too good.