In an attempt to rev up auto sales, various automakers have bombarded the market with plenty of zero percent financing offers. Qualifying for these rock bottom financing deals is much easier than people generally think. Market research and studies have shown that over seventy percent of customers who apply for this type of financing option easily qualify for these plans.
The very fact that you don’t have to pay interest on auto loans is good enough to mesmerize the auto-buying public. But, what exactly is this interest-free financing offer? Do you also qualify for the same? And, should you really rush out to an auto lot in search of zero-percent financing? Or, are there better alternatives available? You must empower yourself with answers to all these questions because only then can you make a smart decision.
Who Can Qualify?
In general, most automakers require you to have a certain amount of monthly income (the set amount varies from one lender to another) and an excellent credit rating. This is important because these interest-free financing offers are usually provided on very short-term auto loans – the loan term in most cases is 2 or 3 years.
However, you can also find lenders who are willing to offer you a loan term of up to five years. Considering the short loan term, the monthly payment is usually very high - for most consumers, this amount is beyond what they can actually afford. Following are some other restrictions that are imposed on you in order to qualify for these loan options:-
• You can choose from only a limited number of models.
• You cannot qualify for cash rebates along with zero percent financing.
• Your choices to select the right vehicle are limited to the dealer stock.
Is Zero Percent Financing A Good Choice?
Before I answer this question, here’s a recent market report that says – Only one out of four qualified applicants actually enter into the 0% auto-financing contract. Other three prefer to scoop up a hefty cash rebate instead. So, you can see that despite the fact that 70% of all applicants easily qualify for these offers, most of them don’t go in for the deal. This is probably because of the heavy cash incentives in the marketplace right now. For most consumers, cash is still the king.
On one hand, there are interest-free financing offers and on the other hand, there are cash rebates of over $2000 – which option sounds more alluring? Obviously, the option of cash rebate – and the reasons are obvious.
However, there is also a catch that most consumers are either unaware of or they just overlook it because of their excitement for the interest-free financing. The catch is that most sellers usually jack up the price of the car in an attempt to make up for the lost finance charges. Most consumers are so thrilled to get a zero percent financing offer that they simply ignore the fact that they are actually overpaying for their dream car.
However, even if there are so many catches out there, it doesn’t mean that zero-percent financing is always a bad choice. It is just that you have to be a bit more careful about it. For example, you should still research and negotiate the price of the car in order to make sure that you are not overpaying for the product. Besides that, you should study the terms and conditions thoroughly. Negotiate the down payment if it sounds too high. Negotiate the loan term if it seems too short. Overall, the basic idea here is to make sure that you get an affordable deal. What is more, do not forget to compare the deal with other loan options as well, such as one with cash rebate and others. If you still find interest-free financing a better choice, you can definitely go for it.