In these times of global recession and financial crisis, a lot of dealers and lenders are looking into different approaches in which they can attract people to apply for a car loan. One strategy that they have come up with is the 0% finance on car. This means that a borrower can save chunks of money that would have been paid on a loan with an annual interest rate. Without blindside, this genius strategy have lured many people to bite into this offer.
Zero percent car finance is a loan deal in which borrowers are allowed to finance for a car without having an annual percentage rate. This strategy is selling like hot pan cakes because owning a vehicle nowadays is fast becoming a basic necessity. However, just like everything else in this world, this tactic does have its fair share of advantages and disadvantages.
The greatest advantage of having a 0% loan is that, it can massively reduce that overall amount that a buyer will pay upon purchasing a car throughout the loan term. This is true because buyers will only have to pay the exact amount of car that they have purchased. Even if the loan term runs for several years, they will not be trampled in an increasing annual rate.
However, there is one factor that you need to consider if you’re planning to apply for this kind of loan. This is, knowing whether there are some buyer incentives that are not offered by 0% financing. These incentives may include cash off offers or cash back options. It is very important that you sit down and take time to calculate the amount of interest that would be paid out over the loan term, of whether it is more than or less than the cash back or cash off offers.
In case that the incentive is a cash back, it is always advised to consider a practical interest that would be earned on the cash back. There are some instances where purchasing a car with a 0% financing can have a higher total price as compared to paying small interest rates but having a cash back in the long run.
Another thing that you need to consider is the loan term. More often than not, 0% finance on car usually requires 36 months of loan term. Although the length of the term does not really affect the overall price that you need to pay for a car, it may however, make the monthly payments higher than what you can afford. You should also know that, while 0% loans sounds really pleasing, it is not that easy to obtain.