Bills.com Reveals the Truth Behind Zero Percent Financing
Zero percent financing is an attractive offer - but what are the pitfalls?
San Mateo, Calif. - March 23, 2010 - As automakers begin to ramp up consumer incentives once again, zero percent financing is returning as a popular consumer option. Bills.com, the leading resource for free, personalized and expert money advice, today shared important facts for consumers to consider when evaluating zero percent financing.
"On the surface, zero percent financing can sound like a no-brainer," said Ethan Ewing, president of Bills.com. "However, consumers must understand that zero percent financing is intended to generate foot traffic for dealers as a bait and switch tactic, and that it is sometimes not as rewarding as alternative incentive offers."
In many cases, zero percent financing can present tremendous opportunities to potential car buyers. However, consumers should first do their homework to ensure that it is actually the bargain it is marketed as by dealers and car companies.
- Remember that all dealer incentives are designed to generate car sales. The ultimate goal is to bring consumers into the showroom.
- Zero percent financing is predicated on good credit. Normally, only the best credit customers will qualify for this promotion. If you are purchasing because of the promotion, check your credit score ahead of time so you can know whether to even step foot into the showroom.
- Most zero percent financing offers come with a relatively short payback term, which can make for higher overall payments. For families on a monthly budget, it might make more sense to avoid the promotion and opt for a longer-term payback so monthly payments are lower.
- Most zero percent financing offers are only available on a limited number and type of models. Car buyers should research which automobiles are being offered as part of the promotion before visiting the showroom.
- Be wary of automobile prices that are elevated to compensate for low interest rate offers. Negotiate the price of the car independently from the loan terms. By packaging your new car price, any trade-in and your loan terms as one deal, you stand to lose money.
- Finally, explore competing promotions such as cash back offers. Sometimes, the case for a cash back award might be more compelling in the long run. For example, the monthly payment on a $28,000 vehicle at zero percent interest over 48 months is $583.33. This compares to a $572.52 monthly payment for the same vehicle with a $3,500 cash back offer and a six percent interest rate over 48 months(not including tax and title fees). Do your research carefully and compare all offers.
"Car buyers should arrive at the dealership as well-armed as possible, with an auto in mind, a set price range, and some idea of your creditworthiness," continued Mr. Ewing. "Without this information you are at a great disadvantage."
For more information about purchasing an automobile and for car-buying tips, visit the Bills.com Auto Loan Resource Center.