0% Car Financing

Zero percent financing on vehicles has been so successful that other markets, such as the credit card industry, have begun to adopt the concept. The research is quite interesting, as it shows that roughly only a third of buyers who apply for 0% car financing ultimately qualify. Further only about 10% of those who qualify actually buy a car, according to the National Automobile Dealers Association.

At first, these numbers may seem a little puzzling, until you realize one very important fact. In order to qualify for 0% car financing, an applicant needs to have near perfect credit. That’s right, near perfect credit!

Frequently, qualified buyers who receive the 0% financing, overpay for their vehicles as they fail to negotiate the price. Why? They have mistakenly assumed that they have already received the best deal available, but they are wrong.

Just because you receive 0% financing doesn’t mean you are getting the best deal possible. These offers are usually structured as “0% down or $10,000 cash back” or a similar offer. Here is an interesting fact; that $10,000 in cash that you losing by taking the 0% option is the actual cost of borrowing. This often translates to car loan rates that are, in fact, significantly higher than those of traditional car loan rates. The following is an example.

Annual % Rate 0% 6.95%
Cost of Car $29 000 $29 000
Less Rebate $0 $5000
Amount of Finance $29 000 $24 988
Monthly Payment $625 $596
Total Cost $29 999 $28 608
Savings $0 $1391
* based on 48 months
* an actual car found on the internet – 2005 mid size sedan

All you have to do is look at “Savings” at the bottom of the chart to see which option is the best. It is also possible to look at the same vehicle, only this time the vehicle in question is pre-owned and comes with 10 000 km on the odometer. Keep in mind that you are only qualified for new cars when it comes to 0% car financing.

Annual % Rate 0%(new) 6.95%(pre-owned)
Cost of Car $29 000 $19 999
Less Rebate $0 N/A
Amount of Finance $29 000 $19 999
Monthly Payment $625 $478
Total Cost $29 999 $22 944
Savings $0 $7055
* based on 48 months
* actual car found on the internet – 2005 mid size sedan

As you can plainly see, the best auto loan rate is the 6.95% rather than the 0% option. This all serves to underscore how important it is to do your research before signing up for any “special deals.”

A recommended method for securing the best auto loan rate would be to fill out an online car loan application. Simply click on Smart App Credit Application and you can fill out the application quickly and without any hassles.

This process is for car buyers with good, bad or even no credit history whatsoever. Often more than one dealership or lending company will compete for your business, which allows you to choose the best car loan rate option. This way you can spend your time researching the perfect car for you and not waste your time dealing with all the in and outs of car financing.

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