Should You Get 0% Car Finance?
How does 0% car finance work?
Zero per cent car finance means that for the period that the zero per cent feature applies to your car loan, your car loan payments will only include the purchase price of the car.
It's good because it keeps your initial loan repayments low, but before you sign up for a 0% finance loan, make sure that you read the fine print.
Where will I find 0% car finance offers?
Zero per cent finance is usually offered at the dealership when you finance your car through the car dealership where you purchase it.
It's a sales tactic that can be used by car manufacturers to get buyers in the dealership door and sell more cars.
The reason that you won't find zero per cent car finance through a car loan broker or a bank is that the costs of lending the car purchase price have to be included.
The car dealer has an advertising advantage here because they can include the costs of providing car finance into the purchase price of the car by:
- Giving you a lower trade-in value on your old car
- Balloon payment and loan term may not be flexible
- The purchase price of the car may be non-negotiable.
When should I consider 0% finance?
The advantage of zero per cent car finance is that your car loan payments will be lower for the period that zero per cent is applied to the loan. This means that you can more easily afford the repayments when you initially purchase the car.
Taking your finance through the dealership may give you access to capped price servicing, as well as a higher loan amount, especially if you have a deposit.
You'll usually need to have a trade in or deposit, a good credit history, and usually a shorter loan term. With zero per cent finance, you may also need to be willing to accept the sticker price on the car, rather than negotiating a price.
How does 0% finance compare to a regular car loan?
Zero per cent car finance is generally available at the dealership, and it can be hard to compare the real value of the purchase with the same car purchased using a regular car loan.
A zero per cent loan will often have a large residual or balloon payment due at the end of the car loan. With a regular car loan, you can choose to have a balloon payment or to reduce your repayments by putting a deposit towards the car purchase.
At the end of a regular car loan with interest, you can choose to own the car fully, meaning that you are debt free once your car loan term ends.
The zero per cent portion of the car finance may not extend for the entire loan term, so make sure that you understand how long zero per cent applies, when it will increase, and the rate that it will increase too. This will allow you to compare it more accurately to a regular car loan.
How do I find the best car loan deal?
To make sure you find the best car loan deal, you need to make sure you understand what car loan payments will be due at each stage.
With this information, you can more accurately compare car loan options to get a great deal.
Remember that the purchase price of the car determines how much you have to borrow. With a car finance pre-approval in place before you go to the car dealership, you are free to negotiate the purchase price of the car that you're considering.
Positive Lending Solutions can help you with a car loan pre-approval, or to get the right car loan if you aren't eligible for the zero per cent finance.
Benefits of comparing car loans
Rather than offering a single finance option, you'll be able to compare your finance options across a range of car loan lenders in one place.
With the best possible car loan deal in place, you're ready to tackle the car dealerships and negotiate the lowest price and car features that you want. You can even change your mind and buy a secondhand car.
Don't hesitate to get a car loan pre-approval in place, there's no obligation if you do find a better deal, but it gives you a great negotiating tool at the dealership.