Recently many car companies have been offering low interest or 0% car finance interest rates on new vehicles; which at face value of course looks like a great deal. But is it?
The main manufacturers like Toyota, Holden, Ford and Nissan all offer these deals. But be warned! You may well end up paying more for your new car than if you had shopped around and (maybe even) financed your new wheels through an independent broker like Aussie Car Loans.
Why Shouldn’t I Take Advantage Of A 0% Car Loan?
Well, if car dealers are not charging interest on their finance deals, they have to make up the difference in other ways. In fact, there are lots of ways they can do this that you need to be aware of.
If you walk in to the showroom and ask for the 0% car finance deal, the price is often not negotiable – you’re paying full retail. You can almost certainly negotiate a better price with the dealer if you’re not asking for the 0% finance option.
2. Trade In Value
If you’re trading in your old vehicle you’re likely to be offered a much lower price.
3. Loan Flexibility
The structure of the finance is also likely to be less flexible (term of the deal, balloon payments etc).
Okay, But What About “Guaranteed Price On Future Trade In”?
Another option offered by some dealers is a “guaranteed price at future trade-in” against your next new car. From a psychological (and sales) point of view, this is the same as locking you in to buying your next car from them as well – very clever!
Again, the problem is that the cost of offering this guaranteed buyback price is generally an upfront loading to the cost of the car. And often these deals come with restrictions that may preclude you from taking up the offer anyway when it comes time to upgrade.
Do Your Homework & Save $$
It’s important that you have done your homework on car values before you go into the dealership. You need to have a clear idea of the value of your current vehicle if trading it in, as well as the price you should be paying for your new car. Half an hour researching car prices on a few of the online car sales sites will pay dividends here.
Also shop around and get some car finance quotes from a finance broker (like us) before going into the showroom. At least if you do decide to take the 0% car finance option, you will have done so having taken all factors into account.