Is 0% financing good?

Because many car dealers offer 0% financing, you may be confused and want to know this ratio from

This is great? from

  Unfortunately, in many cases the answer is from

Yes.

Before we determine if 0% interest is too good to be true, it is really important to understand how 0% of financing is. When you get a car loan, you know that you are borrowing money to buy a car. Banks or credit unions will not provide this money for free. Instead, you have to pay interest, or the cost of lending money to the financial institution.

In this sentence, "If it is really good, it may be too good to be true." This is definitely something you should remember when looking for a car loan. Many times 0% is a "pre-announce rate", meaning that getting you into the door may not work for you, or may not be the best for you.

The problem with 0% financing is that not every potential car buyer is eligible for this ultra-low financing. Too high an honest rate applies to people with a high credit score, a good credit history, and little or no debt. This means that only about 5% of the population is eligible for a 0% ratio. And, if you qualify, you're likely to get a higher payment in a shorter period of time, which can be difficult to include in your monthly budget. If you don't belong to this category, you may fall into higher interest rates.

You may be surprised to find that even if you are eligible for 0% financing, you may spend more in the long run. If the dealer offers you a 0% choice or cash rebate, you can save money by getting rebates and financing through your local credit union - even if their interest rates are higher. Let's do math:

Credit union and Dealer car loan

• Vehicle purchase price: 20,000 USD

• Cash rebate instead of 0% financing: $3,000

• Amount of funds: $17,000

• Interest rate: 2.49% annual interest rate or 0% with dealer

• Loan period: 48 months

• Monthly payment: $372.46 - $416.67, financing 0%

Total loan savings / life: $2,122.08

There are many reasons for getting a credit card auto loan. Here are just a few:

Credit unions have a relationship with the car dealership's funds and health to provide loans.

If you have a credit problem, you have a better chance of getting a loan approval.

Credit cooperatives are non-profit organizations dedicated to providing high quality customer service to members.

Members tend to have a more personalized experience in credit unions, so you can openly discuss your concerns about loans, discuss flexible repayment options, and review your financial situation.

If you are having trouble paying, credit unions are more likely than traditional banks to work with you because they are more coordinated with the local community.

You can get a lower monthly payment through your credit union because the lower car loan rate applies to longer term loans and shorter term loans.

You can save on the total cost of the loan because the credit union does not charge an application fee or a prepaid penalty.

So, next time you see the 0% rate, do your homework and get pre-approval from your local credit union before you buy your dream car. Informed buyers are definitely the best buyers!

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