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0% Financing – Should we be enticed?

Often times when dealers want to increase sluggish sales, auto manufacturers begin to advertise 0% financing offers. At face value, these 0% Annual Percentage Rates (APRs) appear very attractive, but there are a few issues to consider before accepting this type of promotion: 

  • Credit Rating – Many of the deals are for “well-qualified” buyers only. Unless you have excellent credit, this financing rate may not even be an option.
  • Shorter Loan Terms = Higher Monthly Payments – Many of the 0% deals are for short-term loans, such as 36 months, making the monthly payment amounts much higher.
  • Down Payments – Dealers often require large down payments for you to receive the 0% special rate. In addition, most of the 0% deals will not apply to those who have a trade-in with negative equity, when they owe more on their current vehicle than the car is worth.
  • No Rebate – The customer may be asked to choose either zero-percent financing or a cash rebate. You can often fare better by taking the rebate and financing the difference at a normal interest rate.
  • Less Choice – You may be limited to what cars a dealer has in stock, resulting in sacrifice of color, style, or options. Additionally, unwanted options may be included, which can add 10% to 20% to the sticker price of a car.

  • Failure to Negotiate - Many people who go to a dealer for the zero-percent financing get so distracted by the offer that they forget to negotiate the price of the car. They don't realize the price of the car and the cost of financing are two separate issues. While they got a good rate on the loan, they can end up paying thousands more than they need to for the car by taking the 0% offer.


As a result of the above issues, only a small percentage of consumers who visit a dealer and qualify for the 0% rate actually close the deal. However, if none of these issues apply to you, a 0% financing offer allows you to essentially get money for free! A good plan would be to compare the deals offered by your Credit Union as compared to those of the auto dealer (be sure to compare apples-to-apples).

“We encourage the Members of iTHINK Financial to comparison shop before purchasing their next vehicle. Although the APR is low, the benefits of financing through the Credit Union might - outweigh those of the car dealership,” says Sandra McAdams, Assistant Vice President of Consumer Lending iTHINK Financial. 

Your Credit Union offers competitive rates, terms, auto buying services, auto insurance, payment protection, GAP insurance and mechanical breakdown protection options. Whether it’s financed at your Credit Union or the auto manufacturer, now is a great time to purchase a new car.



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