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Is 0% Car Loan Financing the Best Option? The Answer May Surprise You.
While the voiceovers in car commercials sure sound excited about 0% APR financing, this offer isn’t right for all people all of the time. Consider these important factors if you’re in the market to buy a new/used car or truck:
You might pay more. Some things really are too good to be true. Car dealerships will often make vehicle price negotiations tougher in order to gain back some of the money lost through 0% financing. They may also offer you less on a trade-in for the same reason. When you do the math, it might save you more to finance a lower-priced vehicle at a competitive interest rate over taking the 0% offer.
Qualifying could be a challenge. Dealerships know this is an incredible deal and are understandably cautious in offering it willy-nilly. Like all businesses, they must minimize risk; this means minimizing the chance that the loan defaults. 0% APR is often only available to those with exceptional credit, and automakers typically don’t disclose credit score thresholds to shoppers. You may come in for 0%, not receive the rate, and then be offered a higher rate than you would have had you come to your credit union first for financing.
The terms may be outside your control. 0% offers often require you take the loan out for a set length of time – one that can’t be negotiated. If you have to pay off the loan within a shorter period of time (36-months, for example), the monthly payments may become unaffordable for your budget. If you have to take out a longer term (perhaps 72 or 84-months), you risk becoming upside down on the vehicle and owe more on it than the vehicle is worth. Being forced to take a longer car term also means you might be stuck with a car payment longer than you would like – had you had the option of a 48 or 60-month auto loan, you could have been payment free faster.
0% may be your best option if you qualify, rock the negotiations, and come to the dealership with a strong down payment; however, in many cases it’s more cost-effective to get pre-approved for your vehicle loan, lock down a great rate, and use your pre-approval to shop with the power of cash.
For a limited-time, Badger-Globe is offering up to $500 cash back and no payments until 2021* when you finance a new, used, or refinanced car or truck. Contact us to learn more and start your application safely and conveniently over the phone.
*Up to $500 cash back refers to 1% cash back up to $500, or 1% of the loan up to $50,000 financed. Credit union reserves the right to discontinue, change and/or update the promotion without notice. Rates, terms and conditions subject to change and may vary based on qualifications, including creditworthiness. All loans subject to approval. Existing credit union loans not eligible. Membership eligibility required. See credit union for details. **Interest will continue to accrue during 90-day period. Federally insured by NCUA.
Sources:
https://www.edmunds.com/car-loan/what-you-need-to-know-about-zero-percent-car-loans.html
https://www.autotrader.com/car-tips/buying-car-whats-catch-0-percent-loans-222702
https://www.supermoney.com/0-apr-auto-loans-zero-percent/
https://www.aprfinder.com/0-percent-financing-auto-loans-truth