How To Finance A Car At Zero Percent Interest Rate?

Nowadays it is possible to obtain auto loans at zero percent interest rates but for obtaining approvals for such types of car finances, there could be some stringent conditions. Normally, only those borrowers, who have good credit, could be eligible for these loans meaning thereby that if you have bad credit, you might find the going tough. But it doesn’t imply that qualifying for affordable car loans with bad credit is a distant mirage. Such a proposition is a reality now as lenders compete with each other to provide some of the best car financing loan deals for securing business.

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Zero percent financing car offers

With a bad credit rating, your chances of securing a 0% interest rate auto loan approval are almost remote. Nevertheless, you can increase the probability of getting approved for a zero interest rate car loan if you put some herculean effort to improve your credit by leaps and bounds. Although such a move can seem impractical, soem practical steps in that direction can certainly boost your chances of getting approved for a low interest rate bad credit car loan with sustainable interest rate and easy to afford monthly payments. In any case, most lenders will verify your loan repayment capacity.

Usually, car makers are the ones that offer auto loans at 0% rates of interest through their finance lending arms for promoting sales of certain new car models. Banks and credit unions may not offer zero percent interest car loans but can certainly provide credit assistance at the lowest interest rates provided that applicants have excellent credit records. To that effect, your best bet to get approved for a 0% interest rate auto loan is to directly work with some major car manufacturer. And if you have low credit, better not waste your time on that, work for improving credit first.

Very often car dealerships play the role of middleman by helping borrowers to get qualified for auto loans from some local subprime lenders. However, it is advisable to stay away from the loans being arranged by them as the interest rates offered could be extremely high and loan repayment terms totally inflexible. To prevent yourself from getting into this kind of a situation, it could be better if you get your car loan pre-approved and then visit dealerships for choosing your car. Such a move could enable you to secure interest rate that fits your budget based on your income.

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Why a zero per cent interest rate could cost you more for a new car

Zero per cent interest car finance deals may end up costing you more, but there are bargains to be had. Picture: Supplied

A NEW car bought with a zero per cent interest rate can be dearer than the exact same vehicle purchased at a discounted price with a regular finance rate, a study by News Corp Australia has found.

Last month the Nissan Pulsar was available with 0 per cent finance but the deal was linked to a $24,990 drive away price.

The same car was previously available for $19,990 drive-away. With a regular interest rate of 8 per cent, the total repayments are in fact lower than the 0 per cent deal.

According to figures calculated using the website, a car loan for $19,990 paid back at 8 per cent interest over three years amounts to repayments of $624 per month and a total cost of $22,449, not including any establishment fees or extra charges.

But $24,990 paid back at 0 per cent interest over three years amounts to repayments of $694 per month, an extra $2541 over the life of the loan, according to the online calculator.

Important advice . Nissan Pulsar or not, always found out what you owe in total. Picture: Supplied Source:Supplied

Finance experts say car buyers should always find out the total repayment figure on low interest rate offers, and then compare that with an outside finance offer on the price of a discounted car.

“Many car companies use low finance offers to get customers into showrooms, but in most cases the deals are tied to the full price of the car and full dealer delivery charges,” said a veteran car dealership finance expert speaking on condition of anonymity.

“That’s the only way car companies can afford to offer the low interest rates. They get their money eventually. You don’t get nothing for nothing.”

Adding to the confusion for car buyers, some low interest rate deals are better than others.

When the low interest rate is combined with a low drive-away price, the customer is well in front, savings thousands on the repayments of a new car over the life of the loan.

For example, this month Ford has a low drive-away price on three slow-selling vehicles in its SUV range combined with a low 1.9 per cent finance offer.

Car finance .. deals are being offered around the Ford Kuga. Picture: Supplied Source:Supplied

The Ford Kuga mid-size SUV, for example, has been discounted to $29,990 drive-away in recent months, about $3500 off its full price.

But the company is now also offering a 1.9 per cent interest rate over three years to sweeten the deal, a saving of about $3000 over the life of the loan at 8 per cent interest.

Last year the Toyota Camry was also available with a “double whammy” deal, combining a 1 per cent interest rate with a discounted drive-away price of $28,990, at the time about $7000 off full price.

Interest rate offers are likely to become the new battleground in car dealerships.

The car industry is expected to use finance offers to mask price rises in the coming months if the Aussie dollar continues to fall.

“The finance rate offer is a way to say to customers ‘this is how much the repayments are’ rather than having them focus on the actual price, especially if it goes up,” the dealer representative said.

How to drive a bargain

1) Ask how much the total repayments are over the life of the loan, regardless of the interest rate.

2) Always compare the low interest rate offer with what’s available outside the dealership. Sometimes dealers can be better than then banks and other outside lenders, and vice versa.

3) Ask if the low finance rate is attached to the price of the car, or is the price of the car negotiable as well.

4) Many low interest rate offers are only available over three years, and the monthly repayments may be higher than a regular interest rate over a longer term loan.

Zero per cent interest car finance deals may end up costing you more, but there are bargains to be had. Picture: Supplied