May 27, 2011
What is the catch about buying a car with zero interest for many months?
For example, a GMC truck or a Kia. Some people I’ve talked with say you get crappy cars (low fuel mileage) or warranties that can’t be transferred over to a 2nd owner – like from Kia. Is that pretty much it?
I’d like to get a new car with 0% financing or a 10 year warranty, but is this just a trap to lure in unsuspecting customers? Should I just save up 18k and buy a used 745i from a BMW dealer instead?
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Comments on What is the catch about buying a car with zero interest for many months?
Last November I bought a Pontiac G8 GT and got the 0% for 72 moths and there’s no catch they just want to get rid of inventory. the only thing is is you have to have amazing credit. Which I have when I got the car the sales manager was actually really surprised and told me that most people even with good credit dont get it so If you have great credit like me then you will be fine but if not you can always try. But theres no catch its just hard to get. GM has a thing were if you belong to a credit union of some sort they get you a even better deal dont ask me how. hope this helps
1st you need immaculate credit history to qualify. You pay fullMSRP and they use some of money to pay interest whereAS THE LOAN IS 2 OR 3 YEARS AT 0%.
KIA’S AND ALL THAT OFFER WARRANTY,FOR 10 YEARS, IT IS ONLY HALF OF DRIVETRAIN AND YOU PAY HALF. PRICE IS INCLUDED IN CAR. ANY MODS TO WHEEL SIZE OR ENGINE VOIDS WARRANTY.
It is no catch… only “qualifiers”… you buy the car with 0% interest on the loan, but you have to stick to their terms of the loan (credit score, # of months on the loan, or down-payment requirements to get it)… not really a “catch”… more of a “terms of contract”. You also have to have perfect credit to initially qualify, so unless your credit is fantastic… you can’t even think about 0% financing.
If you can qualify for VERY low interest on your own (bank, credit-union, etc.) then take the offer of cash back instead of 0% interest, and finance it yourself… it will translate into more money saved because the cash back will out-weigh your cost of interest in most cases.
These advertising gimics are often used to get you onto the lot. But you can save a lot of money by negotiating down from the sticker price, taking the cash-back, and financing yourself for low interest. if you take the 0%, you don’t get the cash-back… it is one or the other, NOT both!
If you want a 10-yr warranty, you’ll be stuck with Hyundai or Kia (owned by Hyundai now), because they are the only companies offering a 10-yr manufacturer’s warranty.
Zero interest loans are just discounts amortized over the length of the loan.
A 10 year warranty is often worthless as after the manufacturers warranty, they will only pay for the rest if you had EVERY scheduled maintenance done at their dealership. Late on an oil change ? Voids the extended warranty.
A dealer near me used to advertise “free tires for life”. My guess is nobody ever qualified for free tires.
And I got an advertisement in the mail from a credit union offering a lifetime drive train warranty with any new car. (Again, there are so many gotchas that they cost very little to offer because they are nearly worthless)
You have to have near perfect… 750+ credit to be approved for any kind of 0% interest deal.
Others get discounted rates but not zero.
I sure as heck wouldn’t buy a new car or a used BMW.
But, its your money.
There is ALWAYS a catch. Zero % financing is just another marketing tool to get people to buy. The reality is is you choose 0% finance you don’t get as good a price on the car. Rebates and discounts rarely apply if you choose the 0% finance. It also takes an excellent credit rating to qualify for Zero % financing. Zero % is also tied to short term loands so you may get 0% finance but you have to pay the car off in 3 years.
Most people won’t do the math and they just assume that no interest finance has got to be a good deal, but it isn’t always the cheapest finance option.
Take this example. Purchase a 2010 Chevy Cobalt and get Zero% Finance or $2000 Rebate. The price of the car is $16,000.
With Zero % finance you get a 36 month loan. You pay $16,000 for the car. Your payments will be $445 for 3 years. You’d save $1600 in interest charges with a zero % loan.
With a $2000 Rebate and a 5.9% loan for 4 years. You pay $14,000 for the car. Your payments would be $325 for 4 years.
Is saving the $1600 in interest worth losing the $2000 rebate, worth losing the longer loan and the lower payments? You decide.