topic Re: 0% Financing in Auto Loans

0% Financing

joeyv1985 — Tue, 23 Jun 2020 17:43:25 GMT

Hello All,

I've always been intrigued with zero % financing, especially in this economy.

What's the catch for 0% financing?

What's the minimum FICO score to qualify for one?

Are "premium" dealerships(ie. BMW/MB) different than non premium(ie. Toyota) dealerships?

Other than moving inventory, what's the incentive for a dealership to offer this?

Besides a trade in/down payment, taxes, license, etc., what are other fees one should be aware of?
Are the financing months condensed(36 months vs 60 months)

Thanks as always.

Re: 0% Financing

ridgebackpilot — Tue, 23 Jun 2020 19:47:58 GMT

Zero percent financing is usually offered only by OEM dealerships because the manufacturer subsidizes the interset rate. Their objective is to sell cars; making money from loans is secondary. Reduced interest rates like zero percent are usually offered to people with excellent credit scores and may only be offered for a relatively short loan. But in times like these when car-buying drops off, some manufacturers offer extended loans (e.g., 72-80 months) at zero percent along with other incentives like 90 days before first payment due. And they often also relax the credit scores needed to qualify for reduced rate financing.

My pet peeve is dealerships that tell customers, "You can have zero percent financing, but you won't get other incentives and you have to pay sticker price". Absolute nonsense! You can still negotiate your best price regardless of financing. And you should still get any rebates offered by the manufacturer. If a salesman tells you otherwise, ask to see the sales manager or find another dealership that is ready and willing to negotiate!

It's been said before here but I'll say it again: If you can get zero percent financing, TAKE IT! No incentive or extended loan or rebate is worth giving up zero percent financing. Over the life of your loan, you'll save literally thousands of dollars.

Re: 0% Financing

joeyv1985 — Tue, 23 Jun 2020 19:51:07 GMT

Thank you for the info. I once heard that when a dealer offers 0% financing, it's a buyers market. How about the down payment? Is it even worth it?

Re: 0% Financing

Anonymous — Tue, 23 Jun 2020 20:29:02 GMT

the way 0% works is that you have to buy at MSRP minus some incentives they might have like first responder or loyalty or whatever. you have to finance with the manufacturer financing. If you buy at a lower price with more incentives you have to finance with manufacturer financing at their higher rate. Sometimes you can find a middle price with your own cheaper financing.

Reason is the manufacturer gets less money for the car than the price you pay since no one lends money at 0%. The bank has to pay their investors a higher rate

Re: 0% Financing

ridgebackpilot — Tue, 23 Jun 2020 20:34:26 GMT

@Anonymous wrote:
the way 0% works is that you have to buy at MSRP minus some incentives they might have like first responder or loyalty or whatever. you have to finance with the manufacturer financing. If you buy at a lower price with more incentives you have to finance with manufacturer financing at their higher rate. Sometimes you can find a middle price with your own cheaper financing.

Reason is the manufacturer gets less money for the car than the price you pay since no one lends money at 0%. The bank has to pay their investors a higher rate

Nope! It's a commonly-held myth that "you have to buy at MSRP" to get zero percent financing. Dealerships would like you to believe that, but in reality nothing could be further from the truth.

I've purchased several cars, most recently two Fords, with zero percent financing. One dealership told me I'd have to pay MSRP if I wanted zero percent APR. I walked out and found another nearby dealership that was perfectly willing to negotiate on price AND give me zero percent financing. Don't believe the myth that you can't have both!

Re: 0% Financing

ridgebackpilot — Wed, 24 Jun 2020 04:50:59 GMT

@joeyv1985 wrote:
Thank you for the info. I once heard that when a dealer offers 0% financing, it's a buyers market. How about the down payment? Is it even worth it?

With zero percent financing, you're essentially getting free access to capital. So why put any money down? One reason would be to lower your monthly payments. Another would be to reduce the amount of GAP insurance you'll need to buy.

And make no mistake, with loan terms of 72-80 months, you'll almost certianly need to buy GAP insurance. If you total your new car, GAP insurance pays you the difference between what your car is worth and what you owe on your loan, which can be considerable. You can either buy GAP insurance from the dealer, from some auto insurance companies, or from an independent insurance company like GAP Direct.

Re: 0% Financing

joeyv1985 — Tue, 23 Jun 2020 21:08:23 GMT

Speaking of GAP Insurance, it's usually a must if you put less than 20% down?

Re: 0% Financing

Anonymous — Wed, 24 Jun 2020 03:16:33 GMT

Rates, like everything else, are negotiable. My Nissan dealer had a fancy metal sign that listed a minimum rate around 6%. They tried pointing to it as if to say, "Look, it's set in stone."

I got the 1.9% rate from their captive. It's just a negotiating tactic. The same is true of, "You have to pay MSRP."

Some manufactures have offered 0% or $X rebate. Those really are one or the other, but that would be stated clearly on the manufacturer's website. That does not prevent you from negotiating the price of the vehicle.

Re: 0% Financing

Anonymous — Wed, 24 Jun 2020 03:14:30 GMT

Ask your auto insurance company for their price on GAP before you buy a car. I pay less than $20/year through Progressive. (I would normally have put enough down to avoid being underwater, but there was no benefit to doing so.) Rates vary widely.

Re: 0% Financing

ridgebackpilot — Wed, 24 Jun 2020 04:55:43 GMT

@Anonymous wrote:
Rates, like everything else, are negotiable. My Nissan dealer had a fancy metal sign that listed a minimum rate around 6%. They tried pointing to it as if to say, "Look, it's set in stone."

I got the 1.9% rate from their captive. It's just a negotiating tactic. The same is true of, "You have to pay MSRP."

Exactly! Your best bet is to negotiate your price first, then discuss financing after you've secured the price you want.

Re: 0% Financing

Save-n-Invest — Sun, 28 Jun 2020 01:46:00 GMT

Dealers tell all kinds of stories of what you must do under certain circumstancess. Balderdash! You know what you are willing to pay. The dealer knows what they will take for the car. If you can't come to terms go elsewhere. Lots of cars and dealers.

I always pay cash. On one occasion a dealer pulled the deal when they finally believed I am a cash buyer. No problem. I bought elsewhere. My only regret there was that I wasted three days listening to the slaesman mumbling and lying. That should have been my first clue.

Re: 0% Financing

Anonymous — Sun, 28 Jun 2020 01:57:48 GMT

@ridgebackpilot wrote:
@Anonymous wrote:
Rates, like everything else, are negotiable. My Nissan dealer had a fancy metal sign that listed a minimum rate around 6%. They tried pointing to it as if to say, "Look, it's set in stone."

I got the 1.9% rate from their captive. It's just a negotiating tactic. The same is true of, "You have to pay MSRP."
Exactly! Your best bet is to negotiate your price first, then discuss financing after you've secured the price you want.

I do typically let the dealer know that I will consider financing through them. They sometimes offer a little better price on the car if they think they can make money on the financing. It's not my problem if they later discover they can't make anything.

The biggest issue buyers have with negotiations is emotion. Any emotion at all gives the dealer an opportunity. Don't think for a second that they'll be intimidated if you play tough or start yelling at them. What really drives them nuts is slow, calm, deliberate discussion. It took me a few tries to figure this out.

Re: 0% Financing

joeyv1985 — Sun, 28 Jun 2020 02:24:53 GMT

Don't think for a second that they'll be intimidated if you play tough or start yelling at them. What really drives them nuts is slow, calm, deliberate discussion. It took me a few tries to figure this out.

Good Point. Thanks.

Re: 0% Financing

Anonymous — Mon, 06 Jul 2020 06:00:59 GMT

I'm curious about this as well. My auto scores are 750+ on all bureaus and scoring versions. How much higher do I need to get it up before 0% is an option?

Re: 0% Financing

Anonymous — Mon, 06 Jul 2020 13:10:50 GMT

0% offers are captive lender promos. Capital One (for example) isn't going to offer you 0% regardless of how high your score gets.

Re: 0% Financing

Brian_Earl_Spilner — Mon, 06 Jul 2020 13:21:51 GMT

@Anonymous wrote:
I'm curious about this as well. My auto scores are 750+ on all bureaus and scoring versions. How much higher do I need to get it up before 0% is an option?

Depends on the manufacturer. Some require a 720 or 730 for tier 1, I have seen others go as low as 690. If you can't find the tiers online you can simply call and ask. Steer clear of a dealer where they won't give you that info. They basically want to get you in so they can work on you.

Re: 0% Financing

RootDet — Mon, 06 Jul 2020 15:01:38 GMT

I am buying a car right now and I am a bit mean. So I always go in with a pre-approval and I am upfront about that. I select the lender to apply with so I get the best rate. This round I walked in with Navy and 2.29%.

I do negotiate the price first and check multiple dealers. But as others mentioned you could still get 0%, and if they want the sale bad enough, the tradein can be valued higher to offset rebate loss. No body pays MSRP even with financing, so if your paying msrp, keep walking. You can even sometimes get the dealer to kickback some profit on them doing financing,

But at some point, you need to do the math. With the reality that you do indeed lose the customer cash incentives, the amount you lose could be greater than what you finance. If the cashback deal is $5k and your financing at lets say 3.9%, 25k, 60 months, you would pay 2,557.14 in interest. Would you rather take the $5k, pay 2,557.14 in interest, or give the $5k back and save $2,557.14 interest?

Always look at the big picture to figure out if the deal I right for you.

Re: 0% Financing

joeyv1985 — Mon, 06 Jul 2020 15:17:08 GMT

@RootDet wrote:
I am buying a car right now and I am a bit mean. So I always go in with a pre-approval and I am upfront about that. I select the lender to apply with so I get the best rate. This round I walked in with Navy and 2.29%.

I do negotiate the price first and check multiple dealers. But as others mentioned you could still get 0%, and if they want the sale bad enough, the tradein can be valued higher to offset rebate loss. No body pays MSRP even with financing, so if your paying msrp, keep walking. You can even sometimes get the dealer to kickback some profit on them doing financing,

But at some point, you need to do the math. With the reality that you do indeed lose the customer cash incentives, the amount you lose could be greater than what you finance. If the cashback deal is $5k and your financing at lets say 3.9%, 25k, 60 months, you would pay 2,557.14 in interest. Would you rather take the $5k, pay 2,557.14 in interest, or give the $5k back and save $2,557.14 interest?

Always look at the big picture to figure out if the deal I right for you.

Thank you. As always, "saving money" is a relative term. I'm sure when working the #'s, there's a figure that's equitable for everyone.

Re: 0% Financing

Anonymous — Mon, 06 Jul 2020 19:45:29 GMT

I just purchased a CPO 2017 RAV4 and got 0% financing through Toyota motor credit for 60 months. Almost unheard of on a used vehicle. Finance guy looked up in his book and told me that the minimum score for 0% financing was 690.

Re: 0% Financing

Anonymous — Tue, 07 Jul 2020 02:14:42 GMT

My lease is up in March so I've been considering paying it off and keeping it, turning it in and buying a Tesla, or turning it in and buying a hybrid SUV. I hadn't considered the possibility of 0% financing, which I think would push me to buy a new car, probably a Lexus hybrid. Any idea whether their tiers are similar to Toyota's?