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.
@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!
@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.
@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.