Is 0% Financing Really As Good As It Seems?

As you hem and haw while shopping for your new car, truck, or SUV at the dealership, the salesperson might come by and wave 0% financing around to entice you to sign on the dotted line. You might feel like you’ve just snagged the deal of a lifetime, but the truth is that this sales tactic typically favours the dealership, not you. Here are a few things you should know.

Only Available for Excellent Credit Scores

Although salespeople will mention 0% financing to anyone who will listen, the interest rate actually depends on your credit score. 0% deals are reserved for those with near perfect credit only. So, if you have any marks downgrading your score, then kiss that interest rate goodbye. Once you sit down with the finance manager to negotiate, they will roll out other offers with higher interest rates, citing your credit score as the cause.

Only Offered on Brand New Vehicles

If your vehicle of choice has more than a few kilometres on the clock, then it will not qualify for any sort of 0% financing deal. The reason is that this deal is reserved only for brand-new vehicles to get you to commit to their higher sales price. Pre-owned rides have already depreciated quite a bit before they arrive back on the dealership lot, giving salespeople minimal ability to offer sweet deals.

Interest May Be Sneaked Into the Price Anyway

In order to avoid losing any money on their sales, some dealerships build in what you would have saved with 0% financing into the price of the vehicle. When selling a $20,000 car, for example, they may list it at $25,000 with 0% financing and refuse to go any lower. This allows the dealership to collect the full price of the $20,000 car as if it were financed with a 4% interest rate. You, however, will not walk away spending any less than you would have otherwise, though their wording will definitely make you feel like you did.

Thankfully, there are ways to go about your next vehicle purchase and get an actual good deal.

Cash Rebates Could Provide More Savings

If you want a real discount on a new or used vehicle purchase, then cash is king. When you skip the financing, the dealership gets all their money upfront, making them more likely to negotiate on the price. Don’t assume they will just hand over the discounts without you asking about them, however. They may let you pay full price in cash without even telling you about the discounts. You have to directly ask about cash discounts and bonuses to unlock the deals and move ahead with negotiations.

Time Your Shopping Right

Sales quotas are definitely a thing and the window closes at the end of the month. So, save your pennies until the last week of the month, then hit the dealership in earnest. You are more likely to get the salespeople to budge on the price at that time, especially if they have not hit their goals for the month. Be prepared to shop around.

Ask About Other Discounts

As you negotiate for the best price, do not leave anything on the table. Ask outright if the dealership can do better on the price or has any other deals they can offer. They may drag their feet a bit in hopes you will forget but ask until you get a clear answer.

Be Prepared to Walk Away

Of course, if the dealership cannot offer any deals or drop the price to suit your budget, then you will need to walk away. Keep your ringer on, however, as salespeople often call back later to offer a better deal.

Although 0% interest rates are not always as good as they sound, you can use the tips in this guide to secure a great deal on your next vehicle purchase. Just keep your head on straight and try not to fall in love with every truck, car, or SUV you see, so you can muster the strength to walk away and wait for the good offers to roll in.