0% May Not Be the Deal You Think - Genisys® Credit Union

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0% May Not Be the Deal You Think

on 7/5/2016

Woman driving new car
If you’re thinking about buying a new car, you know that the best time is rapidly approaching. The end of the model year means car prices on current year vehicles will never be lower.

So, now is your chance to grab a new car for the lowest possible price.



If you’re a savvy enough consumer to wait until dealers are desperate to sell, you owe it to yourself to wait just a little bit longer to do your research on financing options.

Don’t be fooled by dealer promises of zero percent financing.   

Let’s take a look at four hidden costs that come with these advertised low rates.

  1.  You may not qualify for zero percent financing.
     Car commercials don’t talk about the fine print, but dealers place a pile of restrictions on zero percent financing. If your history with credit is anything less than perfect, don’t expect to qualify for these  rates. Roughly 60 percent of people who apply for zero percent loans get rejected.
  2. These loans are usually short-term.
    If the dealer is offering zero percent financing over the life of the loan, it frequently may be for no more than three years.  The shorter term results in a much higher payment than you’d have on a five- or seven-year loan.  
  3. Dealers may use the promise of 0% financing to get you to pay more for the car. With their knowledge of your financing options, they can manipulate the price of your trade-in and the cost of the transaction to arrive at a monthly payment you’re happy with. That way, you’ll focus on the cost of the payment, not the price of the car.
  4. Choosing 0% financing usually prevents you from taking advantage of other discount options.  Zero percent financing may be offered instead of manufacturer rebates and other discounts. Also, these financing packages are usually incompatible with special discount programs like Ford’s Friends and Family package.

This last hiccup can mean zero percent financing is actually more expensive than a loan obtained through a private lender, like Genisys Credit Union.

To see this effect, let’s take a look at some numbers.

We’ll assume that you’re paying $20,000 for a car. You have two choices. You can take zero percent financing on a three-year loan, or you can get a 4 percent interest rate on a five-year loan from Genisys Credit Union, plus a $2,000 rebate. Let’s see how those options break down.

  • If you take the 0 percent financing option, your monthly payment will be $555. Assuming no other fees or problems, you’ll pay $20,000 over the lifetime of the loan.
  • If you take the rebate, your monthly payment will be $331- a much more reasonable amount. Over the lifetime of the loan, you’ll pay a total of $19,890. That means you will save $110 and have a lower car payment.

Need a visual example?  See our 0% vs. Take the Rebate financing infographic!

Even if it’s not incompatible with cash back incentives and other rebates, having outside financing lined up before you go to the dealership can be a tremendous advantage in negotiating.

By continually postponing questions of financing, you can let the dealer think there’s still money to be made. This position might lead them to give you more on your trade-in, lower the price of the car or offer you more options.

The loan you get to pay for your car may be the biggest financial decision you make outside of your home. You owe it to yourself to do your research and treat this momentous decision with diligence. You wouldn’t buy a car just because it had an enticing price tag. Why would you do that with a loan?

Remember, dealerships make money from financing.  They want you to finance your car through them because it’s one more way for them to profit from the sale.  You can take that power away from them by doing your research on car financing.

If you’re considering buying a new car, your first call shouldn’t be to the dealership.

Buying a car is one situation in which that old cliché “knowledge is power” really is true. Take the time to educate yourself about your vehicle financing options.  Your wallet will thank you for it!

Start your research with Genisys Credit Union’s flexible auto loan options and competitive auto loan ratesApply for your auto loan today, and start your vehicle search knowing you have the best financing already secured.


© Genisys Credit Union and www.genisyscu.org, 2016.  Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to Genisys Credit Union and www.genisyscu.org with appropriate and specific direction to the original content

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