Zero-percent financing may not be the best deal - The Detroit News
1, 2010 file photo, 0 percent financing for 72 months is advertised on a GMC Sierra pickup truck at a dealership in Center Line, Mich. When a car dealer offers to loan you the money to buy a car at zero interest, it gets your attention. (AP Photo/Paul Sancya, File) When a car dealer offers to loan you the money to buy a car at zero interest, it gets your attention. Dealers can offer zero-percent financing through automakers’ finance companies because, unlike banks, they make money on the sale of the car and don’t need to rake in interest payments. Zero-percent financing offers have been common in the last four years as auto sales recovered from the recession while interest rates remained low, says Philip Reed, a senior editor of consumer advice at Edmunds. Experian Automotive, which tracks auto loans, says 7 percent of new car loans had an interest rate of 1 percent or lower in the first quarter of this year. By comparison, 29 percent of new car loans had interest rates of 2. 05 percent and below. Before biting on the zero-percent financing, check for other deals such as cash-back offers. Edmunds recommends taking the cash to reduce your total loan amount for the base all-wheel-drive model from $27,123 to $25,123. Even with a 2-percent interest rate, you’ll wind up paying $440 per month with the cash deal. Source: www.detroitnews.com
