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The Truth About Zero-Percent Financing

It can be a dream come true for people with excellent credit.  But for many car shoppers, zero-percent financing is simply not feasible.

Statistics from CNW Research show that only about one-third of buyers who apply for zero-percent financing actually qualify.*  And among those, only around 10 percent actually close the deal, according to the National Automobile Dealers Association.**

Why so few?  Because of drawbacks like these:

  • Shorter loan terms.  Some dealers offer 60-month terms, but 36 months is more typical--which means higher monthly payments.


  • Fewer models to choose from.  The customer may be limited to what's in stock, and therefore, not able to buy the vehicle they truly want.


  • No rebate.  The customer may be asked to choose either zero-percent financing or a cash rebate.

Can a customer do better than zero-percent financing?

Sure!

By financing with a low rate and taking a dealer's cash rebate (if available), a customer could really save big. Below is an example:

  36-Month New Car Loan Comparison

Annual Percentage Rate 0% 3.99%
Cost of Car $20,000 $20,000
Less Equity in Trade $4,000 $4,000
Less Rebate $0 $2,000
Amount to Finance $16,000 $14,000
Monthly Payment $444.44 $413.27
Total Cost $16,000 $14,877.85
SAVINGS $0 $1,122.15

Plus, a customer gains a strong negotiating advantage.  (Many customers lured by zero-percent financing get so distracted by the offer that they forget to negotiate the price of the car.) With your own financing a customer doesn't have to worry about dealer financing, and can concentrate on negotiating the lowest price.

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