It sounds like a dream come true, but are those zero percent auto loans that dealers offer really the answer for you? Chances are, they’re not. Few auto shoppers qualify for the rate, and when they do, terms of the loan are often not advantageous in the long run. Many of the zero percent loans are for shorter terms. Many dealers offer 24- or 36-month loans with zero percent financing, rather than the more traditional 60-month loan; therefore, increasing the monthly payment amount.
Customers may be asked to choose between the zero percent financing and the manufacturer’s cash rebate. In addition to this, the financing is often only available for autos on the lot, so shoppers may not get the auto they really want. It is important to do your research and run the numbers before choosing an auto loan.
Zero Percent Do’s
Make sure you really want the auto. Just because a car has a zero percent loan offer does not make it the right car for you. Test drive the car and make sure it satisfies your needs.
Get pre-approved for the loan. Secure financing with Wasatch Peaks before you go shopping. This can serve as a backup in case you do not qualify for the zero percent loan offer. It is nice to have a loan in hand that you can compare to what the dealer is offering.
Zero Percent Don’ts
Do not skimp on the down payment. Dealers will give you the option to put nothing down at closing. We always recommend putting down as much as you can. If you can’t manage that, then consider buying GAP insurance to offset depreciation.
Be careful on long term loans. There are drawbacks to going with a term longer than 60 months, with the biggest being that the value of the auto will have greatly diminished by the time you finish paying for it. Remember that we, at Wasatch Peaks Credit Union, are happy to help you get into the car of your dreams!
C. Blake Burrell