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Automobile companies have discovered that 0% financing promotions are one of their most effective sales tools. Print ads and television commercials abound with offers of “0% APR” on new models. The idea is to attract buyers for new cars by making it appear that compared to used cars, they will save money on financing.
If you are considering a car with a $15,000 price tag and are told that you will get $2,000 back if you pay cash, that car costs $13,000. If you are told that the car cost $15,000 and instead of the cash back they will finance it at 0% for three years, the car still costs $13,000 and you are being asked to pay a $2000 financing charge up front.
Car dealerships go through an elaborate charade to make the car appear to cost $15,000, but the bottom line is once all the money has changed hands, the net cost to you is $13,000.
I don't consider myself stupid and I don't believe in zero percent financing on vehicles. One way or another they are getting their money.
Now there is zero percent financing from places like Best Buy provided you make the monthly payment on time. However many miss a payment and whole financing is at 24%
What is stupid is bringing politics into an automotive forum discussion.
I'm glad I opened this thread up and found out I didn't get scammed when I bought a new truck a couple years ago with a 0.99% rate and $9K in rebates. Damn, I dodged a bullet.
This is why the very first step for car buying should be getting pre-approved for a loan from your credit union. You walk in knowing you're good for $35k at 1.9% or whatever. Negotiate your price for the car. Then do the math to see if taking such a manufacturer rebate and using your financing rather than their 0% works out to be a better deal.
Automobile companies have discovered that 0% financing promotions are one of their most effective sales tools. Print ads and television commercials abound with offers of “0% APR” on new models. The idea is to attract buyers for new cars by making it appear that compared to used cars, they will save money on financing.
If you are considering a car with a $15,000 price tag and are told that you will get $2,000 back if you pay cash, that car costs $13,000. If you are told that the car cost $15,000 and instead of the cash back they will finance it at 0% for three years, the car still costs $13,000 and you are being asked to pay a $2000 financing charge up front.
Car dealerships go through an elaborate charade to make the car appear to cost $15,000, but the bottom line is once all the money has changed hands, the net cost to you is $13,000.
No, it's pretty simple actually. You compare the cost of interest you can get to what the cash you're leaving off the hood for taking 0% instead and make a decision. It's not complicated and not a scam. In my case my loan was, using round numbers, $20,000. Best interest rate I could get was 4%. Most buyers could do better but I'm self-employed with no verifiable income and even finding a lender was difficult. In that case since I gave up $1,500 on the hood for five years of 0% it was about $500 cheaper to take the 0%.
It's actually a better deal to take 0% as opposed to paying all cash upfront.
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