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Are You in the Market For a New Car?
Don’t fall for the deal that’s too good to be true.
By Susan Aitoro
Is it time to trade in your gas guzzler? Has your family outgrown the car you have? Or is it finally time to get that little red convertible you have been dreaming about? Buying a new car can be overwhelming but not if you arm yourself with the facts.
Zero percent auto financing is only for perfect borrowers
Be careful of rates that sound too good to be true. Often dealerships will advertise rates that can be deceiving. When new car dealer ads say 0% APR, look for the fine print. It might say "with approved credit only", "available to well qualified buyers only", or “on select models”. This 0% offer reels buyers in but you must have perfect credit to qualify. Your credit report determines if you will qualify for this type of financing and the guidelines for credit are very strict. One blemish on your credit report can ruin your chances for this type of financing. Most of us do not have perfect credit. In fact, only about one third of buyers who apply for 0% financing actually qualify for it, according to Steve Schooff of Capital One Auto Finance.1
Zero percent financing or rebate
Dealers will sometimes advertise that they offer 0% financing and a rebate. In the small print you will find that you can’t have both. If you don’t qualify for 0% financing, or even if you do, you may want to ask about cash rebates.
For example, 0% financing on a $20,000 vehicle could save you thousands of dollars in interest versus a five year loan with interest. However, the rebate may actually save you more money in the long run. “Arm yourself with all the numbers before you’re blinded by slick talkers at the dealership or amazing numbers in an ad”, advises Annelena Lobb of CNN/’Money2. The rebate may be a better way to go.
Loan terms can be very short
Many times a 0% financing option is offered for a shorter term than a typical car loan. They are usually no longer than 36 months as opposed to a traditional car loan term of 48-60 months. Because of this, the monthly payment will be higher even without interest. For example, a $20,000 vehicle with 0% financing for 36 months will require a monthly payment of $555. That same vehicle with a 60 month loan at 5.0% will require a monthly payment of $377.42. There is a significant increase in your monthly payment with the zero percent car financing option versus a traditional car loan. For many borrowers, it’s worth paying interest to keep the car payment reasonable.
Zero percent financing on select vehicles
Dealers will usually offer 0% financing on slow selling vehicles. It’s the dealers’ way of offering an incentive to the buyer so he can get the vehicles off his lot. Generally, you will only be offered the cars on the lot. You may want a car that’s a different color or you may want leather seats instead of cloth. The dealer will gladly find you the car of your dreams but your interest free loan will no longer apply.
Shop as a cash buyer
According to Gerri Willis of CNN, “your weapon against dealership antics is to secure independent financing before you go to the showroom”3. First Atlantic can set up your pre-approved loan with a low rate and affordable terms, so when you get to the dealership, with check in hand, you can concentrate on getting the best possible price on the car you really want.
At First Atlantic, you can count on getting a great rate without having to worry about the fine print. Our Consumer Lending Specialists make the application process easy—whether you’re looking for a Hybrid, a mini-van or a convertible.
If you have any questions or you’d like some personal assistance with a vehicle loan just stop by your nearest First Atlantic location, call Consumer Lending at 732-380-3600 x3902 or apply online. Susan Aitoro is Assistant Vice President, Lending at First Atlantic. She has been providing First Atlantic loans to Monmouth and OceanCountyresidents for over twenty years.
