Beware the Lure of 0% or Low Interest Finance Deals

There’s a lot of noise being made in the marketplace lately about amazing low finance deals for cars.  While many people may think that this is a great deal, it’s actually increasing the car dealerships average profit per car by $1,000 to $2,000.

Why?

The reason is that the discount interest rate is typically only available to full price purchases and they pay the interest for you.  On a $30,000 car at 6% interest comparison rate, this equates to about $3,800 worth of interest over a four year loan term. The car dealership protects their margins (by selling at full retail) and also need to be less aggressive with their trade in offers.

If you do decide to get a low interest low, be sure to read the fine print and ask the following questions:

  • What is the upfront deposit required?
  • Is the finance rate is fixed: it can sometimes be an introductory rate where the payments could go up.
  • Ask what is the total amount of interest you will pay when the 0% arrangement ends.
  • Find out what happens if you miss a payment: there can be significant penalty fees.
  • Establish the exact term of the finance agreement – make sure you know when the first and last payments are to be made.
  • What is the balloon payment if any?  Check the balloon payment against the projected value of the car when the finance finishes.

If you want the best deal on your next car, get your finance sorted first before you go shopping for your car and you will be able to negotiate a better deal.  Speak with one of Fusion’s professional finance team for an obligation free finance assessment.

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