When “0%” Sounds Too Good to Be True
You’ve seen the ads. Zero percent financing, 2.9 percent financing. The automobile manufacturers’ rates seem great. What could be wrong with them? Plenty, if you take a look at the fine print.
- These low rates are often available only to those with the best credit records. One small credit blemish and the rate goes up.
- Many of the companies are offering these low rates for loans with shorter terms (36 months or less). That increases the amount of your monthly car payments.
- The rates are sometimes offered only on “selected” models, which are usually not the most popular models.
- Consider the total cost of the loan too. Will you be charged an application fee? Is there a prepayment penalty? Would you be required to pay front-loaded interest, that is, pay more of the interest earlier in the loan?
How to find the best deal
- You start off with a lower loan amount if you take the rebate, saving you money in finance costs.
- You could get lower monthly payments with your credit union, because low auto loan rates are available for loans with longer terms as well as short ones.
- You may save money on the total cost of the loan, because credit unions don’t charge application fees or prepayment penalties, and they charge simple interest, meaning you pay down your principal balance at a faster rate.
Come to Delaware State Police FCU before you sign any financing agreement a dealership offers you.