Seen an offer along the lines of: ‘Drive away, 0% finance to pay’? Well, like most things in life, when it sounds too good to be true, it probably is.
Finance offers like 0% (or other low interest rates) for new cars exist for a reason: the seller wants you to put the pedal to the metal when it comes to making the purchase.
The truth is, however, that they can actually end up costing you more overall compared to getting your own finance through a broker.
But first: what is a 0% finance deal?
So, you’ve most likely taken out a loan from a bank, or used a credit card before, right?
Well, when you do so, you agree to pay that money back, plus any interest that’s accrued over the course of the loan.
But for 0% loans, you pay no interest.
That’s because instead of paying back a bank or a lender, you’ll likely be paying back the actual automaker.
So how do they make money?
Well, besides the fact they’re selling you a car, they routinely sell the car to you at a higher price than you’d be able to purchase it upfront for.
For example, a car that has a price tag of $24,990 with a 0% finance deal might sound great, but the automaker would most likely be willing to sell it to you upfront for $19,990.
There may also be hidden charges and establishment fees that you might not find out about until it’s time to pay them.
And in many cases you might need a very good credit rating, or a very large deposit, to secure the deal in the first place.
So how can I get a better deal?
The role of a broker is not only to get you a great loan with a very low rate, but to negotiate on your behalf to ensure you pay the best possible price for the vehicle.
Let’s do a little comparison. Say you take out a $20,000 loan with the help of a broker for that $19,990 vehicle mentioned above.
With the right finance, over five years you can pay anywhere between $23,000 and $24,000. That’s going to leave you more than $1,000 better off than it would have if you opted for the 0% finance option.
Another bonus is that by going through a broker, you’ll be made aware of all the relevant fees and charges that may be hidden in the fine print. This means there’ll be no extra costs sneaking up on you.
Final word
If you’re keen to put yourself in the driver’s seat when it comes to purchasing a new vehicle, speak to your Mortgage Broker.
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