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0% Financing: Look before you leap
Whenever 0% financing makes a come back as it has in the past
year, many people consider purchasing a car because the financing
sounds so attractive. While some people may benefit from
provocative advertising, others cannot. It's essential to
understand all your financing options and to know what you're
buying before purchasing a new or used car.
Know what you want
Making a spontaneous decision about purchasing a car usually
invites trouble. Before you buy a car, take the time to
thoroughly research the model you're interested in by reading
reviews, checking features and safety requirements you want,
looking at crash results, and taking a test drive.
0% versus Cash Rebate
For most models that carry 0% financing, a cash rebate is also
available. A rebate can be taken as a lump sum payment but
according to Consumer Reports, it is often better financially
to use it as a down payment. If you use the rebate as a down
payment, the amount of money you have to borrow is lower but
you'll have a higher interest rate. To determine which option
is a better deal for you means that you will have to crunch
the numbers both ways.
Keep in mind that 0% financing is almost always only available
for slower-selling models or to make room for the next year's
model. Also, remember that 0% offers are usually restricted
to short-term loans of 12 to 36 months. This can make your
monthly payments quite high.
Finally, always pay close attention to the fine print.
Qualifying for 0% Financing
According to Consumer Reports, only about one-third of those
who apply for 0% financing actually qualify. Qualification is
up to the auto manufacturer, who relies on your credit rating.
If you don't qualify, you may be offered a higher rate of
financing through the dealership. Before you sign on the dotted
line, take the time to compare rates by calling the SCCCU loan
department. In many cases, we can offer you a better option
than the dealership. We're here to help you decide which rate
will serve you best.
Refinancing
If you've financed a car in the past year or two, it's worth
taking a look at refinancing. Even by pushing the interest
rate on your auto loan down a percentage point or two, the
money you save by refinancing adds up.
Call us, we're here to help
We encourage you to call our loan department no matter what
your situation is. We are happy to answer any questions you
have about vehicle financing and to help you crunch numbers to
determine which is your best financing option. If you have
any questions please call Lisa Carrisales in our Santa Cruz
office at (831) 460-2304 and Martha Martinez in our Watsonville
office at (831) 460-2233.
