0% ZER0-PERCENTFinancing is being offered by Chrysler, Dodge, Ford, Hyundai and Kia? DOES that mean it’s a good deal for you?  Yes, if you QUALIFY credit-wise, want to buy a NEW CAR/TRUCK or SUV that is offering zero 0% percent interest and you can afford the payment for the term option the program requires.

CHRYSLER,FORD,CHEVY,CADILLAC and GMC have HUGE incentives available for those individuals that DON’T qualify for 0% (credit wise, or negative on the trade) and optional lower rates if you can’t stomach a 9$900 payment for 36 mos.

Mr. Stea, a blogger on Scribd,  had this to say about 0% deals…  “Automotive manufacturers use their own financing companies to underwrite these zero percent car financing deals, each of which have their own credit qualifications. Generally speaking an applicant must have close to perfect credit to qualify for zero percent financing.”

SO what’s wrong with making the rules stipulate that only customers with PERFECT credit payment histories, a strong balance sheet and proportionate debt-to-income be allowed to take advantage of this offer. Perhaps a higher standard for recent home-buyers would have abated the current housing loan crisis, of which I am quite familiar, living in LAS VEGAS, Nevada, the Numer Uno locale for housing foreclosure. But alas, I digress from the subject of car buying at ZERO PERCENT.

Stea also went on to point out that these deals are usually offered on slow moving product, however, I have found that it is usually on the more expensive items, that some clients are unwilling to expense at this time.

This comment and example was by far, the most glaring error in his commentary…  “Cash Back. Have you ever noticed the “or” clause in those zero percent car financing advertisements? You may have seen ads stating “0% or $10,000 cash back” That $10,000 you lose by opting for the zero percent financing is the actual cost of borrowing. This often equates to an interest rate much higher than a traditional car loan. Adding up the Numbers: A recent search of the website of one of the Big 3 automakers shows an offer of zero-percent financing on a 2008 mid size sedan. This is how the numbers work out.

Annual Percentage Rate	0%	6.95% (New Car)
Cost of Car	$29,999	$29,999
Less Rebate	$0	$5000
Amount to Finance	$29,999	$24,988
Monthly Payment	$625	$596
Total Cost	$29,999	$28,608
Savings	$0	$1,391

Based on 48 months. Does not include taxes, administration or other fees dealer may charge. This comparison doesn’t take into account the fact that you are forced to purchase a new vehicle. Let’s take a look at the same vehicle, same model year with approximately 10,000 km on it that was found by doing a quick search on the Internet.

Annual Percentage Rate	0%	6.95% (Used Car)
Cost of Car	$29,999	$19,999
Less Rebate	$0	N/A
Amount to Finance	$29,999	$19,999
Monthly Payment	$625	$478
Total Cost	$29,999	$22,944
Savings	$0	$7,055

By financing at a low rate and choosing a slightly used car, a consumer would save over $7000 in this instance.”

Now, if you are interested in ZERO PERCENT  0% FINANCING, chances are you already know it’s only on NEW vehicles, so the pre-owned argument doesn’t apply.

Here’s the SARAH LEE/MY CARLADY truth behind why 0% works… 

#1. The premise of 0% interest is to attract individuals with EXCELLENT credit who might otherwise not buy a NEW car because a) they have their money tied-up in CDs and other interest earning accounts. b) they are waiting for the bottom of the market.

#2. Those opting for 0% are aware it is on NEW cars, and again, these folks are attracted to new vehicles which they keep for a long time.

#3. New car manufacturers have extended UP TO LIFETIME, UNLIMITED FACTORY-backed WARRANTIES to attract the consumer sitting on the sidelines with money in the bank.

#4. The ZERO PERCENT offer is limited to the models that are more expensive or slow movers, but when they are gone, the party is over.  For example, Can’t get 0% on the new GMC Arcadia at 30k but you can get 0% on the Chrysler ASPEN at 38K, so you are getting alot bigger vehicle, more features and LIFETIME WARRANTY for the same net cost, at 0%.

 #5. These interest rate incentive programs are designed to stimulate the economy of auto production, not the resale of pre-owned models which only serves to move currency but do nothing to create or maintain jobs. 

#6. The only time a consumer doesn’t make out on 0% is if they pay the loan off early, whereby, the rebate would have brought a higher yield.

 #7. In the situation that the consumer takes the rebate and finances at a higher rate, the cost savings may be close to 0% or slightly more, however, in the example above, the positive of the “take the rebate argument” fails to divulge the potential earnings/positive return on the cash earning interest in the market while the consumer has a 0% loan on the car.  In-fact, this scenerio may create a “wash” effect between the two arguments, but in the later case, the buyer had his/her cash (including the effective value of the rebate) liquid; not tied-up in the car, or car loan. In conclusion, the 0% interest rate offers will last as long as there are inventories of the specified models languishing on dealer lots.  If one of those models appeals to you, go grab it, the money won’t be there forever, and take that down payment and invest it in some Toyota, GMC or Hyundai stock. SLM ]]>