If you’re in the market for a new car, and see a 0% interest finance deal advertised, chances are you’ll be interested.
But like all amazing deals, there’s likely to be a catch. We’ve highlighted some of the issues and hidden costs associated with a 0% interest deal on car finance.
1. You may not qualify
As inviting as it sounds, 0% finance may not be available to all customers. The deal may require a higher credit rating than most other deals. In some cases, you’ll need to be a business customer with an ABN to qualify.
If you aren’t sure if you’re eligible or not, check the loan criteria, and talk to your Smartline Adviser about whether or not you qualify.
2. You might have less choice
While 0% interest might be advertised by the car dealer, it may only be applicable to certain makes and models such as last year’s model, ex-demonstration vehicles, standard model or excess stock. If you’re looking for a limited-edition car, or for a particular feature, you may find that you’re out of the running for 0% interest.
3. There may be a shorter loan period
Some 0% finance deals have a shorter loan period – say, three years. This will mean that your monthly repayments will be higher than if the period is five years. While this might not necessarily be an issue for you, it is something to consider.
4. The trade-in value may be compromised
It’s possible that you may get less for your trade-in on a 0% finance deal. If the deal is designed to move excess stock from the dealership, when it comes time for you to trade in your 0% interest finance vehicle, you might find the resale value is lower because there is less demand for that make and/or model.
5. You may have less bargaining power
Car dealers sometimes offer 0% interest finance as an incentive to get you through the door. But once you’re in, you may find that you have less room to negotiate on the price of the car. You may even end up paying the full price. It’s worthwhile calculating how much you would save on interest over the course of the loan and compare that to what you could save if you were able to negotiate the sale price.
6. Consider the hidden costs
While 0% interest may initially seem attractive, you need to understand the true costs of the loan. Check the comparison rate. If the comparison rate is not 0%, the loan you’re considering may have higher fees to compensate for this difference. You also need to know about other fees. For instance, what are the exit fees? Exit fees may be higher on a 0% interest loan.
The good news is, that you don’t have to navigate finance deals alone. To talk more about the true costs of a 0% finance deal, and to see if you could be eligible, have a chat to me.