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0% Finance: The hidden cost

Posted on: February 3, 2017 by Tim McClare

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It’s easy to be tempted by the appeal of a 0% finance deal – but are these offers too good to be true?

News Corp Australia recently conducted an independent investigation into dealers advertising 0% finance and found the reality to be very different than what you might expect. In fact, the investigation found that buying a car on a 0% interest rate deal can end up costing you a great deal more.

Beware the attention-grabbing headline

Firstly, it’s important to understand that often these 0% finance offers are used as a tactic to lure customers into showrooms. The deals tend to be available on the less popular models, or those nearing the end of their line.

The vehicle can end up costing you more

That’s right, you’ll usually lose your ability to negotiate on the vehicles price on a 0% finance offer. The deals are typically offered on vehicles sold at full recommended price, including all on-road costs.

Buyers should also be warned that many low interest rate offers are only available over 3 years. This means the monthly repayments may be higher than that over a longer-term loan with higher interest.

Other common catches

Alongside the older models and more expensive purchase price, watch out for these other catches:

  • The offer is often only available on older stock
  • You could find yourself with a less generous trade-in offer
  • Not always available on vehicles with upgrades and add-ons.
  • Less flexibility with loan terms and balloon payments

How to drive a real bargain

Make sure you do your homework before purchasing on 0% finance offer. Compare the costs between loans including those available outside the dealership. Also, ask if the low finance rate is attached to the price of the car and if the price of the car is also negotiable.

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