0% finance too good to be true?

0-percent-finance

No interest or low interest car loans are the latest thing from car manufacturers desperate for sales. When a car dealer offers you money for nothing, there must be a catch, right? Well, yes and no.

The good news is that special advertised rates of 0 per cent to 2.9 per cent interest from car makers such as Holden, Ford, Nissan, Toyota and Kia do deliver on their promise. The catch is, you may end up paying more for your new car than you would if you had shopped around and paid cash, or even if you had taken out a personal loan!

Interest rates for new-car loans are typically 2 per cent or more, higher than mortgage interest rates. According to loan-comparison site Canstar, rates on standard car loans range from 7.69 per cent to 11.95 per cent, compared with the average standard variable mortgage rate of 5.75 per cent. This is because cars depreciate quickly over the first 18 months so lenders are unable to recoup the full value of their loan if the borrower defaults. People who lease a vehicle for business can claim depreciation against their taxable income, but personal buyers foot the bill themselves. If dealers are not charging interest on their finance packages, they need to make up the difference in other ways. For starters, the price of a vehicle with a special low or no interest deal is often non-negotiable. Buyers who are prepared to shop around may be able to negotiate a cheaper price elsewhere.

Typically, the new-car purchase price is higher than you could get elsewhere and the trade-in value on your old vehicle is lower. Low-interest loans offered by dealers are typically only offered for limited terms, such as three years. To pay off a vehicle over that time requires larger repayments that can stretch household budgets.

Even though these advertised low rates are very attractive on the surface, don’t jump at the first one you see on television or in the paper thinking it’s the best deal. Do your homework and find out the total amount you will be repaying and make the most suitable decision for your current circumstances. By applying with Blink Finance, your application will be personally handled by one of our finance experts who will compare loans across a number of leading financial institutions to find the most suitable loan product for you.

All applications are obligation free which means you have nothing to lose to try and find the best deal possible!