0% finance is an option which is offered to the individuals by either the money lenders or car manufacturers for financing their cars for specific amount of time wherein there is no annual percentage or APR on the loan amount.
This is a tactic which is used by most of the car manufacturers for attracting those people, who are interested in buying new cars for themselves. As we know there are two sides of the coin, similarly, this option has both advantages and disadvantages tagged along with it.
The most obvious and certain advantage of considering the option of 0% finance is that you will be able to save a great deal of amount which otherwise would be payable over and above the actual cost of the car over the term of the loan. The main reason for this is that the buyer will be paying the exact amount that he/she bought the car for, although it would take him a few years to pay off the entire amount.
One of the most important factors to be considered is that if you are going ahead with the option of 0% finance, there is every possibility that you will lose buyers incentives, which could vary from cash off to cash back offers. Therefore, it is imperative to do all your calculations well and check if the interest paid over the entire loan term is more or less than the cash back or cash off offered by the company.
If the car manufacturer is giving you the option of cash back, then it becomes all the more important to calculate the overall interest that can be earned on the cash back. Many times, it becomes apparent that the 0% finance scheme can turn out to yield a higher overall price for the car, compared to second option of paying a small rate of interest but at the same time getting either money off or money back.
The next important thing to be considered while going ahead with the option of 0% finance is the actual terms and conditions of the loan. In majority of the cases, it is observed that with 0% finance option, the loan has to be repaid in 36 months. Here, there is no importance given to the feasibility or the affordability factor of the buyer. There is every possibility that the amount would go beyond the reach or the comfortable range of the buyer. It should also be noted that it is virtually impossible to get the best suited 0% finance options easily.
The general thumb rule for getting approved for the 0% finance option is to have a minimum credit score of 700 and absolutely no or negative marks on the credit history of the buyer for the last five years or more. This criterion is achievable by not more than 10-15% of the car buyers qualify.
It is certainly an important consideration to go in for the option of 0% car finance but at the same time it becomes equally important to calculate all the potential drawbacks associated with it. The best way will be to check all the financing options available and calculate sensibly all the positives and negatives. This will help you to decide and go in for the best finance option while buying your car.
