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Is 0% Financing a Good Idea?

Is 0% Financing a Good Idea

Zero down! Zero interest! Zero payments for Six Months! You'll hear one or all of these deals at different times. What can go wrong with deals like that?

Just about everything. These ads are promoted heavily at different times, so you should know the facts, starting with the fact that these promotions can be some of the most deceptive and unfair to the consumer.

By using word games and by deliberately obscuring details, the promotions hurt unwary consumers' pocketbooks in big ways: Read the very fine print and you'll see this:

  • Zero down payment doesn't mean no money – Every buyer still has to pay tax, tag, and license, which can run over a thousand dollars. That's a down payment in my book.
  • Zero Payments for Six Months! – Are the finance companies being nice and making your first six payments for you? Of course not! They are doing one of two things: either adding the six payments to the end of your contract, or, even worse, adding those first six payments into the loan. Either way means you end up paying more in one way or another..
  • Zero percent! – In addition, you might have seen that zero percent is legal bait and switch. According to CNW Marketing Research, barely 9 out of a hundred people drawn to a dealership because of zero percent financing actually get it. To make matters worse, the research company found that consumers don't negotiate on the actual price of the car when they go to dealerships for zero percent. They don't realize the price of the car and the cost of financing are two separate issues. Those consumers can pay thousands more than they need to pay.

Can you do better than zero percent?

If a rebate is offered as an alternative to 0%, the answer is often yes! To do so, you'll need to apply the rebate as a down payment on the vehicle.

Should I take a zero percent loan or a rebate? It all depends. Go to our auto loan calculator "Should I Take a Rebate or Low-Cost Financing?"

You could save a considerable amount if you

  • forgo the dealership 0% interest rate;
  • take the rebate and use it as a down payment;
  • get a low interest auto loan at DCU

For example, this calculator will tell you that if the purchase price of a car is $15,000, with a dealership offering a cash rebate of $2,000 or 0% financing for 60 months, a person could save over $1,000 by using the rebate as a down payment and financing with DCU if they have good credit.

Compare financing before you buy

Compare any dealer's financing offer to DCU's. Ask the dealer to completely fill out a copy of their finance contract, but don't sign it yet. If the dealership refuses to give you a completed copy of the contract to take with you, chances are, they aren't cheaper.

Bring the unsigned contract in to any DCU Branch or fax it to us at 508.263.6392. DCU will assess their loan and we will tell you if we can beat their financing or not. If we can't beat their offer, we will tell you so, and send you back to the dealership.

DCU also has an arrange with different dealerships to provide DCU financing right at the dealership. To learn more about the DCU Auto Buying Service, go to our Auto Premier Auto Buying Service.

Are you currently paying too much?

In the last several years, thousands of members saved millions of dollars by moving their auto loans to DCU. Every one of these members thought they were getting a cheaper rate at the dealership, and found out they were wrong.

How can you tell? For an approximate estimation, go to our simple "Auto Loan Refinance Calculator" on our Auto Refinancing page. Fill in

  • the loan term you desire,
  • the total loan amount you desire,
  • your approximate credit rating,
  • your current monthly payment and
  • the approximate loan term remaining (in months) of your current loan.

For a more exact figure, fax the above information to us at 508.263.6392. Please include your name, member number and a way to contact you. You can also email us or visit any DCU Branch.

Every day we save members money over dealer financing – often even when zero percent financing is offered. What should you do if you're in the market for a vehicle and see one of these ads? Slow down! Remember that speed in the car business can cost you thousands. Use StreetWise to help save those thousands!