# Explain 0% financing to me



## jdubbya (Nov 6, 2005)

What am I missing. If a car dealer offers 0% financig for 72 months, does this in fact mean there is no interest? I'm looking a new Jeep Wrangler 4 door which, with incentives (cash back, customer loyalty, blah blah) is priced at around 26K. I have no trade, don't want to put anything down, and told the dealer I was interested in the 72 month 0% financing. He comes up with a payment of $490.00 a month! WTF!
According to my figures, it should be around $360.00. I'm probably mising something here but the monthly payment seems WAY too high given the 0% and the payment term.
Any ideas or am I getting a typical hosing from a car dealer?


----------



## Otaku (Dec 3, 2004)

Typically, when a dealer offers 0% interest on new car financing, it means that you forego the cash-back, any rebates, customer loyalty perks etc. and pay the full list price of the car. No incentives. It's kind of a wash - the difference in the prices comes out to about what it would cost you to finance the car at, say, 7% or whatever the average going rate for car loans happens to be.
Here's a quick explanation of how it works:

http://everythingcars.wordpress.com/2008/04/01/0-zer0-percent-financing-truth-or-fiction/


----------



## dflowers2 (Mar 5, 2007)

Typically you are going to pay a higher price for the vehicle. Most of the time, you are not going to get any incentives if you choose the 0% interest financing. Other tactics they use is to shorten the loan terms to something like 36 - 48 months. Did they actually tell you that the financed price would be $26,000.00? Also be aware that even if you have perfect credit with a FICO beacon score above 700, some dealerships use a auto industry score that is based on your auto purchase credit history and is not something you can get from one of the three credit reporting agencies. If you are a first time car buyer, you could be denied 0% financing due to this auto industry score. I would one make sure that you qualify for the 0% loan and then have them show you the math. The numbers and terms you gave should not equal to $400+ monthly payments. They have increased the price or shortened the terms. Remember increasing the price could simply mean that you are not getting all of the incentives that you think you are getting. One of the best tactics you can use when buying a car is to get approved via a personal bank or on-line first. Typically when you are pre-approved for a set amount, the bank will give/send you a blank check that you are able to sign over to the dealership up to the approved amount. When you go shoping for the vehicle, haggle the best price and keep all the incentives yourself. This typically will give you the best bang for your buck. Be sure to do research on the pricing of the vehicle you want and all incentives available before you step foot on the dealer's lot. Also, be very aware of the extended warranties and service plans, they can add considerable costs to your vehicle. If you come to the plate with your own financing, be careful and watch out for bait and switch tactics. The dealerships usually win when you are using their financing companies.


----------



## jdubbya (Nov 6, 2005)

Thanks. Reading these replies makes me believe I was being hosed big time. The salesman clearly listed all of the rebates and incentives and then came up with the monthly payment. I thought it was realy high and told him so but he didn't blink. Just said, well if we hear of any better incentives, we'll give you a call. Jerk. We've been with this particular dealership for the past 10 years and have had what we thought were good deals and the customer service is truly outstanding, but this kind of thing pisses me off.


----------



## Spooky1 (Aug 25, 2008)

I think the car dealers usually only offer the 0% financing on loans of 36 months or less. I'm sure if you're looking for a 72 month loan at 0% they're going to sell at the highest price possible with no discounts at all.


----------



## HibLaGrande (Sep 25, 2005)

we got a really good deal through Mazda at 0% a few years ago.


----------



## RoxyBlue (Oct 6, 2008)

Considering how hurtin' for money car dealers are supposed to be, I'm surprised they wouldn't do better by a loyal customer. If you like the place, perhaps you could try a different salesman. Otherwise, you can always "vote with your feet".

BTW, the advice about financing through your bank is good. You'll get a better rate than a dealership will offer.


----------



## HibLaGrande (Sep 25, 2005)

usually 0% comes at a higher payment with shorter duration. still much better in the long run.


----------



## slightlymad (May 25, 2006)

Dealers are hurting for sales yes but credit is extremely tight


----------

