When 0% interest isn’t your best auto loan
When it comes to auto loans, a 0% interest rate is a head-turner, but it’s not always the best deal. Car dealerships generally advertise 0% interest offers in the summer when they’re looking to make room in the showroom for newer models. The offers come from the financing arms of the large auto manufacturers, which, unlike traditional lenders, profit directly off the sale of the car and don’t necessarily need the interest revenue.
But like any great deal—there’s a catch. According to The New York Times, only about 10% of consumers actually qualify for 0% interest loans, which require pristine credit—usually a FICO score of 720 or higher. Those loans are typically reserved for a limited number of models and are not available if you’re shopping for a used car that costs less than newer models.
These 0% loans often are paired with shorter-term loans, which cost you less overall but mean a higher monthly payment. So, before you head to the dealership chasing a 0% loan, keep these points in mind:
1. Look at all available deals.
Check for other offers, such as cashback. If you can get a rebate—which lowers the overall price of the car—paired with a low-interest loan, it may save you more than the 0% financing. Be sure to crunch the numbers with an online calculator: Car Loan Calculator
2. Negotiate the price.
Before you get to the interest rate, finalize a sale price and stick to it. Don’t feel pressured to accept expensive add-ons. Once the sale price is established, then talk about financing; and
3. Get preapproval for a loan at your credit union.
Heading to the dealership with a firm offer will give you a point of comparison and put you in a stronger negotiating position. Credit unions, as not-for-profit financial cooperatives, offer competitive rates.
Why choose Elevate Credit Union
While Elevate Credit Union may not be able to offer 0% interest rates, we can help you get into a car that you can afford at a great rate. A pre-approval for a car loan will save you interest at the dealers and put you in control. Make sure you know before you go! Get your pre-approval today! You can apply online here or visit one of our two branches and speak to our helpful team members. Find out more here: Auto Loans.
