Auto dealerships offer all kinds of deals to customers to entice them into coming down to the lot. One of the most often seen is an offer of a 0% interest auto loan. Since most individuals can’t walk into a dealership and pay cash for a car, who wouldn’t want an interest free loan?
Like most people, you probably immediately realize that only people with the most stellar credit would qualify for 0% interest. Perhaps you believe your credit is good enough to take advantage of the deal. The problem is that you may be in for an expensive surprise once you pick a vehicle.
The fine print
You may go to the dealership thinking you can choose whatever vehicle you want and apply for a 0% interest loan. The salesman leads you around and finds you a vehicle you love. This is where reading the fine print comes in handy. The problem is usually two-fold — you can only get the financing deal on certain vehicle models and the term of the loan is ordinarily quite short.
You may have chosen a modest vehicle that will fit within your budget and that you like. The no interest loan may only be on luxury models that, of course, cost more, which means higher payments. On the other hand, the vehicles may not be what you were really looking for. Then, to make matters worse, you can only finance the vehicle of their choice for anywhere from 12 to 36 months. As you can imagine, the payments on those terms would be high.
What do the dealers gain from this scam? Dealerships hope you will choose another vehicle that requires you to take out a loan with an interest rate and a longer term, which makes them more money in the long run. They do this by making it difficult or expensive to accept the terms of the no interest loan. The finance manager already knows what to say and do in an attempt to get you to see things his or her way.
All you have to do is agree to a vehicle or loan terms that you didn’t want when you walked into the dealership. As is the case with any negotiations for a vehicle, you need to be prepared to walk away when you discover that you are being manipulated into a deal you didn’t want. Auto sales representatives count on you making a quick emotional attachment to a vehicle. Don’t give them the satisfaction.