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When shopping for a new car, you’ll come across dealers advertising car loans with an extremely low interest rate — sometimes even 0%. This type of dealership loan is generally a sales tactic.
Before signing on the dotted line and driving off the forecourt, there are some things you need to know about taking on a 0% car loan.
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At first glance, a 0% car loan is exactly as it appears, you purchase the car at the agreed price, and then make monthly payments on the price of the car with no interest. However, keep these points in mind:
There are different reasons why dealerships offer zero interest. One reason is to get potential buyers in the door. Once a buyer has entered into a salesperson’s territory, the sales battle has begun.
Another reason is to move inventory. By offering a 0% car loan, they can get rid of the cars that have been on the forecourt too long, and make a profit — even without interest.
If you make all of your payments on time and get a competitive price on the car, it can be. However, 0% car loans tend to have shorter terms, resulting in higher monthly payments of a few hundred pounds.
But if you’ve been approved for a 0% car loan from a dealership, odds are good you have great credit. You’ll probably be able to get competitive deals with a different lender.
When it comes to car finance, there are a number of options with 0% loans that may work in your favour. When comparing loans, consider:
There are few strategies to use when buying a car with 0% financing that can help you use your loan as efficiently as possible, they are:
Before you lock yourself into 0% car loan, research banks and other lenders to see if they can offer you a car loan with terms that are more suited to your financial situation.
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