0 finance car deals
There is a changing trend all over the world and the car has become pivotal in a man or womans life. Its more like a necessary appendage. Henry Ford in the United States set the ball rolling and was instrumental in the car industry setting up assembly lines that are so common now. The result- a massive production of cars of all varieties and costs to cater to an ever growing demand. Nehru of India ushered in what he termed the bicycle age and here also the car is fast becoming a utility item.
This massive output of cars has to be sold. One of the options of sale is finance.90% of the cars sold are with a finance option. financial institutions like banks, credit unions etc have schemes that cater to people from all walks of life from the man with average means to the affluent buyer who may go on for an s class Mercedes or even a BMW or better still a rolls. However one must bear in mind that the cars purchased on finance have two components the principal and interest. In most car deals one pays back the loan and interest in an integrated installment often referred to as emi.
Car financers have introduced anew option and that is the 0% car finance. It may sound something that is out of this world but then its an option that is available from India to the UK and the USA to germany.People who have been brought up on a diet of some APR at least will be surprised at this option of no interest at all..Interest rate is one of most important factors in auto finance and the 0% finance option may sound eerie. But it is not so.
.0% car finance option really means that car loan given to you does not carry any interest. In other words you just pay the principle and forget about the interest.Sounds interesting and need evaluation. Bear in mind that b no lending bank or company will like to give a0% loan to a customer. Interest is after all the bread and butter of finance companies. However in a 0% interest rate a consumer is not required to make any payment towards interest rate and in most of cases.
However there are many compelling reasons for the dealers to offer the 0% finance option to cutomers. Firstly in a depressed market its a form to attract the well heeled customer and secondly it helps to lower the inventory of cars lying unsold in the godowns. Cars 0 finance deals are thus advertised and offered in special cases only. They may also be offered as a promotional deal to attract a customer. However it must be understood that such offers are for short periods like say six months. These limited short period offers suit the finance dealers and the companies as they can recover their loan in a short period and the vehicle is remove from their inventory. There are offer sometimes of these 0% finance options for as short as 3 months.
All car dealers may not have these 0% car options. But you cant have to go very far and you will definitely come across some dealer coupled with a financier who will give the 0% car option to you. However, a person can still find some car dealers that have arrangements with different lenders and But getting a car at 0% finance is not a straight road and some stringent conditions can be enforced. Its really not a free for all and the 0% finance option is not for everybody. The requirements for 0% finance Apr requires the buyer to have an ideal credit history. In most countries of the worlds a credit history does have considerable importance for a 0% finance deal. The second requirement is that the repayment is to be done in a shorter period. This is understandable as the lender will require recovering his investment as quickly as possible. I cannot think of a 0% finance option for more than 2 years. In most cases the dealer would want it to be shorter than these 2 years as well.
But once you have decided on the 0% finance option it is incumbent on you to evaluate your income and financial position. Remember in shorter period the EMI will be much higher and to service this income must be one that can sustain the high installment as a default can have disastrous effect and may well end in your losing the car. For the financer has lien on the car which is mortgaged and he can take over the car in cases of repeated default.Thus, before agreeing to 0% car loan, present and future sources of incomeneeds to be worked out in a sensible manner.
Again any 0% finance option is sometimes not the best deal. You may well ask why ?The fact remains that the Emi could become so prohibitive that servicing the loan vis a visa low interest car loan for a longer period may not be the best thing.
However in a depressed market, dealers have another option up their sleeve and that is the cash back option. This when coupled with a 0% apr can be proposition that can be accepted by the consumer. The cash back option can be as high as 5%.that could put a sizable sum in your kitty.
All in all the 0% par option and the cash back options are part of the depressed car manufacturing industry where only Dodge made a profit and all other dealers are struggling to stay afloat. The scenario is not likely to change for any appreciable length of time