How can car dealers offer 0% finance?

January 31, 2017
Marvin Coleman

One of my life learnings is "if it sounds too good to be true, it probably is".  Any of you who invested in Pyramid Bank in the 1980s will know what I'm talking about. 

What's the catch?  

Ever wondered whether car dealer offers for low rate car finance (eg 0%, 1%) can really be true?  Well, the interest rate may be correct, but the dealership needs to make a profit somewhere.  So look for all the fine print in the deal - perhaps the lowest price they can offer on the car is higher than elsewhere? or the offer is limited to models they need to clear?  What are all the fees and charges in the deal?  They may keep the car sale price high, or lock you into certain maximum km's over time or servicing requirements.  It may be by minisiming your trade-in value or restricting your balloon (residual) payment.  There may be extra fees and charges.  These conditions may not be clear until car delivery day, when you might be so interested in taking your new car for a spin that you don't pay attention to the fine print.

Further, Finance Brokers such as myself are bound to provide responsible lending services, by both professional and legal means such as the NCCP Act (National Consumer Protection Act).   We have to be open about all aspects of the finance, especially about fees and written (the effective charge) rates.  Those not bound by NCCP could quote you a base rate, but it's the written rate along with any fees that will best describe the true cost of the loan.  Car Dealerships are exempt from the NCCP requirements, which means they may not have to meet any standard of conduct or comply with responsible lending obligations.

What can I do about it?

If you already have a quote, compare the repayments to any other quote (including one I can get you).  If all other terms (time, base loan, residual) are the same, then the monthly repayment figure should allow you to do an "apples with apples" comparison.  Then read all the fine print, to ensure you understand what's involved.

Like the scouts say, it's best to be prepared.  If you are in the market for a car, truck, caravan, boat, or whatever, contact me before you go shopping so I can get you finance pre-approval. I will find the best finance to suit your needs, from our panel of more than 15 lenders. This means you have the comfort of knowing you that you have the car finance in place, what your maximum price will be and your loan terms before you go shopping.  And that you're agreeing to finance under NCCP requirements (which are there to protect you the consumer). And if you're looking for car inspiration, the RACV have announced their Australia Best Cars of 2016 finalists!

How do I apply for car finance pre-approval or approval?

Please contact my Loans Specialist here at Mortgage Choice Oakleigh (not to mention my better half), Robin Coleman robin.coleman@mortgagechoice.com.au or Ph 0402 161 184.  She can give you a quote very quickly.   

Any customers who settle a home loan (or refinance an existing loan) worth at least $150,000 or settle a car loan or equipment finance for any amount up until the end of June 2017, will automatically go in the draw to win $20,000!

Posted in: Car loans & leasing

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