How the 0% Finance deals from Car Dealers really work - By Monica van Riet, Mortgage Choice South Melbourne

October 14, 2013
Erin Rimmer

Many car dealerships are now offering what they call 0% car finance deals. You may be thinking “How can it be possible to purchase a car at such a low rate?” The truth is that there is no such thing as a free lunch.

The term for this low interest rate is known as a subvention agreement. This is a marketing tool developed by car dealerships, and is used to get you into the dealership and make you feel that you can afford a more expensive car.

Under a subvention agreement, you may not be paying interest on the loan, however the car price is loaded so you actually end up paying more upfront than if you were buying the car without dealer finance. The contracts may also be very restrictive, and revert to a very high interest rate after 2 years, with high exit fees to get out of the loan.

So the best thing you can do is the following:

* Ask the dealer to quote you a monthly repayment including all fees

* Ask for a ‘cash price’ on the same car, and then come to us to compare the monthly repayment.

For more information or to compare a quote, please speak to Monica van Riet or Erin Rimmer at Mortgage Choice South Melbourne on 03 9681 8182 or or

Posted in: Car loans & leasing

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