Unfortunately, when it comes to car finance there isn’t such a thing as a free lunch. If the official cash rate is above zero, and the banks and other majority of lenders are charging more than this, it's almost guaranteed that somewhere along the way a 0% deal will see you hit with additional fees and charges and it's up to you as the buyer, to find out where.
0% car finance offers can be very alluring, for car dealers, getting buyers to walk into the showroom is a big part of the battle to secure a sale. That's where those 0% offers are so effective, they capture our attention and to create a sense of urgency they are often marketed as being 'for a limited time only'.
The con with a 0% deal is Less price flexibility, though 0% sounds great at the time, the deal isn't entirely interest-free. The finance provider still earns their cut of interest but instead of the money being spread over a series of repayments, the interest cost is factored into the upfront sales price of the car, which means the dealer may not be able to afford to be flexible on the price of the vehicle and may not be able to be very generous with a trade-in offer.
Another con of a 0% deal is Higher servicing costs, 0% deals generally apply to new cars however, remember, it's likely you'll be obliged to have the vehicle serviced by the dealer at set intervals, should you fail to do so you risk voiding the warranty, also these service charges can be a lot more than you’d normally pay at an independent mechanic/servicer.
Dealer may also aim to increase their profit by Up-selling additional services with add-ons like an extended warranty. Some will even dangle the carrot of a guaranteed price on your next trade-in, thereby locking you in to a future sale.
It’s crucial to do your homework so that you can be confident you are getting a good deal on your next car, its essential to research the market value of any vehicle you're planning to trade in, this will give you an advantage in price negotiations and remember you are always in control, never be pressured into signing up for a purchase on the spot.
Before you buy its recommended that you talk to a Mortgage Choice broker to see how other forms of car finance compare. It may turn out the 0% offer is right for you but at least you'll be able to enjoy the vehicle knowing you made an informed choice.
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For more information contact Tim and team today, with no obligation you have nothing to lose.