The fact that zero percent car loans isn’t as widespread as it used to be has led some to believe that it no longer exists, and that the companies that do offer it are scammers. But that’s not true, as zero percent car financing is still available and if you can find one, save up to $3,500.
A Legitimate Business
Industry analysts and observers have pointed out that zero financing is actually making a comeback, and judging by the number of offers appearing on the web, this certainly seems to be the case. Zero percent financing is a legitimate business and marketing tool and it’s used by manufacturers to entice customers to purchase specific models. However, this financing program is usually offered only to those with good credit. In a typical deal, you can pay off the interest-free loan in three to five years.
This is a win-win solution for the consumer and manufacturer: consumers save money, while the manufacturer has to spend less on rebates and special deals, which is why it’s gaining popularity again.
To put this in perspective, if you availed of a zero percent financing loan during the first nine months of 2014, you’ll get savings of $3,554 when compared with what other car owners spend on standard financing and interest. In fact, a typical car loan has an average interest rate of 4.31%, a 67 month term and $28,000 principal.
As good as the numbers sound, zero percent financing is actually lower today due to low interest rates. Back in 2007 for instance, you would have saved up to $6,000 because car loan rates back then was at 7.3%. Still, the savings can be substantial.
Where to Find Zero Financing Deals
But the fact is these deals are harder to find now than they used to be because the sales benefit is not as substantial as it used to be, and it doesn’t offer much in terms of sustainability. But that doesn’t mean you can’t find the deals, although your chances of success depends entirely on what type of car you buy and where you live.
To give you an idea, 19% of van buyers were able to get a zero percent financing deal while less than 4% got one for buying a luxury vehicle. What this indicates is that automakers usually offer zero percent financing to business-oriented customers more than those that can afford luxury cars. However, only 4% of truck buyers got a zero percent deal, but that’s not really surprising because most of these drivers prefer cash rebates.
A study by the car buying website Edmunds shows that interest free loans are most common in Kentucky, where 16.7% of sales provides it, followed by Wisconsin (16 percent), Illinois (14.2 percent), Nebraska (13.9 percent) and Iowa (13.7 percent).
At the other end is Alaska with just 1.6%, Hawaii with 4.5% and Louisiana 5.1%. Florida and Georgia are tied at 5.3%.
What do these figures tell us? First, automakers tend to offer zero percent deals to Americans who’ll buy and drive cars for years, while the rate is very low in Alaska because the market is difficult to reach and therefore doesn’t offer much in terms of incentives. As for the other states, it all comes down to credit, because unless you have good credit standing you won’t be eligible for this offer.
The bottom line is that while zero percent financing is no longer as common as it used to be, that doesn’t mean you can’t avail of it. As analysts point out, it’s simply a matter of knowing where to look and making sure you’re qualified for it.