Low Rate Auto Loans
Posted on June 16, 2008 | Filed Under Finance, Vehicles
You feel like it is time to buy an expensive car. You have a problem at hand,though - you do not have enough money. Do not loose heart. These days you can get plenty of financing offers, popularly described as zero percent finance for cars. How does this work and are they really for you?
Scenario
All these offers of cheap auto loans are, in reality, well crafted marketing tactics. They will have outlined a profile of the prospective customer. Quite obviously, a major criteria would be that the customer should have a good credit standing. SO, normally such offer will be made to existing customers. New customers will be vetted on several parameters like, income, location of the customer, employment or business status, or even the assets that the customers own. For obvious reasons, credit term is usually shorter than the normal regular interest credit scheme, often below 2 years. It will result in higher EMIs - equated monthly installments.
Terms
EMIs and duration always move in opposite direction - shorter the term of credit, the higher the amounts payable per month and the longer credit period, the smaller amount to be paid per month. Incidentally, if you opt for a longer duration you will end up paying more amount simply because interest rate is induced for a long period of time. You will find that you will have paid more than 20 times the retail price. If you default on monthly payments, it will result in higher interest after that as a penalty for not paying on time. In such eventuality, it will result in your paying out a far higher amount than what is required by a zero percent finance scheme. To top it all, the car is priced higher than cash down value. For example in a zero percent scenario, the car is offered at say $100,000 on display for 2 years to pay having a monthly payable amount of $4,166. The $100,000 price is actually still higher than the actual value of the car. The car dealers usually know that the car value is only say $70,000 but if offered at zero percent credit, they would price it at $100,000.
Conclusion
The zero percent finance car is a good marketing strategy for the car dealer. It is also beneficial for the customer who can afford it. It is really debatable as to how much monetary benefit is derived from a Zero Percent Finance Car. This sales tactics will definitely get good business for auto vendors. It always better than paying longer credit period. And it will definitely help those who can afford the terms.
Check out these blog posts - car finance gmac cheap insurance — Discount Auto Loans.
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