The truth about 0% car finance

Offers of zero per cent interest on car finance may sound tempting, but it pays to read the fine print, because deals that sound too good to be true usually come with hidden costs.

When it comes to car finance there’s no such thing as a free lunch. If the official cash rate is above zero, and the banks and other mainstream lenders are charging more than this, it’s a fair bet that somewhere along the way a 0% deal will see you slugged with additional fees and charges. It’s up to you, the buyer, to find out where.

Features of 0% car finance offers

Eye catching offers

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 grab our attention. To create a sense of urgency they’re often marketing as being ‘for a limited time only’.

Less price flexibility

While 0% sounds generous, 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. This means the dealer may not be able to afford to be flexible on the price of the vehicle – or particularly generous with a trade-in offer.

Higher servicing costs

Zero per cent deals typically apply to new cars but remember, it’s likely you’ll be obliged to have the vehicle serviced by the dealer at set intervals – otherwise you risk voiding the warranty. These service charges can be a lot more than you’d pay at an independent mechanic.

Up-selling additional services

Dealers also aim to beef up their profit 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.

Stop, compare, be informed

The key to getting a good deal on your next car is homework. Research the market value of any vehicle you’re planning to trade in – this will give you a head start in price negotiations. And never be pressured into signing up for a purchase on the spot.

Speak with a loan expert

Most importantly, talk to our 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.

Talk to us about car loans today

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360 Degree Finance Services (ACN 634 234 709)
Suite 28, 50-56 Sanders Street, Upper Mount Gravatt QLD 4122
Authorised Credit Representative of Australian Credit Licence Number 384704