Let’s be honest, there aren’t many Canadians who love talking about finances unless you’re some big finance hot shot. When purchasing a new car, most car buyers loathe the process of visiting car dealership after car dealership. Not to mention, the worst part of buying a vehicle, whether a new vehicle or a used car, is sorting out the car financing. There’s nothing worse than finding the perfect vehicle and then being dragged into the finance guy’s office, where you have to answer a bunch of personal financial questions as if you are on trial for something you didn’t do. What makes it the ultimate horrible experience is when they tell you that there aren’t any financing options for you. WHAT!? What a waste of time that is.
Before we even talk about zero percent financing, we’re giving you a tip on how to avoid the embarrassing moments of watching a stranger sift through your credit history for auto financing approval. Here’s the pro tip: start by qualifying through FFUN Cars without impacting your credit score. You’ll be given loan terms with interest rates in just two minutes. You can shop for your next car without dealing with a salesperson. Knowing what type of car loan you are approved for will help keep you on budget and give you a clear understanding of your monthly payments, including your down payment. You can also see what your current vehicle’s trade-in value is. Forget the fine print; FFUN Cars makes it easy!
Everyone Thinks a 0% Interest Rate is the BEST
That’s fair; why wouldn’t car buyers want to get the best financing deal at zero percent interest? But, you know the old saying, if it’s too good to be true, it probably is? Getting a financing offer of 0% sounds incredible, but it’s important to consider what that means long-term for you and lenders.
Let’s start by breaking down what an auto loan is. An auto loan is when you borrow money from a bank, credit union or dealership, which is paid back (car payments) over a term (i.e., 36 months) with a specific interest rate. An interest rate is considered a service charge for the cost of borrowing money. Interest rates in Canada vary depending on whether or not the borrower has good credit or poor credit. In addition to what a car buyer’s credit score is, lenders will also look at payment history and credit card balances.
How Do You Get 0% Interest?
With the way dealerships advertise 0% interest, it seems easy to get, and anyone can walk off the street and qualify for that rate. The reality is, it’s not easy at all. Since financial institutions don’t typically offer 0% financing, as the interest is how they make money, 0% is available when an automaker offers it, not banks.
We are not going to sit here and say that borrowing money without paying interest isn’t amazing; it is. However, tread carefully and read the fine print. More times than not, the only way to receive an auto loan with zero percent interest is if you have excellent credit. Like, above a 725 credit score. If you can receive that rate, it’s not on any vehicle you want. Since automakers make their money on the sale of a vehicle, not the interest rate, they will use 0% financing to entice car buyers to purchase certain vehicles, such as models they want to clear out at the end of the year and only on new vehicles.
Is it the Only Incentive to Save Money?
Don’t be seduced by the idea of no interest without understanding what is involved. Often, a low-interest rate may only apply for a certain length of time. So if you can’t pay it off within a shorter term, it’s probably not the best option, as when that term is up, the interest will sky-rocket for the remainder of what is owing on the vehicle at that time. Full disclaimer; we can’t speak for all dealerships, it’s just what we see as common knowledge. At FFUN Cars, it’s no hassle. The price you see is the price you pay without any hidden costs, so you’ll know upfront what the vehicle will cost you.
Do Your Own Calculations
If a dealership is offering a few incentives, i.e., 0% interest or cash rebate, make sure you do your own calculations and don’t assume 0% is the best. It’s easy for automakers to make money, especially if they own their financing arms, such as Toyota Financial Services or Honda Canada Finance Inc. Selling a vehicle at a higher price with 0% still makes them money, and these dealerships will usually offer the vehicles with the higher profit margin at the 0% interest rate. It’s not a scam; it’s business, and it’s up to consumers to do their research.
For simple math, if you purchase a vehicle that costs $50k and has zero interest over the term, you pay $50k. If you take that same $50k vehicle and take advantage of a car deal with a $10k cash rebate and get a slightly higher interest rate of 1.99%, the amount you pay in the end is $59 950, but you are getting $10k back, which puts an extra $50 in your pocket. That doesn’t account for any additional special offers or negotiating you do.
Not only does it often work out cheaper to stray from the 0%, you also get more choices on vehicles, so you can get the car you want, even if it’s a pre-owned one.
At the end of the day, it’s what you feel the best about. After all, it’s your money. Call us biased, but we think the hassle of a traditional dealership isn’t worth the (slight chance of getting) 0%. Instead, buy a vehicle in a way that’s convenient for you. Hint, hint, check out FFUN Cars. Whether in London, England, Toronto, Ontario, Montreal, Quebec or Vancouver, BC, FFUN Cars is always open. Buy, sell, qualify, and trade in a vehicle online! Like 100% online, without having to speak to anyone - if you want. Otherwise, come shop in-store. We even offer extended warranty options, and every vehicle comes with a free CARFAX report. At FFUN Cars it’s First, Fast, and FFUN.
