Zero Percent Financing: A Consumer Benefit Or A Marketing Trick?

In recent years, zero percent financing has become an increasingly popular financing option offered by most car manufacturers on new cars and trucks. While it does sound great and is extremely appealing to many car buyers, there are few things attached to it that may diminish the benefits.

Commonly, car dealers offer an alternative of a zero percent financing or a cash rebate on the vehicle purchase price. Let us say, that you are confronted with an offer of getting a cash rebate of $3,000 or a zero percent financing. While you are going to have no interest to pay, you will end up paying $3,000 more for a vehicle that you may have saved otherwise. Should you pay off your loan early, the advantage of taking zero percent financing would become null.

It is important to keep in mind that any car is a quickly depreciating asset. Taking a rebate instead of a zero percent financing incentive may help you to reduce the gap between the loan balance and the vehicle fair market value. Since your car depreciates most in the first year of use, having it totaled or stolen may leave you upside down on your zero percent auto loan since your insurance company would not cover extra $3,000 you paid for your vehicle. That means that you would have to come up with the difference to cover the remaining loan balance.

It is important to remember that nothing is truly free in this life. Financing incentives, typically coming from the corporate offices of car manufacturers, are most commonly hidden in the vehicle selling price. Car dealers, sometimes offering zero percent financing on their own, follow the same strategy.

How Does It Work?

While it is somewhat understandable how financing incentives offered by auto manufacturers work, zero percent financing offered solely by a dealer may raise your eyebrows. Obviously, banks are not going to finance you at no interest, no matter how good your credit is, since they have to make money off you to stay in business.

What usually happens is that auto dealers rebate the bank upfront for the interest charges that a customer would accrue and pay to the bank otherwise. In simple terms, your dealer pays your interest for you. Since they are not going to make it a money-losing proposition, they have to compensate these expenses somehow. That is why these costs are built into the vehicle purchase price.

Typically they are offset by a rebate that a car manufacturer would give you on a new car purchase and/or an incentive that an automaker gives a dealer for higher volume sales. What this also means to you that there is less negotiation power on your side, since a dealer would be less eager to go down on a vehicle price in this case.

Financing Incentive or a Cash Rebate?

What this means to you is that a simple mathematical equation needs to be solved. When approached with a choice between the rebate and a zero percent financing, calculate how much interest you would normally pay on a car loan and compare it to the amount of rebate. If your interest charges are going to be greater, it may be time to consider zero percent financing. Should they be not, take the rebate and run away from the zero interest deal!

Student Car Loans Now Made Easy

Every young American student who is eligible for a valid driving license feels the need to own his or her own car. And in a way there need is justified, between college tuitions, home and part time jobs they are the ones who need an automobile the most. Most of the banks and credit unions are very wary of providing college student car loans, mainly because students have low income capacity. Even if they agree they may insist on a guarantor or a co signor for your loan, which may not be an option for everyone.

Online car loans for college going students

However in this modern era the advent of numerous online car finance companies have come as a boon for students. They have specially designed car loans for students with no credit. And these online car financing companies are not in a limited number. A few clicks on the internet search engines and you will be able to see a plethora websites that deals in online car financing for college students. Hence do not settle for auto finance deal until you have compared loan terms for your category in these sites. Some of the websites also functions as brokers allowing you to compare deals offered to you by various lending companies.

Car loans are usually fully secured loans, where in the car it is held as security by the lending organization. This is until you have paid your last due installment. So that if you default on your payments and are not able to pay back these loans then they will take possession of the car. Student car loans are no credit type financing as normally most students would not have taken part in credit transactions that are tracked by credit rating agencies. Hence it is advisable that they take the repayment of these loans seriously. This loan can be a stepping stone in building a secure financial future by starting to create a new positive credit history. But this can only be possible if they pay their installments on time without defaulting. If they do not, they face the ignominy of starting their credit history on a very negative note, where in future lenders would be very weary to give you any sort of financing services.

So students need to make an honest introspection and evaluation of kind of vehicle they need and can afford. Because there are other costs too involved with owning a car. Apart from the principal and the interest amount the student also has to pay for insurance; gas (it is advisable to choose the most fuel efficient one among the available options) and other maintenance cost (like servicing charges, oil change cost etc.). So be prudent and make a smart decision.

There are in point of fact some good advantages of college student car loans. Firstly if you pay off the car loan payments on time it will replicate positively on your credit score ratings. Credit agencies all the time look to see if you have taken out loans over the itinerary of your credit history. It is not easy for university students to get a student car loans with tight finances, but now many online lenders like www.carmoneyfast.com are offering student car financing at very affordable interest rate. Now students can get pre approved financing for car despite bad credit.

Chapter 7 Bankruptcy Car Loans

More now than ever before, many people are searching for chapter 7 bankruptcy car loans. With today’s economy, people find themselves filing chapter 7 bankruptcies to relieve themselves of too much debt.

When someone files for a chapter 7 bankruptcy they are filing with the court system asking that they be discharged from all unsecured debt. Unsecured debt includes such things as medical bills or credit cards.

Compare this to secured debts such as your home and your vehicle. Due to homestead protection laws your home is safe from your creditors acquiring it. With a chapter 7 bankruptcy, your car loan may need special consideration.

In some cases, people are finding that they must release their vehicle along with the discharge of other debts. This may be caused by a couple different situations. One reason may be that they have simply fallen too far on the payments. Or another reason may be because the monthly payment is simply too high to make and stay current with the new finances.

If this is the case for you, you may be in the market for chapter 7 bankruptcy car loans. These are considered sub-prime auto loans and you may be able to apply a few months after your discharge has occurred. Depending on some situations you may not have to wait this out and can apply as soon as you are discharged.

Because not all lenders work with those who have recently filed chapter 7 bankruptcies, it will require a little research to find a dealership that may offer you this specialty loan. Doing an internet search will help you locate a couple of resources near your home.

The next thing to do would be to take a good hard look at your new monthly budget and determine realistically what type of payment you can handle each month. Being prepared with this figure can help ensure you are not smooth talked by some salesman to buy a more expensive car. The biggest key after bankruptcy is to be sure that you live within your means and can make all your new payments on time.

Now collect a few pieces of documentation to bring with you when you visit a car dealer or auto consultant that offers chapter 7 bankruptcy loans. This would include a couple recent check stubs to show proof of your income. Also bring your driver’s license and proof of insurance. And the final thing to bring with would be a couple utility bills. This will serve as proof of residency.

You are now prepared to pay a visit to the dealership or the auto consultants office. Tell the salesperson your situation and the particular reasons that you had to file the bankruptcy in the first place. Ask them if there is anything else you can provide to help make the loan process a little better. Use the advice of the expert to give you the greatest chance at getting a chapter 7 bankruptcy auto loan.