"Interest-Free'
Car Financing
Is For Real, So Buy Now
by Robert K. Heady
Bank Rate Monitor
Buy
a new car with "0 percent" financing? Too good to be
true?
Nope. It's all for
real and totally legit, with no gimmicks or tricks along the
way provided you act by Oct. 31.
That's the deal the
Big Three auto manufacturers are offering consumers, to jack
up seriously slumping sales and help the country's near-recession
economy. With Ford, General Motors and Chrysler sales down by
anywhere from 3 percent to 28 percent last month, and because
of the post-Sept. 11 gloom, you're being handed a once-in-a-lifetime
opportunity to save big bucks.
That is, of course,
if you have good credit.
Most of the Big Three's
interest-free deals apply for 36-month financing across the board,
on all makes and models of 2002 cars and light trucks, and some
2001 models. In some cases you'll find terms of up to 48 or 60
months.
The savings are huge,
even on luxury automobiles. If, say, the vehicle is priced at
$35,000, with 7.5 percent financing or, about the national average
rate for 36 months, the car will cost you $39,452. With the current
0 percent deal, you save $4,452. Not only that, if you stretch
the 7.5 percent deal to 48 months, you'd be out another $1,436.
Nowadays, many dealers
will offer you a choice of interest-free financing or a cash
rebate of, say, $2,000, with a 7.5 percent rate for 48 months.
Take the 0 percent offer, even though you'd like to stuff the
two grand in your wallet. Why? For a car priced at $20,000, you'll
wind up saving $958.
The Oct. 31 deadline's
around the corner, so you can't let any grass grow under your
feet. But at the same time, says an auto sales expert, "Don't
be too hasty. Too many people become enamored by a test drive,
or the salesperson's smooth pitch. Instead, they should get all
the manufacturer's info on the vehicle, take a test drive, learn
all the costs, then go home and think about their budget. The
$395 monthly payment they might have been quoted is a lot more
than the $250 they can afford."
"Problem is,"
adds Dick Myers, who owns a Chevrolet dealership bearing his
name in Elkton, VA, "people only want to know what the payments
are. They're not educated about how to purchase. This gives the
dealer a huge amount of leverage. People should look at what
they can afford, not at what they want."
There are even six-year
financing deals around, but, warns Myers, "If you want to
change the vehicle in a few years, you will owe more than it's
worth. If you have to have a six-year loan, you can't afford
the vehicle.
As with any loan, financing
depends on your credit history. Anyone with a credit score of
625 or higher will probably have no difficulty obtaining a 0
percent loan. Anything less than that will push the buyer into
what the industry calls a "sub-prime" loan, meaning
he or she should be prepared to pay up to, for example, 10.9
percent on a new vehicle. For used cars, rates as high as 30
percent are not uncommon.
Step No. 2: Determine what type of car you want and can afford.
Step. No. 3: Always shop at least two or three dealers, never just one. Save the dealer you think is best for last such as the one that's closest to your home for service. Then ask that outfit to beat the best price you got from the other guys.
Advice: Buy now while that unbelievable 0 percent financing is here. You'll not only save a bundle, our economy can use your help.
Editor's Note: Robert K. Heady is the founding publisher of Bank Rate Monitor and is the co-author of the book, "The Complete Idiot's Guide to Managing Your Money."
