SECRETS BEHIND AUTO LOAN RATES
You are a first-time car buyer. Wanting to get a great price and best rate, you choose a 0% financing. Do you believe that type of financing is the best choice? We tell you otherwise.
Zero percent may not be 0% literally. Sure, a 0% interest on a car loan is a good catch. But it may include additional fees. Yes, you are not paying any interest on the loan, but the dealership escalates other charges such as warranty in order to compensate for any loss. Many institutions only offer such an interest if a borrower has a considerable down payment or on short-term loans.
Zero percent is not the best option. Why not? But 0% financing is not as appealing as it seems. In most instances, factory rebate is a better option than 0% financing. If you secure a reasonable rate and opt for a rebate, which refers to the rebate from the selling price, the savings may be higher from a rebate than from a 0% financing.
Bank has a better rate. Institutions essentially finance themselves by offering various services such as auto financing. Hence, don’t expect them to give you the best rate. Why? Most dealerships inflate rates by about 1% in order to bolster their earnings. It is advisable to explore the financing options of a bank to avoid the intermediary and paying unnecessary charges.
Go short and save a few bucks. Nothing is stopping anyone from buying their favorite sports car or the latest vehicle on the market. Who wants an upside down auto loan? No one. You may want to consider obtaining a short-term loan. The interest rate declines to an entire percentage point if you prefer to settle the loan for the shortest time possible, not to mention you can save money.
Not all used cars are cheap. Believe it or not, new vehicles have much lower rates than used ones. But a lower rate on new cars do not imply you are paying more for that vehicle. The monthly payment on a used car might be the same (or even higher) than on a new vehicle, presuming you have an impressive credit score and become eligible for a 0% financing.
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