Scenario



Auto Dealers show off their sales plans in the garb of Easy Auto Loans. They will have outlined a profile of the prospective customer. It requires only common sense to realise that good credit standing is a must to qualify. SO, normally such offer will be made to existing customers. New customers will have to pass checks on several parameters like, income, location of the customer, employment or business status, or even the assets that the customers own. For obvious reasons, credit term is usually shorter than the normal regular interest credit scheme, often below 2 years. It will result in higher EMIs - equated monthly installments.

Terms

EMIs and duration always move in opposite direction - shorter the term of credit, the higher the amounts payable per month and the longer credit period, the smaller amount to be paid per month. Incidentally, if you opt for a longer duration you will end up paying more amount simply because interest rate is induced for a long period of time. You will find that you will have paid more than 20 times the retail price. If you default on monthly payments, it will attract penal payments in the form of higher interest. If that be the case, it will result in your paying out a far higher amount than what is required by a zero percent finance scheme. Finally, the car is priced higher than cash down value. For example in a zero percent scenario, the car is offered at say $100,000 on display for 2 years to pay having a monthly payable amount of $4,166. The $100,000 price is actually still higher than the actual value of the car. The car dealers usually know that the car value is only say $70,000 but if offered at zero percent credit, they would price it at $100,000.

Remarks

The zero percent finance car is a good marketing strategy for the car dealer. It is also beneficial for the customer who can afford it. Whether you derive any gains from a Zero Percent Finance Car, entirely depends on how you service the loan. Car dealers will almost always earn good business from this marketing strategy. It always better than paying longer credit period. If you can fulfill the requirements, you will also make gains.