0% Financing Pitfalls – What to Watch Out For

In recent months many dealerships and car companies have been offering financing that in many cases seem too good to be true. Zero percent financing with no money down is just one example. When perusing this type of financing you must be careful. Below you will find a few of the common pitfalls that dealerships and car companies hit consumers with.

Essentially zero percent financing is free money to the consumer, so this may make you ask, Why? Well many say there is no such thing as a free lunch, and in most cases, this a good adage to stick to.

Commonly when getting an interest rate of 0% car companies will make you pay a tediously large down payment. These commercials may be in place just to get you in the door to look at the cars. Keep your guard up and ask the hard questions when talking to a sales person. Make sure to find out what the percentage of the car must be paid up front and if there are any stipulations if a late payment is received. It has been noted that some companies have stipulations in the agreement which make the interest on the loan retro-active if a delinquent payment is received, thus greatly increasing the amount due on the loan.

When looking at these interest rates it is important to also look at the pay-off period, as many companies require the loan to be paid off within 3 or fewer years, to meet this requirement many consumers may have trouble meeting the monthly payments.

All in all, by asking these hard questions you can better understand why the dealer is offering these special financing options. In the end you may be better off finding auto financing online or through a different lender.

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