We have all seen those ad's on TV and in the paper offering 0% or 0.50% interest rates to buy a (certain model) new car. How do they do that? To quote ASIC "if it's too good to be true; then it usually is". So lets have a look at this "offer" and compare the results if you were to pay normal market interest rates.
The first thing you notice with these low interest rate offers is that the price of the car is listed in the fine print and is not negotiable. Who ever paid full price for a car!?. We will use a real life example of a recent ad where the price of the vehicle with the low rate was $47 495.00, full RRP. The purchaser went to another "branded/factory" dealer who was not involved in the promotion and got exactly the same car (remember it's new) for $40 740.00. A significant difference.
The finance amount under the offer was $41 500.00 after the $6 000.00 trade in. There were 36 monthly payments (you had no option 3 years was the loan term) of $753.00 with a residual/balloon of $14 525.00.
By using a broker, not the dealer finance, the loan amount was $35 140.00 including the same $6 000.00 trade in and a $400 documentation fee for the loan. The loan interest rate is 8.75% over 3 years (for the comparison). The are 36 monthly payments of $748.00 and a residual/balloon of $14 250.00. However by choosing and arranging your own finance you could choose the loan term and payment that suited you, not the car dealer.
Over $450.00 in savings and greater flexibility by not taking the "if it's too good to be true; it usually isn't" option.
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