When in the market for a new car purchase, there are more ways than one to finance this new car! Most of us can’t pay cash for the entire vehicle up-front. More than 80% of car buyers use some sort of financing options. With this method more people are able to get the new vehicle they need at a more manageable way of paying for it. The purchase price is broken down into manageable monthly payments. You have several financing options, each has its own pros and cons you must carefully consider before deciding on which is better for you.
0% Financing
Newly made popular by the automotive meltdown is 0% financing. This allows buyers to extend the life of the car loan without the normal interest rate that comes with a loan. Dealerships have this to be a great way to draw in customers. However, in order to qualify for this type of financing you have to have a nearly perfect score. Plus, you have less time to pay back the loan. Rather than having lower monthly payments and repaying the loan over a 5 year period, you might have high payments spread out over a 3 year period.
Cash Back
You might want to opt for a cash back incentive, instead. This option offers two choices. One offers a 0% APR and the other a cash back. Deciding which option is for you, you first need to figure out what dollar amount the interest amounts to over time. For example: a $10 000 loan at 5% will cost you about $500 in interest. If the cash back incentive is more than $500, take the cash back. If it is less, take the 0% financing.
No Money Down
Another option is the now famous