What 0% Financing Really Means

For years, you’ve heard the advertisements for zero percent financing on your favorite new vehicles. But what does that mean? No interest financing means you can borrow money from a lender, for free! The money you are borrowing is exactly the amount you’ll be paying back. You won’t pay any additional fees on that loan. What exactly does that mean for you? Depending on how much you’re borrowing, and how long you have to pay it back, that means you could save thousands of dollars on your loan! 


How does it work? 
Typically, 0% financing is available for a limited term - that means a shorter length of time. Lenders might be more willing to loan you money for free if you pay it back faster, so 0% offers are usually available for 24 or 36 months (that’s 2 or 3 years). However, in the last decade, during times of economic trouble or during holidays or special events, manufacturers have extended zero percent financing offers to longer terms to make buying a vehicle more enticing and affordable. Recently, it’s not uncommon to see offers of 0% for 60 months and 0% for 72 months (that’s 5 or 6 years, respectively). 


How much can you really save? 
In order to qualify for long term interest-free financing, you usually need excellent credit. But if you do have great credit, 0% financing can save you thousands of dollars over the life of your loan. For example, on a $30,000 vehicle, if you paid typical interest of about 5%, you’d be spending an additional $4000 in interest by the end of a 5 year loan. That comes out to an extra $66 a month. It would cost you even more on a longer term loan (over $4700 in interest on a 6 year loan; over $5600 for a 7 year term) or a higher priced vehicle. So, if you can qualify for long term zero percent financing, take advantage and save!


Check out the no-interest financing deals at the Folsom Auto Mall now. Many manufacturers offer special year end finance incentives to finish the year strong. You can save now by considering a remaining new 2020 model, taking advantage of year-end manufacturer rebates and 0% financing deals. View our new car inventory or start a credit application now to see if you qualify. If you have any questions or concerns, please contact us today.