Interest Free Cars – What’s the catch?

When shopping around online for a new car, you may have seen interest free cars being advertised. These 0 car finance deals are very attractive – paying absolutely no interest on your finance package is certainly tempting. But are these deals too good to be true?

What exactly is a 0 car finance deal?

In simple terms, a 0 car finance deal is when no APR is charged on the financing of a car. You still spread the cost of the vehicle across a set period of time, but the amount you borrow does not incur any additional cost through the interest on the repayments.

These 0 APR deals are generally only available to those with a very good credit score – very few consumers will be eligible for this type of deals. You may also be required to pay a larger deposit, in some cases up to 40% of the car’s price!

So are they too good to be true?

The question you have to ask with 0 car finance deals is “How is the dealer is going to profit from this deal?” That doesn’t mean this type of deal is a scam, but you may want to take a closer look at the details to ensure you are getting the best deal available.

In some cases, the dealer will have factored in the loss of earnings from the lack of interest rate into the price of the car. In other words, the car you buying will have a higher price than one on a fixed or variable interest rate package. Make sure you shop around to see the true market value of the car.

There is also the danger that the 0 finance deal is used as bait to draw you in. You will need to check that the package offered is not just an introductory rate that will end during the term of the contract. Ethical lenders, such as Creditplus, will provide you with a full breakdown of the finance package’s costs before you sign the contract.

You may also want to be wary of any terms in the contract should you miss a payment. On a 0 APR deal, these may be very strict and lead to a much higher rate of interest being imposed than on a normal finance deal.

Another thing to watch out for is the very high requirements a 0 car finance deal has to be approved. You may be invited to apply for this type of package by the dealer, only to have your application refused. At this point, you may have set your heart on the car and be more open to choosing another deal. An unscrupulous dealer may use this to pressure you into agreeing to a finance package that isn’t right for you.

So what should I be looking for?

There are pros and cons of choosing a 0 car finance package. Tough restrictions and potential pitfalls mean they can often be too good to be true. When choosing a car finance package, you want to be certain of the total cost before you sign any agreement. By choosing a finance package that fits your personal circumstances, you can find a deal that works for you. 

Creditplus is an ethical car finance provider that focuses on giving our customers all the information they need to make the right decision based on their own personal circumstances.  Unsure about car finance products? Visit our car finance options tool to see which product is right for you and your circumstances.

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If you require further assistance, our team of Customer Advisors are here to help. We're open six days a week - you can view our opening hours here - and we're more than happy to answer your questions.