What are the benefits of getting a 0% finance deal?
The advantages will vary for each customer but not having to pay anAPR can offer huge savings for anyone. Even if you have had a low-interest rate deal in the past, you can still expect to save up to hundreds of pounds a year.
A 0% contract is usually quite a short contract, so you are likely to be paying bigger monthly instalments but for a shorter time. You can pay off your loan much more quickly than you would otherwise so that in just a few short years that car will be yours.
What's the catch?
First, your eligibility. The lender needs to know you will be able to afford to pay back your monthly fees so you will probably only qualify for a 0% deal if you have a very good credit score. They may advertise the offer to everyone, but don’t put your time into researching deals unless you know your loan application has a high probability of being accepted.
It is likely that you will be expected to pay a large deposit to secure the loan, whatever your credit score is. Although mostcar finance deals will require a deposit of around 10%, an interest-free contract may require a deposit of anything up to 40%.
If you are looking for a specific type of car then you might struggle with this type of contract. They are usually offered on old, unpopular cars to make room for new models so you may not be able to find an interest free deal on your dream car. However, if you aren’t picky then it could be ideal for you.
Sometimes the contract will only offer a 0% interest-free deal for part of the agreement and it will run out after a set period of time. Check the small print of your contract or ask the car dealer about this to make sure you don’t receive any surprises later on.
Considering that you are avoiding paying any interest then the benefits may outweigh the costs, but this depends on how much you want to pay each month and what car you would like.
Is interest-free car finance right for me?
If you are looking for a newer car model, then you might be able to find a low-interest deal that suits your needs better and which could even be more cost-effective.Compare car finance deals with your monthly budget and current credit score in mind so that you can find the most competitive deal available for the kind of vehicle you want.
Although shorter contract lengths can offer benefits to some people, you need to decide whether this system will work for you. You may need to look for a longer contract length so that each monthly fee will be more manageable. However, bear in mind that the longer your contract is, the more time there is for the value of your car to depreciate. This means that you will probably end up selling it on for less than the amount you paid for the car.
It can sometimes be difficult to negotiate the price you want for your new car as companies have also removed theAPR from the deal. But don’t let this stop you from trying to bargain with your dealer to get the best car finance deal possible.
Other ways to get cheap car finance deals
While 0% interest deals are not available to everyone, there are other ways to save money when buying a car on finance. If you have the money available up front, you could opt to pay a larger deposit, and thereby reduce the size of the monthly payments you'll make throughout the course of your contract.
It also pays to choose the right car. Make sure you choose a car that's within your budget - you can assess this by first working out how much spare income you have each month to put towards the finance plan, and then by checking the value of the car you'd like.