What is an APR?

What is an APR?

You’ve finally decided to buy yourself a car and have been looking for the right loan offer to get started but you may want to keep an eye on what’s genuine and what’s not. For example, if you come across an offer that gives a 0% APR rate for your auto loan, this should itself signal a red flag. While you could get lucky with such an offer sometimes, that’s not always the case.

While there are several car dealers putting forth this offer, this article lists a few useful tips and information pertaining to the same. Here’s how the financing works:

0% APR on an Auto Loan

If you manage to get an auto loan with 0% APR, you could expect to make payments on the new vehicle without any interest over a set period of time. While this may seem like incredible information, you will need to get yourself approved before going any further.

Who Makes Such 0% APR offers?

You may have noticed that it is usually the vehicle manufacturer services that put forward such proposals. They’re certainly making the required profits on the car sale if not on the financing bit. This way, they will still have their name against the profit margin whether they choose to charge the interest or not.

While the above method is one, sometimes the car services also shake hands with third-party dealers. Now, because it’s always an attractive offer from a buyer’s point of view, dealers will always profit from the financing of the 0% APR perspective.

Why Do Dealers Really Offer 0% Financing?

To begin with, your manufacturer will not always put across this offer on all available car models or makes. This is usually done in the case of an overstock situation, when certain cars aren’t selling or when the model will soon be discontinued.

Secondly, even if you do manage to score such a deal, make sure to understand if your cost has increased elsewhere. This is usually done simply to make up for the interest charge that wasn’t imposed on the offer. It is important that you get ahold of these loose ends in a contract, especially when you come across an excited salesperson eager to strike a deal. To help you understand further, let’s take an example to understand how the car price could be played around with.

One of the ways your financer may offer you a 0% APR deal is by putting across a second offer that may call for a cashback rebate and a higher interest rate. For example, the advertisement may have offered between 0% APR financing and $2,000 cash back and would have varied depending on the zip code as entered on the website. The main takeaway is that you either pay slightly more for the vehicle and nothing on the interest bit or pay more on the interest and little for the car.

Either way, take the time to understand what you’re getting into even if it’s genuine.