“Cash for Clunkers” may be over, but our favorite discount is still available on dozens of new cars and trucks.
That’s 0% financing.
If a finance company is willing to lend you $20,000, $30,000 or more for free, we say, grab it.
Here’s why.
If you finance $25,000 for four years at 0%, you’ll pay $521 per month or a total of $25,000.
That same $25,000 financed at 7% — the current average cost for a 4-year new car loan — will cost $599 per month or a total of $28,746.
Your monthly payments will be $78 lower and you’ll save $3,746 in interest charges over the four-year life of the loan.
If you borrowed $15,000 for four years, you would save $2,247 with 0% financing.
Even if you were going to pay cash, it makes sense to take advantage of that no-cost money instead. You would use the lender’s $25,000 for free while earning interest on your $25,000 through savings or investment.
If all you did was put that $25,000 into a CD compounding interest annually at a 3% rate, it would earn $3,138 during the 48-month car loan period.
It’s like finding money in the street.
Automakers will often give you a choice between a discount loan or cash rebate that can be used to reduce the purchase price of the car or truck.
A 0% loan will trump all but the most humongous rebates — and you don’t have to guess.
This “Rebate vs. Low-Cost Loan Calculator” will tell you exactly which discount saves the most.
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