By Anthony ScavuzzoZero percent financing has become a popular sales tool for car manufacturers, new car dealers and their finance companies. The truth is that most people do not realize the potential losses in this promotional vehicle.
Not everyone qualifies for Zero percent financing which makes it appear somewhat rewarding for those who do, but the truth is, even those who qualify should beware of what they are describing as free money.
The best way to see the hole in zero percent financing is to use a car purchase example. To get us into the dealership we respond to an ad or promotion that offers us zero percent financing and let through in a $3,000 rebate that can be used as a down payment too.
Let's say it was a Cadillac Dealership and we walked in and fell in love with a new Sedan Deville Cadillac that lists for say $55,000 - We're shown all the options and are able to negotiate another $2,000 off in option savings.
They're offing us free money right, Zero percent financing, so we want to finance all we can so we decide not to add anything to the down payment.
After the $3,000 rebate and the additional $2,000 discount we agree to pay $50,000 for the new car - we finance the car for say 5 years (60 months) with no interest.
Now let's now assume we keep that car for two years. The payments we made $833.33 per month reduced the principal amount owed to just over $30,000
The problem here is that the car we purchased for $50,000 two years ago is now only worth approximately $24,000 or less and we still have three years left to pay on it.
Wow you say, how can our car now only be worth about $24,000? Although there are many reason, let me give you just one. At the time you bought that new car, so did the car rental companies. They kept theirs for a year or so and sold them into the wholesale market. Depreciation being a result of supply and demand, it drove the price down even further than what is considered normal.
Here is what I found most people just don't get and/or have accepted as the way that it is...
We just paid $20,000 in payments and we still owe $30,000 on the car which is $6,000 more than we can get for the car if we wanted to sell it. That's a total loss of $26,000 and we got a pretty damn good deal on the car, and paid no interest on our loan.
The bottom line is, for most of the people who buy new car, they depreciate way too fast to make any of their offers including zero percent financing worth taking advantage of.
If people would stop asking how much cars cost, and/or how much their payments would be to determine if they can afford a car, and start asking the right question, which is - How much is this car going to cost me to drive for a year or two, they would find that most of the promotions offered including zero percent financing make very little difference in the thousands it's costing them to buy cars THEIR WAY.
The good news is, there is a one of kind information available that allows anyone to easily understand what new and used cars are actually costing them. And that provides proven solutions that allow people to all but, if not completely eliminate car expense from their budgets. Drive Free Or Damn Close To It... Guaranteed! By MrDriveFree.com Anthony Scavuzzo not only clearly addresses the problems, but provides simple effective solutions.
About the Author:
MrDriveFree.com Anthony Scavuzzo... A true entrepreneur, he is known for providing simple imaginative solutions to tough issues. With his Book "Drive Free or Damn Close To It... Guaranteed!" he discloses proven strategies he developed that make permanent solutions to owning cars saving people tens of thousands of dollars. http://www.mrdrivefree.com/
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