Posted on May 4, 2017
0 Financing on New Cars in Toronto, Ontario, Canada
Chances are that if you’ve begun the search for a new car in Toronto or Mississauga or Brampton, you’ve likely come across a lot of low-interest special offers and incentives from a variety of automakers. Let’s look at one such offer that comes up often: 0 per cent interest. Can you actually finance a car and pay no interest at all over the term of the loan? Too good to be true in the GTA?
When you apply for a car loan, it’s fairly straightforward: you're borrowing money in order to pay for a car. But banks don’t dole out money for free. Interest is a fee that you pay your bank for lending you some of its money. In the case of 0 per cent loans, you pay no interest. You’re borrowing money without paying a fee for doing so. Zero per cent interest lets you pay the same amount of money as someone buying a car with cash. You’re simply spreading your payments over a longer term. How is this even possible? In most cases, it’s because the automaker, not the bank, is doing the lending.
The automaker can still make money with a 0 percent deal. The amount earned on any car deal is the same, only now the money is earned over a longer time-span. The money isn’t made from the financing but rather, on the car itself. Zero per cent deals are usually quite legit. Zero per cent financing can however be difficult to qualify for, and that’s where that many car-buyers face some disappointment. What many carmakers and dealers don’t mention is that unless you have the highest credit score possible and a lengthy credit history, zero per cent interest deals aren’t likely to be available to you.
As a shopper with average credit, you may find that you don’t qualify for zero per cent incentives. It’s best not to assume you’ll qualify for zero per cent financing until you visit the dealership. The higher interest rates that may be offered by the dealer or automaker at that point aren’t a scam, it just means the fine print specified different qualifying requirements. If you're excited about a 0 percent interest rate, it’s best to confirm that the rate is available through the dealership. Take the car you’re interested in for a test drive and negotiate a good price with the salesperson. The dealer will examine your credit history to determine whether or not you qualify for 0 per cent financing.
Should it turn out that you do not qualify for zero per cent financing, backing out of the deal may not be the only option. It is however important that you feel comfortable with the new rate offered. If it's too high for your budget, you have a couple of other options. Check out other dealerships or visit a bank to see if you can get them to provide a better rate. The best bet is always to sit down with an expert at the dealerships to get the facts so that you can make an educated purchasing decision.