Understanding Auto Loan Rates

[Srijan Narang]

Getting a good deal is not just about snagging a great price. Factoring in interest rate will determine monthly payments and affordability. It is no doubt that the benefits of a low interest rates are countless but there might be few catches.

1. Zero-Percent Financing : Is this the cheapest option?

In addition to offering zero-percent financing on new cars, some manufacturers offer factory rebates. Most of the auto buyers fall for the zero-percent trap but the savvy ones think over skipping the zero-percent financing and pay a competitive interest rate while taking the factory rebate. The savings one receives after subtracting the rebate from the sale price might be greater than the savings from zero-percent financing.

2. Strings Attached with Zero-Percent Financing

These attractive interest rates also come with a few catches. Most of the issuing agencies either offer these rates on short term leases or require a sizeable down payment. It's not really that straight forwared now, Is it?

3. Saving Money by Going Short

Many of the buyers stay away from new cars because they fear the values will depreciate as much as 20 percent after the first year. But going for short-term loans in such cases can result in nearly the same amount of savings. Reducing the term of payment from 72 months to 60 months and one can easily go for buying the newest favourite car without worrying of any loss in savings.

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Regards,

Srijan Narang

Junior Undergraduate

Mathematics And Computing

Department of Mathematics

IIT Delhi

[Paras Aggrwal]

I have a few confusions and would be glad if you could clear the same.

1. Are rebates offered in opposition to zero percent financing?

2. How do short term loans balance the depreciation of car rates?

Thanks,

Paras Aggrwal