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0% car finance or 1% car finance means you make repayments on your car loan but you’re charged either no or a very small amount of interest.
It’s a kind of car finance that’s most commonly offered by car dealers.
Sounds too good to be true? That’s because generally it is.
0% or 1% car finance is often simply used as a sales tactic.
Making the finance seem incredibly cheap gets customers in the door and sales across the line.
But the costs for the buyer are often tagged on elsewhere.
These are some common traps to watch out for with no interest car loans or 1% finance deals:
The short answer is to help them sell cars. Here’s how 0% car finance offers do that.
Dealerships know that advertising 0% car loan or 1% finance will attract customers
.
Even the ones with no chance of qualifying.
Because they have bad credit, or are self employed and need a specialist low doc car loan.
BUT by the time they find that out, the customer is already sold on a car
.
And they could be talked into a different, more expensive car loan.
A dealership may simply have cars it's keen to get rid of.
They may offer 0% interest to ensure they can clear that remaining stock
.
This isn’t necessarily a bad thing for you if you genuinely want the car.
BUT it’s still important to understand the dealer’s motivation.
Instead of making money through the finance itself, the dealer may be paid commission, earn money through fees or through upselling you on add ons and upgrades.
For example, they may earn a commission by referring you to a preferred insurance partner. This will rarely save you money versus doing a car insurance comparison yourself.
Here are some question to ask the dealer so you know what’s ACTUALLY being offered:
There's a decent chance 0% or 1% car finance will NOT be the best deal.
The best approach
is usually to research and compare car finance options BEFORE you go to the dealership.
This is what to look for:
You can use our car loan calculator to see what your repayments and total costs will be on different loans.
When you’ve found a loan that ticks the boxes, apply for car loan pre-approval with the lender.
THEN go car shopping with your finance locked in.
Ready to compare car loans?
Get your best offers from multiple lenders. There's no obligation and checking your rates won't impact your credit score.
GET STARTEDGET STARTED*Information about comparison rates Comparison rates are designed to allow borrowers to understand the true cost of a loan by taking into account fees and charges, the loan amount and the term of the loan. The comparison rate is based on an unsecured fixed rate personal loan of $30,000 over 5 years. WARNING: Comparison rates are true only for the examples provided and may not include all fees and charges. Different terms, fees or loan amounts might result in a different comparison rate.