Car Finance - 0% Comparison Rates

Skramit on 09/01/2017 - 08:20

So I've seen a few ads around for 0% comparison rates on selected vehicles, often older stock they want to move on which is where a good deal can be found. I am curious if this is putrely a marketing/advertising term and the interest rate is not in fact 0% when you sign the contract to repay?

Has anyone signed up for one of these deals on "0% interest"? Are you actually paying 0 interest - I find this very hard to believe….

Or, are the cars priced as such that the dealership makes their margin on the sale price and can therefore afford to loan you the money at 0%? In this scenario I would presume there is very little or no wiggle room on the car price?

Thanks.

Automotive

Comments

  • BensonP on 09/01/2017 - 08:38
    +2

    Nailed it, mate.

    My friend works for Toyota and they do this all the time. The 0% finance price has no wiggle room for bartering.

    The extra money they would make from the interest is built into the price of the new car (brand new car)

    Although he tell me sometimes they do 0% on runout models or last years stock, just to get it out of the showroom.

    • Skramit on 09/01/2017 - 08:41

      Thanks for confirming.

      So it is in fact a 0% loan - as long as you buy at the "RRP"?

      • BensonP on 09/01/2017 - 08:44
        +2

        This should explain everything.

        All the best!

        • Skramit on 09/01/2017 - 08:50
          +1

          Wow….

          A good example is a purchase price of $23000 over 36 months at 0%p.a. will cost you more than the same car with a purchase price of $20000 over 36 months at 7%p.a including fees and charges and there are less restrictions when you have negotiated the car and the finance separately.

          That's pretty insane. I would never have realised at face value that the 7% with a good negotiated price is a better deal.

          I bet they make a bucket more money from duping people in to these 0% loans.

        • BensonP on 09/01/2017 - 09:25
          +1

          @Skramit:

          At the end of the day, it's all about making money.

          It's no different to those 'Buy 3 tyres, get the 4th free!'

          The other 3 tyres are sold at RRP to supplement the 4th tyre.

        • JimB on 09/01/2017 - 14:50
          +1

          @BensonP:

          I agree there are aren't usually free lunches, however your example of 'Buy 3 tyres, get the 4th free!' is incorrect.

          It's the manufacturer (i.e. Bridgestone) who subsidises the tyres.

        • tik tok on 10/01/2017 - 09:28
          +2

          @Skramit: How can the quoted text be true ?
          20000 @7% = 1400. 1400 * 36 months = 4200. GT 20000+4200 = $24200. How is paying $230000 more expensive than maying $24200 ?

        • DarkOz on 11/01/2017 - 22:26
          +1

          @AussieB:
          The interest gets progressively lower in the second and third year as you pay off the loan.
          I used a calculator from Suncorp for a $20,000 loan @ 6.99% over 3 years. The monthly repayment is $617. So the total repayment is $617 x 36 = $22,212 which is less than $23,000.

  • chumlee on 09/01/2017 - 09:30
    +1

    The finance is provided by the manufacturer so they wear the cost. The 0% finance as per all finance comes with application fees etc and that is how they cover the cost of funds.

    Why don't you just negotiate the best price and at the end tell them you want the 0% finance. There is no law saying you need to disclose your payment method upfront

    • spackbace on 09/01/2017 - 11:50
      +1

      Why don't you just negotiate the best price and at the end tell them you want the 0% finance. There is no law saying you need to disclose your payment method upfront

      The 0% would be on the contract. There's nothing on the contract to state they have to provide you finance @ 0%… They have every right not to if you mention it after both parties have signed.

      • chumlee on 09/01/2017 - 11:56
        +1

        I mean after you settle on a price but before you sign a contract.

        • k-rokfm on 09/01/2017 - 12:06
          +1

          There would be very strict conditions around the 0% finance. And youve said it yourself - before you sign a contract, so theres no obligation for them to give you 0% finance

        • spackbace on 09/01/2017 - 13:19

          before you sign a contract.

          So your timeline doesn't work, it still requires a salesperson to agree to it, as part of negotiations. A simple "no I can't" answers that one.

          Most customers, before they offered that up, would've been asked "so if I can do this, you'll be happy to buy the car?" of which you would've answered yes, so why are you suddenly not able to buy it? You told me you were financing through your bank/cash purchase/whatever other excuse you used.

          Negotiating before contract is printed isn't like negotiating right before a handshake, there's quite a bit of a time delay involved.

  • Marcsie on 09/01/2017 - 09:56

    Just remember,nothing comes for nothing :)

    • Skramit on 09/01/2017 - 09:59

      Of course.

      I just wondered if they take a loss on 0% finance to simply move old stock and apparently not - it's a nice money maker :P

  • tomsco on 09/01/2017 - 12:02
    +1

    I had a topic recently about this. Was looking at the Toyota Aurion. Unfortunately, circumstances led me to not go ahead with it.

    As others had mentioned, you can't haggle the price. With the Aurions vs others (VW for example), the fixed price for 0% was the best on Car Sales, wheras the VW 1% deal, you could immediately find stock cheaper without the deal, then add negotiation.

    For me, the Aurion was going to be an awesome deal.

    It would mean I would get a brand new car while keeping money on my mortgage. If I got a $12k balloon payment at the end, I would be saving about $5k in interest not taking the money out of my offset account. They also had a $1k fuel card, so in my eyes was essentially $6k off the $29,990 price.

    Not all low/zero percent deals are good, you have to do some research, but sometimes it can be quite lucrative.

  • [Deactivated] on 09/01/2017 - 12:57

    best way is to goto a dealer and negotiate a cash buy price, get a printed quote from the dealer, goto another dealer and show them the quote and get them to match it with the 0% finance deal…
    its not hard people.

    • BensonP on 09/01/2017 - 13:06

      I can guarantee this will not work.

      The dealership will simply say they cannot match the deal and you should accept the first offer.

      Also, all three times I have purchased a new car, the dealership would not give me a 'quote' to stop me from playing dealerships against each other. They just write the price on a business card.

      Edit: Just messaged my 2 salesman friends (Toyota and Ford) and both confirmed they don't do written quotes. And negotiating a cash deal and then saying you want 0% finance does not work.

      • spackbace on 09/01/2017 - 13:17

        They just write the price on a business card.

        You'd be lucky to get that even. A senior salesperson gave me good advice years back - get the customer to write the price. Does work too, suddenly they're hesitant to do so, they know the next salesperson will notice.

        • Skramit on 09/01/2017 - 14:42

          Sorry can you elaborate? What do you mean?

        • spackbace on 09/01/2017 - 14:48

          @Skramit:

          a) No salesperson will just give out a 'quote'. Not a complete, written quote.
          b) if a price is offered, or quoted, rather than the salesperson write it on the business card, it works a lot better (for us) to have the customer write it down. That way it's their handwriting, not ours, and the price can be disputed afterwards if need be.

          Generally the only price that will be written down will be the current sale price, not a negotiated price.

    • spackbace on 09/01/2017 - 13:15
      +1

      You know how many people we send away based on dodgy 'quotes'? "If you can get that price, it's a bargain, you're crazy to keep shopping'. The number of times they look dumbfounded, and ask "oh but can you get close" "what does it matter if I can get 'close', go get that bargain right there!".

      It's a really hilarious scenario because the customer thinks they know better but they don't, and instead lose any and all credibility.

      • tomsco on 09/01/2017 - 14:33
        +2

        Why wouldn't they know better? it's not like the sales person deals with it every day. Haha.

    • tik tok on 10/01/2017 - 09:36

      From the comments looks like Australian car dealerships have a long way to go. In the US, I used to play the internet sales departments of dealerships against each other and got great deals. Even the price on a business card holds good if you know how/what you are bargaining for. If a dealership will step back from a quote on a business card, what is to say they will not step away from a written quote? Its a 'quotation' meaning "a formal statement setting out the estimated cost for a particular job or service.". Estimated being the operative word. It isn't a legal guarantee-to-sell document.

      • spackbace on 10/01/2017 - 12:22

        So basically you ran a dutch-auction…?

        So actually the US don't know how to negotiate. So really it's not a case of the Aussie dealerships having a long way to go, it's the US dealerships that don't know how to run a business.

        • tik tok on 11/01/2017 - 20:59

          You really are a car salesman ! Although I am not quite sure if your ignorance is cute or naive as I wonder if you really are a first hand authority that knows that the whole of US doesn't know how to negotiate.

        • spackbace on 11/01/2017 - 21:15

          @AussieB:

          At the end of the day, there's only so far down anyone can go. If businesses want to lose any and all profits, then that's certainly not sustainable. So at the end of the day, if salespeople are entering into dutch auctions, by email no less (not even in person), then so be it, but it's not a long-term idea.

          And that goes with any business, if there was no profit there'd be no business. If one business closes, it means fewer competitors. Fewer competitors eventually means higher prices for the customer.

          So who's it really helping, operating a business that way…?

          Oh, and with the beauty of the internet, I've seen that the sales market in the UK is the same as Aus, and no salesperson would be caught entering into a negotiation if a customer sent off a mass email to dealers and said "here's what I'm looking for, best price gets my business"… most wouldn't even bother replying.

          I find it funny when people think Car Brokers do the same thing, when really there's still at least $500 left to negotiate after their best price, because we have to factor in their fees. But lazy people use them and think they're getting the best deal.

  • UNO on 09/01/2017 - 16:18

    From what I know some companies offer you 0% at the RRP of the vehicle. Other's offer a comparison rate of ~2% on the negotiated price. You have to determine what's best for you.

    So it depends on the car you are looking at, and the offer the dealer is running that particular month.

  • mgh4me on 09/01/2017 - 19:07

    Brought a Toyota Aurion 4 years ago and although the interests free was just that I should have been more attentive to terms of the contract before I signed. I stated that I wanted the loan over five years only to discover on closer inspection that I had signed up for a four year term. I also got it four grand below sticker price after doing some homework, having phone quotes from other dealers and using a few other tricks. There was a $7.50 application fee.

    • tomsco on 09/01/2017 - 19:44

      I also got it four grand below sticker price after doing some homework, having phone quotes from other dealers and using a few other tricks.

      Interesting. Most accounts seem to suggest this isn't possible. You must be a master negotiator.

      There was a $7.50 application fee.

      Also interesting. Unless this is to register it on PPSR, having an app fee would mean it's not 0% comparison rate. In saying that, it really makes me think it's for registering on the PPSR.

  • mgh4me on 09/01/2017 - 20:28

    The fee may have been for whatever the PSSR is, it was four years ago. Vehicle was a late 2012 Toyota Aurion through Maitland Toyota. I purchased at beginning of 2013 so plate clearance. If memory serves me correctly it was 33990 for my Burgundy ATX Aurion at the time but got it for 29990. This is to the best of my knowledge but not going to go and dig up the paperwork either. If I am out on the sums it would not be my much.

  • tik tok on 10/01/2017 - 09:30

    From what I know, it isn't really 0%. I think it works out to 0.1% or something, on the life of the loan - been a while since I bought a car on the 0% scheme (toyota). Also remember, Toyota finance will charge you a $5 monthly account keeping fee. There is no getting out of the account keeping fee.

    • tomsco on 10/01/2017 - 10:40

      Someone posted in another thread, if the comparison rate is 0%, they can't charge any fees, etc. as these are calculated in the comparison rate.

      So I guess it comes down to whether they list the 0% as comparison or not (if I recall for the Toyota deal's last month, it was comparison).

      EDIT: Yep, comparison rate for Toyota: http://www.toyota.com.au/special-offers-and-great-value

  • [Deactivated] on 10/01/2017 - 10:20

    this why there's so many new camry's on the road

  • boscom on 10/01/2017 - 11:02

    Some more reading on this subject.

    http://autoexpert.com.au/buying-a-car/why-low-interest-car-f…

  • ph81 on 11/01/2017 - 21:59

    We got our Renault Clio almost 12 months ago on 0% finance. We had a car wholesaler friend that negotiated the price which was substantially cheaper than we could have got at the dealerships and we've got 2 years left on the loan now. We could of used our money, but why would we when it frees up our cash flow?

    • Skramit on 11/01/2017 - 22:02

      Do u think you got a great deal on the price though?

      • ph81 on 18/04/2017 - 21:17

        Definitely! The car is awesome and we are happy with it!

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