DETROIT (AP)—When a car dealer offers to loan you the money to buy a car at zero interest, it gets your attention.Yet that cheap money might not be the best deal you can get.
Dealers can offer zero-percent financing through automakers’ finance companies because, unlike banks, they make money on the sale of the car and don’t need to rake in interest payments. Zero-percent financing offers have been common in the last four years as auto sales recovered from the recession while interest rates remained low, says Philip Reed, a senior editor of consumer advice at the car shopping site Edmunds.com.
Not everyone will qualify. Zero-percent financing is generally reserved for those with the very best credit. Experian Automotive, which tracks auto loans, says 7 percent of new car loans had an interest rate of 1 percent or lower in the first quarter of this year. By comparison, 29 percent of new car loans had interest rates of 2.05 percent and below.