0% Financing on New Cars

Zero financing for new cars is a rather new concept and involves very favorable credit terms, for financing car loans. However, the conditions that qualify people for a 0% financing on new cars are rather stringent. Let us have a look at some of the conditions that qualify a person for the best 0% financing deal for new cars.

What is a 0% Financing?
Nowadays, it has become a common trend for car manufacturers to provide 'car financing' or 'car loans' for their customers. In some cases, dealers and vendors may also provide such service. The concept is simple, a customer can buy a car from the company but paying the down payment. The company provides an auto loan to the consumer with the car in itself as a collateral or security. On the whole, it works exactly like an auto loan. An important variant of this kind of auto loan is the 0% financing loan. This is the kind of loan were not APR (Annual Percentage Rate) or Interest Rate is charged upon the loan. It's an interest free loan.

• What's the catch: There is a small catch though. One needs to pay all generation, processing and loan transaction fees for the loan, it is not entirely free. Late payment fees and other fees associated with installment payment are also imposed.

Conditions for 0% Financing on New Cars
The conditions are several and strict, which is the reason why not many qualify for the financing. Now this loan is an auto loan which is provided either by the car dealer or the manufacturer. However, financing by the manufacturer has become quite common.

• As always, a good credit rating and score - the primary requirement for a loan or financing. Depending upon the manufacturers, the required credit score ranges may be 650, 700 or even 750 (as per FICO scores). A rule of thumb - costlier the car, more is the required credit score. A score ranging from 680 to 720 will get you a good financing.
• Employment or regular income is another condition which the company demands. Of recent, this condition is followed pretty strictly.
• The company will have a right to lien on the automobile, that is, it will be a collateral or security till you repay the entire loan. In circumstances where the loan is not paid back, the car would be confiscated to recover proceeds.
• Apart from the credit report, companies tend to check some other details such as other liabilities, the original cost of the car and even its upkeep. Basically they want to determine whether the person is financially capable of taking care of the car and its upkeep.

In this process, the ratio between a person's annual or monthly income in comparison with the cost of the car is take into consideration. A large number of liabilities may lead to rejection of the loan application.

Some Alternatives
There are various simple ways of availing the facility of 0% financing on new cars. The best way to qualify for such a zero percent interest rate scheme is to rectify your credit score and credit rating. The first step to improve the credit rating is to pay off all the possible bills that are payable. You may also sell off your previous car and pay off any pending loans. The second effective step that you can initiate, is to approach the car dealer whom you know. Preferably approach the dealer who sold you, your previous car. You may also go in for an exchange program, where you can sell the first car and purchase the second one at a discount. Rectifying and repairing your old car, in order to increase it's worth is also another option that you can consider. Last but not that least, one can also consider the 'interest financing rebate' facility which works in a totally different way but tends to save you a considerable amount of money.

Some Truths about 0% Financing on New Cars
There are some harsh truths about 0% financing that one must know. The one is of course the strict credit check. Take a look at a few others...

• Lesser Options: This sort of a loan is available for only specified models and some high-end models or rather almost all the expensive ones may not be included in the 0% financing scheme.
• Not the Best of the Best Deal: Apart from that, you also may not get the best deal while purchasing the car. That is your option of models and accessories will be curtailed. Apart from that you will probably not be allowed any discount seasonal or permanent.
• Less Number of Models: New vehicles will probably not have such a 0% financing facility. The vehicles which usually have been around for a year or so the ones whose next 'generation' is about to be introduced have the 0% facility. There are of course exceptions.
• Lack of Discount: Last but not the least, the price of the car usually tend to be a little inflated, or simply the company won't offer you any discount. The car will be sold to you at perfect market price.

Well, that's about it. Note that there are exceptions.

The best way to avail this kind of loan, is to first improve one's score, pay off some possible liabilities and lastly, assess and ascertain the models and companies which provide the facility. Toyota, GMC, Chrysler, Chrysler, Nissan and Mazda are some companies which offer this kind of facility. After you the 0% financing approved, make it a point to pay off every installment on time, not only it will keep you out of the vicious debt cycles but it will also help you to considerably improve your ratings and scores.