General Question

talljasperman's avatar

What does 0% financing mean?

Asked by talljasperman (21858points) November 19th, 2014

Also what does 100% financing mean? For buying a car. I don’t know what they mean by financing? Which is better?

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9 Answers

ragingloli's avatar

0% interest rate when you pay in installments? at least that what it means here.

SQUEEKY2's avatar

Well from my experience 100% means you can finance the total loan.
0% usually means they will give you 0% interest for the loan or for a time on the loan.

josie's avatar

See @SQUEEKY2

By the way, either way you are going to pay the difference.

Anybody who charges no interest over time is getting the cost of the money by increasing the true market price, so when you make your zero per cent monthly payments, the interest is simply buried in the payment.

Anybody who finances with none of your money in the deal is making up the risk with higher points, closing costs and increased purchase price.

Nothing is free. Somebody is paying for it. In both cases it will be you.

SQUEEKY2's avatar

@josie we don’t agree on much, but in this case I totally agree with ya.

Earthbound_Misfit's avatar

Be careful with such deals though @talljasperman. As @josie suggests, interest free, 100% loans are paid for somewhere. Most often you’ll pay a higher price for the goods you’re buying than if you paid via another method. The retailer does a deal with the finance company. Also, you must pay it off within the loan period or they will hammer you in terms of the interest rate. So if you doubt you can pay something off under those terms, don’t take on the loan. You’ll pay very high interest until the debt is cleared.

ARE_you_kidding_me's avatar

Most of them are 0% with fine print

It’s usually things like:
If you are a day late on a payment interest goes to XX% retroactive for the whole loan.

If you don’t pay the loan off by a specific date then the interest rate goes to XX% (like 25% or more)

You are overpaying and they don’t need to charge you interest.

If you are late on a payment they repossess the item and you lose what you have paid already. (“we’ll finance anyone” car lots are often like this)

Something to remember is that debt is debt even at 0% it’s not usually a good thing. These loans are usually predatory and you should cast an evil eye on them when offered.

hearkat's avatar

In health care in the U.S. there are credit companies that have 0% payments for health care products and services. In this case, they make their money from the vendors, who pay them a percentage of the sale, so they have this option available to their patients. Most of these 0% offers also are voided if you are a minute late or a penny short on a payment, and then they slam the customer with fees and outrageous interest rates.

pheobesed's avatar

Offering 0% financing may inflate the price of a vehicle to make up for lost finance charges. This may make it more challenging to negotiate a lower price. A reputable dealer will allow you to negotiate the best possible deal before the 0%.

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