We’re seeing a lot of financing deals these days offering you six (6) months of no payments as incentives to buy a new car. While this may be a blessing to some, it may not be the right choice for everyone. In fact, it could cost you more in the long run. That’s why we want to educate you on the reality of this offer, and help you discover if you’re better suited to some alternatives.
What’s the offer?
Most manufacturers and dealerships are offering some version of No Payments for six (6) months or 180 Days on a new vehicle. While they differ on additional promotions, restrictions, and how payments are deferred, the general idea is that you will not have to make your first payment until 180 days after purchase. Because of COVID-19 and its impact on society and businesses, this offer seems to mutually benefit consumers who are financially strained and the automotive industry as they struggle to sell vehicles.
How are my payments deferred?
This varies case by case, but what we see most often is dealers selling vehicles without a discount, then dealer financing credits your account for three (3) months of payments while deferring the other three. Meanwhile, you are accruing interest and by the time you make your first payment, it all goes towards interest. You will end up paying a lot more across the life of your loan this way. However, we have seen some dealers offer 0% APR for the six (6) months or even longer. It’s important to do your homework and ask questions.
Read the fine print.
While we are certain that you would not sign anything without reading the fine print, there are some important details to look for in the fine print of these deals that may affect your buying decision:
- What is the credit score requirement? Typically the deals that are most beneficial to the buyer require a credit score of 720 or higher. The average credit score (as of 2018) is 659.*
- How long is the term? Can you reasonably pay off your vehicle in 60 or 72 months after waiting six (6) months to make payments?
- What are the limitations of the model selection? Keep in mind that these offers are for vehicles that are not in high demand and need to be moved off the lot. Make sure you love it.
- Are you missing out on a better deal? Most discounts, rebates, or other incentives available are voided with the deferred payment deal.
Ultimately, if you are the type to trade in vehicles often, it’s best to steer clear of these offers. Even more important is considering how uncertain our future looks in 2020. Zero percent incentives will not matter if you can’t afford monthly payments. The smart move right now would be not to purchase a vehicle unless it is a necessity. If you are certain you would like to make a vehicle purchase this summer, we strongly encourage you to talk to a loan officer and get an auto loan pre-approval before shopping.
Still have questions?
Talk to one of our loan experts today by calling 903-597-7291 or through CU Online via our secure chat. You can also tune in to our online webinar on Car Buying on May 14th. Register Here!