ZERO FI­NANCE CAN COST MORE

Herald Sun - Motoring - - Cars Guide Confidential - Twit­ter: @JoshuaDowl­ing

LOW-in­ter­est-rate deals are start­ing to reap­pear as car com­pa­nies at­tempt to dis­guise price rises driven by a weaker Aussie dol­lar, or mask heavy dis­count­ing on slowselling mod­els.

Ei­ther way it can be con­fus­ing for car buy­ers try­ing to de­ter­mine if it’s a good deal or not.

In many cases it can be bet­ter to hag­gle a sharp price and ar­range your own fi­nance out­side the deal­er­ship. But some­times the deals in the show­room do add up.

We did some num­ber crunch­ing on one deal.

At least one lead­ing brand is cur­rently of­fer­ing 0 per cent fi­nance on quite a high re­tail price of $24,990 drive­away for a small car that has in the re­cent past lim­boed to $19,990 drive-away.

At 0 per cent fi­nance over five years the $24,990 price would cost $417 per month, pre­sum­ing there are no other hid­den charges or es­tab­lish­ment fees.

But what hap­pens if you buy the car at $19,990 drive­away and ar­range your own fi­nance?

If you have a good credit history, you may be able to wran­gle a rate of 8 per cent. Ac­cord­ing to online cal­cu­la­tors, that works out to be $405 per month over five years, pay­ing $4329 in in­ter­est, bring­ing the to­tal cost of the car to just $24,319.

It al­ways pays to get more than one quote. Make sure you find out the to­tal in­ter­est and to­tal amount you will re­pay over the life of the loan.

Deal­ers of­ten make more profit from fi­nance deals than they do from the sale of the car it­self.

One more tip: don’t just look at the monthly re­pay­ment fig­ure (fi­nance ex­perts can make this fig­ure look small by stretch­ing the re­pay­ment terms, which means you pay more in­ter­est for longer).

The longer the re­pay­ment pe­riod, the greater chance the pay­out fig­ure will be more than what the car is worth at trade-in time.

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