Interest-Free Loan Offers
Interest-free loans can be used as a marketing and promotional vehicle to attract buyers. Dealerships and car manufacturers have an arrangement with a finance company to provide this type of loan to their customers.
Understanding 0% Interest Finance & Affordable Alternatives
Buyers in the market for new vehicles may come across dealerships offering interest-free car financing. Purchase a car with zero percent finance? Sounds like a good deal, but is it? Before committing to such an offer, smart buyers will be looking for the ‘catch’ and are advised to be aware of the potential downsides.
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Understand the Risks of 0% Interest Car Loans and Explore Better Options
No-interest loans may appear extremely attractive on the surface. But dig deeper, read the fine print, and buyers may discover an inflated pricing on the vehicle, a short promotional period for the 0% interest finance after which a much higher rate applies, or possibly high fees and charges incorporated into the loan contract.
As specialists in motor vehicle lending with over 25 years of experience and accredited with over 80 lenders, we do not offer this type of car loan. We provide buyers with the lowest rate achievable across the market to suit their profile. A rate which is fixed across the entire fixed loan term. We work in our customer’s best interests. If you are considering a 0% car finance deal, we encourage you to first read our explainer and speak with us for more information and for a cheap rate option.
Overview of No-interest Loans for Cars
Interest-free loans are predominantly offered in the motor vehicle sector and can also be found through white goods and electrical retail outlets.
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Initial Interest-Free Period
Essentially, the car is purchased with finance that does not attract interest, at least for the initial period. That is where buyers should look closely at the fine print. Buyers make the scheduled payments based on the principal rather than the usual principal and interest payments.
What's The Catch?
The issues to watch for with zero interest finance is the price of the vehicle, high fees, the interest rate after the promotional period, strict loan terms and conditions and a potentially low trade-in price on your current vehicle.
Further Downsides
With no interest being gained for the finance company, an inflated vehicle price can deliver that return. Lender fees and charges at higher levels than the market average can apply and be built into the repayments.
The End Result
After the initial 0% interest loan period ends, a much higher interest rate could apply which means the buyer is paying more over the full loan term than if a more competitive rate was achieved at the outset.
Less Flexibility
Strict conditions may mean the buyer cannot easily end the loan early and refinance at a lower rate. Loan terms may also be shorter which can result in a higher monthly repayment than is otherwise possible and workable for the buyer.
Our Recommendation
Buyers looking to achieve the best rates, transparent fees and charges and workable terms can speak with Jade. Our options for low rate car finance are individually tailored to suit you, not the car dealer.
Understand Zero Percent Finance Options Before Committing
Before committing, speak with us about our zero percent finance options.
- No interest for limited period.
- Marketing tool for car dealers.
- Potentially inflated car price, high fees, strict conditions, limited terms.
- Low rate options available.
Finance guides and resources
Our guides offer quick comparisons and simple explainers to help you move through the financing process with confidence.
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How Interest-free Financing Works
A typical car loan includes a fixed interest rate with interest charges incorporated into the fixed repayments over the fixed term. Buyers repay the principal – cost of the car, plus interest, to reduce the commitment over time. With interest-free finance, only the principal would be repaid.
A typical scenario is that the 0% interest rate finishes after the first few months and then a much higher interest rate applies. Alternatively, the arrangement between the dealer and finance company may be to inflate the price of the car and the lender fees, to deliver an alternative to interest return to the lender.
The end result for the buyer may be paying a much larger amount for their motor vehicle than they may have with a standard car loan with our best fixed rates. With no-interest loans the terms may be shorter than the 5-7 year terms that Jade can achieve for our customers. A shorter term can mean higher repayments which may stress budgets.
Before committing to zero interest car finance, speak with us for other workable options.
- Interest-free for limited period.
- Potentially higher total cost of the car.
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![A man reclines in his seat in his RV with his laptop on his lap as he browses information about refinancing his RV to get better interest rates.]()
Consider Eligibility Criteria for No-Interest Loans
Under Australian Consumer Credit Laws, responsible lenders must comply with the regulations as overseen by ASIC. These include that loan applicants must be over the age of 18 years and provide documents and proof of their income, financial position and other details.
The credit score and history form an integral part of the assessment of each application and any offer made by lenders. There are variations across the lender market in regard to approving applications for less than good credit scores. When considering a no-interest car loan, buyers should pay attention to the interest rate that may apply after the promotional zero interest period.
Where a dealer advertises 0% interest loans as a promotional tool, not all buyers may meet the eligibility criteria. If not, they may be presented with an alternative offer from that same finance company.
As with any offer, buyers should consider the detail closely and speak with us to source the best offer from across our large 80+ lender base.
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Comparing 0% Interest Offers – Advantages and Disadvantages
An advantage of 0% interest offers which may be perceived by some buyers, is of course not having to pay any interest on their car loan. But this perceived advantage may come with less obvious disadvantages. Buyers should read the fine print and we advise getting quotes from other lenders such as Jade, to compare.
The disadvantages are the issues to be aware of with zero interest car loans. The inflated price of the car is an important one. With new cars, price comparisons across dealerships can usually be quite a simple process. See if you can buy the same make and model at a better price from another dealer. With second-hand vehicles, making vehicle comparisons can be more complex as used cars can vary in mileage, condition and other features. But it may be worth researching the market.
While comparing the cost of your new vehicle, also compare the trade-in offered on your current car. To compensate for the zero interest loan on the new vehicle, you may be offered a much lower trade-in price than you could achieve with a standard loan arrangement. The loss may be significant and will add to the overall cost of the loan and the new car.
Another key downside can be higher lender fees and charges. These may be in loan establishment fees or ongoing monthly loan management fees. These can add up significantly over the full term of the loan. Buyers can use our Finance Calculator to work out the total cost of their loan and their car for both 0% interest loans and our low rate options.
A very important point to look for in the fine print is how long the no interest period lasts and what happens when it ends. Check the interest rate that applies at the end of the initial promotional period, work out the repayments and compare that with our best rate car loans.
Some buyers may think they can take on an interest-free loan for those initial months and then refinance when the promotional period ends. Good idea but is it possible? Read the fine print for the conditions and the exit fees. These are lender charges when a loan is finalised before the scheduled end of the term.
Zero interest car loans are offered through an arrangement between a dealer or manufacturer and a finance company. Buyers do not get their choice of lender and the lender offered may not be the best fit with the buyer’s credit and financial profile. Jade offers buyers the choice of 80+ lenders and we match each customer with the right lender. This can be extremely significant in being offered the best rates, best loan terms and overall, most suitable loan.
Compare any offers with our alternatives to zero percent finance – the best rates, individually sourced and negotiated loans from across a vast lender network, fixed rates, terms and repayments and experienced, expert brokers working in your best interests. Request a quote from us to compare and make a well-informed decision on your car finance.
- No choice of lender.
- Possible higher priced vehicle.
- Compare higher fees and charges
- Lower trade-in.
Compare with Jade Finance. We are brokers working in your best interests.
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THE COMPARISON RATE IS CALCULATED ON A SECURED LOAN OF $30,000 FIXED FOR A TERM OF 5 YEARS, NEW GOODS, EFFECTIVE 19/09/2024 AND SUBJECT TO CHANGE. WARNING: THE COMPARISON RATE IS TRUE ONLY FOR THE EXAMPLES GIVEN AND MAY NOT INCLUDE ALL FEES AND CHARGES. DIFFERENT TERMS, FEES OR OTHER LOAN AMOUNTS MAY RESULT IN A DIFFERENT COMPARISON RATE.
We work harder to secure the best rates.
0% Interest Finance FAQs
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The ability to end a no interest car loan after the zero interest period and refinance, will depend on the conditions attached to the specific contract. Exit fees would apply.
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The period where zero interest is applicable on a 0% interest loan will depend on individual offers.
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Zero interest car loans are only available through car dealers who have an arrangement with a specific finance company.
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The types of vehicles that may be purchased with 0% interest loans will depend on the car dealer offering this type of financing.
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Buyers can use an online finance calculator to work out the total cost of a loan with no interest over the full term.
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Typically, car finance without interest is limited to arrangements made between individual dealers and a finance company. Buyers usually do not have a choice of lender.
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When ending a consumer loan prior to the agreed end of the term, exit and early payout fees would apply. The fees and the full outstanding amount would need to be paid to the lender.
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Terms on finance with no interest can vary with specific offers. Sometimes this type of loan has a shorter term.
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Lender fees and charges vary with individual lenders. The fees applicable to a specific loan should be detailed in any offer made.
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Dealers offer financing services to buyers but it is not usually a condition of purchase that the financing be accepted.