Buying a car is always a special act for French households. If 26% of them pay for their vehicle on credit according to our latest sketch of the French motorist , some have been able to benefit from a zero rate car loan. But, paying for your car on interest- free credit is like borrowing money at no cost; free ?
The zero-rate car loan, privilege of car dealers and brands
This corresponds to the only repayment of the amount borrowed, without additional cost. From time to time, car dealers and manufacturers launch 0% auto credit operations on their offers. These can in particular take place when a range needs to be sold to highlight the news, on certain models only .
Example of 0% auto credit at Skoda
Recently, Škoda lent itself to the game of 0% auto credit. “ From September 2 to 30, 2019, benefit from a zero percent rate on the entire Škoda range ”, was it specified on the site of the Czech manufacturer. You could thus borrow €10,000 over 3 years and pay monthly installments of €277.78 to finance your new vehicle without interest.
This mode of financing, a priori very advantageous, nevertheless presents subscription conditions that it is essential to respect in order to be eligible. This will only concern, for example , new models , over a repayment period of generally two to three years , including a basic contribution of 10% to 30% of the value of the vehicle to be presented at the time of purchase.
0% car loan: subscription conditions
To be able to take out a 0% car loan, your personal and professional situation will be studied by the dealer in the same way as for a classic car loan application . Your application must then reflect a good ability to repay to access the release of funds.
In some cases, dealers can also ask for supporting documents concerning your additional sources of income (benefits, annuities, assets, etc.).
However, you will not have to provide amortization tables for loans that you have in the process of being repaid since it is imperative not to have any to apply for 0% car credit.
If you want to buy a ” clean ” electric or hybrid car, be aware that car loan offers at rates close to 0% may apply to this type of vehicle. To find them, you will have to turn to the major banking networks and some online banks.
Be vigilant when taking out a zero-rate car loan
At first glance, a 0% car loan is a very competitive opportunity. Be careful, however, of the costs it may generate with regard to the follow-up of your application file and the cost of any additional insurance usually attached to this type of credit . As part of the example cited above for the 0% Škoda car loan, the contribution applied is €16.50, i.e. a total of €594 over 36 months which you will have to add to the €10,000 borrowed.
Do not hesitate to compare your 0% car loan offer with a classic car loan offer. It may happen that a manufacturer grants a price reduction on a model that can be financed on credit. Impossible situation in the case of a zero rate loan. Check then that this reduction is not proportionally greater than the interest on the credit. In this case, the classic loan is more competitive than the 0% car loan.
On the other hand, the more credit is repaid over a shortened period, the less risk the lender takes to recover the money it has lent. If the rates charged for conventional car loans can sometimes lead to significant monthly payments, we recommend that you pay particular attention to the amount of your monthly payment in the case of a zero percent car loan.
Attached to a fairly short financing period, it can quickly climb for large-amount loans. With a 0% auto loan of €10,000 over a single year, you will repay €830 per month . A large sum that can be difficult to integrate into a budget, especially if you have in mind not to exceed your repayment capacity .