Zero percent finance on car loans is an interesting sales strategy that is being adopted by dealers and lenders nowadays. This would mean saving thousands of pounds which would have otherwise gone towards interest. And so, buyers are getting attracted to this conception. However, this strategy has many drawbacks and is merely a method to attract customers.

Almost all car dealers who offer a zero percent finance, have a sales plan in place. They will have outlined a profile of the prospective customer. Quite obviously, a major criteria would be that the customer should have a good credit standing. SO, normally such offer will be made to existing customers. New customers would be judged for credit background on several parameters like, income, location of the customer, employment or business status, or even the assets that the customers own. For obvious reasons, credit term is usually shorter than the normal regular interest credit scheme, often below 2 years.

Statistics reveal that only one-third of buyers who apply for zero percent financing actually gets qualified for the loan. There are quite a few conditions that you need to fulfill.

1. Credit score: The credit reports of the customers are considered in the case of the zero percent finance deals. Not only this, the guidelines and other terms are also severe for the credit score. If a person is suffering from the bad credit history then he could be denied of the car finance. To get the zero percent car finance deal a person must have the credit score of above 700. This criteria of the bad credit score can makes a person ineligible of getting the loan because most of the people who are applying for the zero percent car finance deals have a bad remark on the history of the credit.

2. Selected models: Another fact is that these zero percent car finance deals are only applicable for the few car models which are present with the dealers. Misery is even more added when customers came to know that the models on which this scheme is available are outdated and are not in demand because of many reasons like the bad performance, less efficiency and mileage. Sometimes the desired models of the car can be available with the dealerships but then the interior and colors of the models are not accepted by the customers.

3. Short duration: Another tactic followed by the dealers is that they provide the zero percent car finance deals for a very shorter period of time. In most of the case the time of 36 months is given by the dealers where the buyers demand for 48-72 months. There is no interest charged for these finance deals but the monthly payment is very high as the time period is very short.

What advantage does zero percent finance car give you the as the customer. On the other hand this is certainly a good marketing strategy for auto dealers. And it will definitely help those who can afford the terms because it always better than paying longer credit period. So, the zero percent finance car is a good marketing strategy for the car dealer. It is also beneficial for the customer who can afford it.

• Secured loan
• Unsecured loan
• Car Finance

A secured loan is available only to home owners. If you own a home and have excellent credit status, a secured car loan is the best option in terms of cost of finance (read interest costs). However, such borrowing often consumes considerable time as lenders need to go through a lot of steps before issuing the cheque in your name. These include credit checking, writing to your mortgage lender and gaining the approval and completing the formalities of second charge on the home etc. If you’re prepared to wait out, it’s still worth it.

If, however, you are in a hurry, the options left are an unsecured car loan and car finance. An unsecured loan, as the name implies, is given with no security. Implicit in such lending is the high risk. Lenders often charge very high interest on such loans. Depending on your credit status, this can vary, but as a rule the cheapest unsecured loan is more expensive than the most expensive secured loan. There are unsecured lenders like Welcome Finance who specialise in giving loans to those with poor credit history. So those with impaired credit history often go to such lenders and opt for unsecured car loans.

Between secured car loans and unsecured car loans lies car finance (car credit). Secured against the value of the vehicle, the interest rate of car finance is generally higher than secured loan but lower than unsecured loan. Interest rate, however, varies with the credit status of the individual. Other factors like employment status, marital status, annual income etc. too are considered while arriving at the loan amount and rate of interest. A car finance or car credit also has the following additional advantages which makes it a big draw with car buyers:

• Quick process
• Easier to obtain than a loan.
• Lenders offer incentives such as part exchange, cash back, free insurance etc. to make their offer more attractive.

Car finance or car credit is advised for people who satisfy one or more of the following:

• Home owners with bad credit or do not want to take on an additional liability on their home for whatever reasons.
• Tenants
• Short of time

Irrespective of which option is suited for you, you’re advised to spend some time researching the market before deciding on which lender to go for. That will be time well spent.