Zero-percent financing is like a dinner bell; car dealers ring it and customers come running. After all, it sounds like a great deal when you consider that your local bank will probably charge a 5 to 10 percent interest rate for the same loan, depending on your credit. The reality is that you can’t get a loan for nothing, no matter how many 0 percent stickers are attached to it.
“The marketing is very cleverly done,” [Viraf] Baliwalla[, owner of Automall Network]* said. “The dealer will often offer something like a $3,000 rebate or zero percent financing. Most people jump at the 0 percent because they think it’s free money. The trouble is that the $3,000 you’re passing up is really not a rebate. It’s you prepaying the interest over that period of time.”
Baliwalla recommends comparing the two options on a spreadsheet to see which one comes out on top. In many cases, the rebate wins hands down.
*I copied this from para 2 of the website.
1. What are the trouble[s]? How's the marketing 'very cleverly done'? What cons or frauds is the dealer attempting? Here's my understanding of para 2 above: if you reject 0% financing, then the dealer offers you a $3000 rebate, which decreases your total car price by this amount, but at a future date. If you choose 0% financing, then there is no $3000 rebate, which implies that your total car price is higher than it would, if you had rejected 0% financing.
2. What if the dealer just offers 0% financing or a lease with an interest > 0% without any rebate option? I assume that I'm not paying cash for the total car price upfront.