Are 0% Finance Cars Legit Or A Scam?

Accountancy Resources

Are 0% Finance Cars Legit Or A Scam?

Personal Finance Author: Admin


My neighbor works at a car dealership and said that the dealership was offering 0 finance cars, is this a scam or legit?

It depends on what you consider a scam. Some people might consider it a scam because these offers generally contain hidden financing costs. Car dealers are notorious for taking advantage of their customers, with lines like “we’re losing a lot of money on this deal”. Don’t believe a word.

Basically, when a dealership offers 0 finance cars or ex amount of money back, they really mean that they will sell you the car for the original price less the money they promise to return to you if you pay cash for that car, or the “cash back”.

The 0% finance car is really nothing more than a car with the interest over three years priced in already, which really comes out to the amount of interest they would charge you anyway if you paid full price for the car minus the amount of cashback the dealer or car company is willing to return.

The “car loan” that the dealer is offering 0% financing on is not really a car loan but a Retail Installment Sales Contract or RISC.

Once you sign the RISC with the dealer, they then sell the RISC to a bank or other lending institution with a hefty markup. The car dealer sometimes participates in the interest rate return, which is why they want to charge the highest possible Average Percentage Rate or APR possible.

Once you have signed papers with the dealer for your 0 finance car or vehicle you purchased with a low APR, and have driven it for a couple of weeks, don’t be surprised if the car dealer calls you up to tell you that you didn’t qualify for the 0% financing and you will have to pay ex amount extra per month, this is another car dealer ploy.