The New, The Used and the 0% Financing

The Auto Industry is in recovery mode and dealers are doing everything they can to move their inventory. I'm sure you've seen the signs for $0 down, 0% financing, buy a car and we'll give you a boat!

As a previously loved auto dealer that doesn't have the backing of a large auto company to support 0% financing and free boats, I was starting to wonder how we could compete for the customer who needs financing and won't look past the flashing 0% financing sign.

Earlier this week I was speaking with a customer who was attracted to the 0's but wasn't confident that would translate into a huge savings.

I decided this would be a perfect opportunity to crunch the numbers. Using our Auto Finance calculator and Toyota's purchasing fees I decided to compare apples and apples. Here are the results:

Previously Loved Car: $10,000

Fees: $0.00

Taxes: $1,200

Total Purchase Price $11,200

Down Payment: $2,000

Amount to be Financed: $9,200

Monthly payment: $288.29

Interest Paid: $1,178.44 (calculated at 8%)

Total Cost of Ownership: 12,378.44

New Car: $10,000

Freight & PDI: $1,280

Battery Tax: $5

Tire Levy: $25

Taxes: $1,353.60

Purchase Cost: $12,663.60

Down Payment: $2,000

Amount to be Financed: $10,663.60

Monthly Payment: $296.21

Interest Paid: $0.00

Total Cost of Ownership: 12,663.60

I'm sure to your surprise - it was to mine - despite the 0% financing, it is still less expensive to buy a previously owned car due to the lack of fees.

Of course it should be noted that new car fees will vary slightly between dealerships and that there are used dealers that charge fees. I guess part of the lesson to be taken away from this is to understand the full picture before purchasing a car.

An example of this is a dealership chain that posts large signs on their vehicles showing the expected payments. I was blown away at how low they were until I looked closer and they are bi-weekly payments.

Don't be afraid to ask your sales person what fees will be associated with your purchase. Dealers are actually required to post these fees so that there are no surprises, if you don't see it ask. That really great deal you've found may turn out to have some hefty fees attached - or not - and then buy it quick and drive into the sunset!