One Percent Car Finance: The Catch

When shopping for a new car, seeing the advertised interest rate for finance being at 1% (or sometimes 0%) can send prospective car owners into a frenzy.

For good reason, having to pay less interest on the life of your loan is a fantastic dream; your repayments are lower, you pay off your loan sooner and you get the satisfaction in knowing that you’ve finally won one over those devious car dealerships. Make no mistake about it, it is a fantastic dream, however, it is one you will quickly wake from as soon as you drive your vehicle off the lot.

To ensure your car buying experience doesn’t turn into a nightmare, keep an eye out for the following 1% car finance traps:

Simply put, you will pay more for the car:


Full Sticker Price

The dealerships base their 1% or 0% finance offers around their stock allocation. Should they have excessive stock of a certain car, they will offer 1% finance, however the car will be advertised at its full sticker price (often thousands of dollars higher than when stock allocation is low) and they will leave no room to negotiate.


Unnecessary Add-Ons

The dealerships will also ensure you spend your money on a warranty you don’t need, as well as those dreaded, excessively priced extras such as paint protection, interior protection and a window tint.

Should this not be enough to deter you, they will also require you to jump through countless hoops to qualify for one of their “too good to be true” 1% finance offers:

Evidence of Assets

You will have to be asset backed, and show evidence that extent. If you aren’t a home owner or don’t have any other assets to justify the loan, you will not be eligible to apply.


Long Period of Employment

You must have held your current position of employment for an extended period of time. If you’ve recently changed jobs, or have had a sporadic employment history, it will be very difficult to qualify for this loan.


Fixed Terms

You will have to strictly adhere to the fixed terms of a 3-5 year contract, with little to no flexibility to negotiate the repayment schedule. Missed payment fees will be high, as will early exit fees.

Car dealerships are not a charity, and they never give anything away for free. While the interest rate may be lower, they will most certainly make up the money elsewhere. The expression, “if it’s too good to be true, then it probably is” applies to the 1% car finance that dealerships offer.

As long as you do your research and have put in the work to improve your credit rating, you’ll be able to find yourself a better personal car loan deal and end up saving more on your new car purchase. To ensure you’re getting the best deal possible, give Auto Car Loans a call on 1300 301 051 or reach out at any time at [email protected].


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