Don't get driven to the cleaners on your next car purchase

I know quite a few people who have been lured into buying new cars with offers of "0% FINANCING!"

We need to have a little chat about this. So please: Repeat after me and write this down on a slip of paper in your wallet and take it with you next time you go to shop for a car:

There is no such thing as 0% financing.

Really, there isn't. if you pay cash, you will always be able to negotiate a better deal -- without any silly financing fees or charges. Anyone who offers to "0% financing" is spinning" and any friend who brags to you that he got 0% financing on his new car is an idiot.

And even if a dealership is offering 0% financing on new cars, remember this line from Dave Ramsey's Total Money Makeover:

Myth: You can get a good deal on a new car at 0% interest.

Truth: A new car loses 60% of its value in the first four years; that isn't 0%.

In an email, I asked Remar Sutton, the chairman of and the author ofDon't Get Taken Every Time: The Ultimate Guide to Buying or Leasing a Car, in the Showroom or on the Internet for his thoughts on 0% financing, and here's what he said:

"Dealers generally don't like cash buyers, period -- they want to finance you, both to make money on the financing, but also to give them a chance to manipulate other charges in a finance contact."

He suggested these tips for handling the financing aspect of car shopping:

  • Know your credit score before you go near a dealership. If you're smart, you'll even apply for a car loan at a credit union before going near a dealership. Here's why: if the dealership won't give you 0%, you'll have a rate from a credit union to compare to the dealer's rate.
  • Never tell a dealer you want 0%. Never tell a dealer you are paying cash. Go in and negotiate for the vehicle without betraying your intentions. Negotiate for the car first -- a separate transaction. And then after agreeing on the price of the vehicle, "now, let's talk about that 0% financing." Or tell them at that point that you're simply paying cash.

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