nope it's plain no interest. I bought a truck a couple years ago for 0% for 72

 

Seems like I am right, here is an exmaple of an offer

Cadillac CTS-V 0% Or $4000 cash allowance

 

That's a rebate that would give you $4000 off the top - plus whatever else you can negotiate.

That doesn't mean you have to pay MSRP to get 0%, though. You're still free to negotiate your best deal with the dealer with a 0% offer.

 

Question about Cash rebate/allowance...Does the Auto company (i.e. GM, FoMoCo) pay the dealer that $4000 that is taken off the price?

I can see a dealer being like "Well, we are automatically taking $4000 off the price, so we can't afford to negotiate a lower price!" If they said this would the correct response be "No, you will receive that $4000 back from the auto company."

 

Yes the cash allowance is not from the dealer but from the manucfacturer.

0% is never true 0% since you choose between 0% or a cash back amount. Ususally that amount is the equal of getting the loan at 2-5% or more.

Difference beeing, if you take the interest rate, you end up paying less if you make faster payments or make a lump some payment.

With 0%, you are paying the interest in the price. So it is securing the lender the interest. No risk of you paying it off faster, even if you do, the interest is built in.

 

0% is zero percent. If you take a zero percent loan, you will never have paid a penny of interest on the loan, period. Don't confuse customer cash with dealer negotiations. Just because you don't take GMs money doesn't mean you're paying MSRP.

Take the $4,000 cash on the CTS-V and your loan rate is 9.65%.

This is true - but how many people really do that? People with that kind of dough will just buy the car outright.

The interest is not "built in" you can still negotiate the price down on the car. You may not be able to take the "customer cash" (provided by GM) and get the offer, but that does not mean you can't find a dealer who will sell you the car at invoice, which is still a savings of thousands.

If you go with 0% for 60 months with no money down on the CTS-V the payment is $869 a month (and that's at MSRP, not figuring for any dealer negotiations). That equals, at the end of the loan exactly the sticker price of the car - $52,140

If you go with the $4,000 cash allowance, the payment is $1015.19 $60,911.40 - $8771 more even with a "free" $4,000.

0% financing is a great deal because it's free money. Period.

 

In this case, the 0% is the better of the 2 deals.

But, not beeing familiar with US rebates, has the CTS ever had a bigger rebate then 4000$? Probably none of you guys know this off hand anyway.

 

Your example is true at your given interest rates, however, for some buyers, a 3rd party loan could be at a much lower interest rate than GM's 9.65% In which case, taking the cash incentive may be the best way to go. That of course depends on the individual's ability to get a lower interest rate loan.
Also, if the buyer is not likely to own the car for the full length of the loan, then they won't be taking advantage of the full value of the 0% financing deal.
Also, the negotiated price for the car eats into the advantage for 0%

That being said, 0% is a better deal for the vast majority of buyers.

 

Auto loans are an extremely variable process, you're correct that there are a number of factors that go into the consideration, but 0% is still usually going to be the better deal unless you're putting a bunch of cash down.

Bankrate puts the average bank loan at 6.8 percent right now on a 60 month, so that would put your CTSv at 948.69 a month with the $4,000 cash back figured in. You'd have to put in another $4,000 down of your own money to equal the $869 payment offered by 0%. Some people may have that much to add in, and they'd certainly build equity faster which is a factor at trade in time, but considering that most American's are upside down in their cars it's probably not too many. And for the ones who can, they probably don't care.

I realize that the CTSv is kind of an extreme example here, there are "everyday" cars where cash back would likely offer the better deal. I think where the CTSv is unusual is that with these offers the car dips into a range where people who might not have considered them become interested.

 

if you have a GM supplier discount

John