When you’re shopping around for a caravan, motorhome, or camper trailer, you’ll find dealerships offering 0% finance interest rates. At face value, these leisure vehicle loans seem like the best deal out there. They sound too good to be true—because they usually are.
With a 0% caravan finance, you’re likely to pay more during the lifetime of the loan compared to a regular low-interest loan. Before closing the deal on your caravan, make sure you have all the facts. Here’s everything you need to know about 0% leisure vehicle loans.
What’s the deal with 0% interest vehicle loans?
If a dealership offers 0% interest financing, it means borrowers won’t have to pay interest on their monthly loan repayments. At a glance, it seems like you’ll be saving heaps by not paying any interest on your loan. But that’s not the case.
The 0% interest rate is typically used as a promotional tactic to entice people to buy certain vehicles. It’s used to incentivise buyers to purchase a vehicle quickly. However, most buyers don’t realise that these 0% interest loans could have hefty built-in fees which could cost them more in the long run.
Dealerships can make up the money they’re losing on loan interest somewhere else. Here are some ways dealerships can charge more for a 0% interest loan:
Non-negotiable price for the leisure vehicle
If you ask for a 0% finance deal at a dealership, chances are you won’t be able to negotiate on the vehicle price. You’ll be expected to pay for the full retail price of the caravan, motorhome, or camping trailer. And you may not be able to buy the leisure vehicle you want. In most cases, 0% finance deals are offered only on select makes and models to encourage buyers to go for the less popular vehicles.
On the other hand, buying a vehicle with a standard loan means having more negotiating power. Getting a standard loan from a lender means you won’t be subjected to the restrictions put forth by the dealership on a 0% interest loan.
Lower trade-in value
Locking yourself into a 0% finance deal could mean a lower trade-in value for your current vehicle. Since you’re not in the best position to negotiate with the dealership, they could offer you the lower possible trade-in value for your vehicle.
No loan flexibility
Another disadvantage of a 0% interest loan is the lack of options and flexibility. The loan term may be shorter than the typical car loan. Plus, you may find several hidden fees not initially advertised on those 0% finance deal signs. That means higher repayment fees monthly at a shorter timeframe. This might make paying the loan off more difficult than it should be.
The truth about “guaranteed price on future trade-in”
Some dealerships offer a “guaranteed price at future trade-in" also known as “guaranteed minimum future value” on the caravan or motorhome you purchase. The dealership guarantees a minimum value trade-in value for your leisure vehicle regardless of depreciation. Once the loan term ends, you trade in your vehicle at the dealership for a guaranteed amount.
The “guaranteed price at future trade-in" may sound like a great benefit, but it’s not as it seems. This perk is essentially locking you into buying your next vehicle with the same dealership. Usually, the deal takes the form of an upfront loading to the cost of the car. It tends to come with restrictions that could prevent you from taking up the offer when you come back to upgrade anyway.
Should you take a 0% interest loan?
While 0% interest sounds like a good idea, it’s not a highly recommended option for most. With a 0% finance deal, you could have higher repayments, restricted freedom, and fewer options when it comes to your loan. If you’re having trouble keeping up with your current bills, it’s better to shop around for a vehicle loan that meets your needs instead of choosing a 0% interest loan.
Before taking out a loan, always review your finances and consider all your options. different lenders may not have a 0% finance deal, but they’re likely to provide a more popular alternative loan type, like a leisure loan, that fits your financial situation better.
Learn about the value of what you’re buying, and what you’re trading in to avoid paying hefty markups. A bit of time spent researching prices online can go a long way. Use our caravan finance calculator to get an idea of your repayments and the current comparison rate to better inform yourself about what a typical finance arrangement might cost you.
Find the best leisure loan with Aussie
Aussie Leisure Loans through the help of carloans.com.au, can help you find the best low-rate leisure loan. Call us now on 1300 889 669 or if you are ready to apply, you can apply online to go through our fast approval process.