Tempted by 0% financing for new cars + Costco/BJs auto plan

[gk90]

Our car mechanic says that our 1995 Volvo wagon (179K miles) is on its last legs. I was looking up possible cars and see that the Toyota RAV4 has a 0% financing offer, but for years we've been going with used cars because they just seem like a better value. We've never financed a car so I don't know if 0% really does mean interest-free or whether there are hidden costs?

Also has anyone used Costco's auto buying program and know how it works? Or BJ's?

 

[beansmom]

we JUST faced this question ourselves. We thought about a 'deeply discounted' Saturn or a Toyota--both new and used.

The Toyotas seem to hold their value better..altho we don't intend to ever re-sell. We got 0% for 60 mos @ $370 per month. We feel we got a much better deal. At $370 x 60, it comes out to EXACTLY our purchase price of $22, 200. I can't SEE where there are hidden costs. I'll be curious to see if someone more knowledgeable says that there are.

I'm very happy with the new car--Toyota is a great vehicle and I am sooooo lovin my moonroof...even in the midst of a HUGE New England snowstorm. One day, I'll be able to actually drive with it open.

 

[RachelTori]

Unless you get a really slick salesperson, there are no hidden costs in a 0% interest offer!

Based on my DD's July 2008 experience, I would highly recommend Costco's auto buying program. They directed her to the Toyota dealership in our area who participates in the program. The salesman worked with her and she got the 09 Camry she wanted. She financed through their finance office (definitely not a 0% offer, but the best interest rate available at the time!)

Shortly after the purchase, Costco sent us a survey about the car-buying experience and I completed it stating I wasn't 100% sure DD had gotten the appropriate discount promised by Costco (hocus pocus add-ons and fast-talking finance manager!!! )

Several days later, a rep from Costco called us!! They got the info from us and did an investigation. About a week later, we heard back from them with the results and DD had indeed gotten the Costco discount! I thought that was awesome customer service from Costco!

 

[daisy1234]

YEs there is sort of a hidden cost....if you finance your purchase you will pay more....because often you are giving up the cash rebates. say the rebate is 2,000...that is what you are missing...so for a 22,000 car one who finanaces will pay 22,000 and the other will pay 20,000.

 

[Golf4food]

YEs there is sort of a hidden cost....if you finance your purchase you will pay more....because often you are giving up the cash rebates. say the rebate is 2,000...that is what you are missing...so for a 22,000 car one who finanaces will pay 22,000 and the other will pay 20,000.

No... one will pay 22,000 and the other will pay $20,000 PLUS interest, which very well might add up to over $2,000 over the life of the loan.

You have to look at the final total both ways and see which works out better for you. If the best interest rate you can get on a used car is 5% then you have to know what your final total paid amount at 5% interest will be vs. 0% on a new car.

 

[Disney Hot Mama]

Costco's referral plan is to give you a direct lead to a dealer. They offer you a set rate - you don't have to haggle with a salesperson.. The rate is 500.00 over the invoice price for the car. AAA also offers a similar referral program. We just bought through AAA - the dealer from Costco didn't call us back - and loved the quick service. We headed to the dealer, our car was waiting for us, completed the paperwork and shortly there after were out the door..

 

[Karlzmom]

I've used the Costco program a couple of times, as well as referred friends to it. All have stated they won't buy a car any other way again! If you have a true % rate, then thre is no "hidden cost" or downside.

Also, Check out Edmunds dot com, as it has all the info on pricing w/options AND more importantly it lists all current incentives and rebates...if there is a rebate, you can still get it it with the Costco program! Marketing support is cash to the dealer for moving the unit, so you can somtimes negotiate into it a bit, like floor mats thrown in or something b/c the dealer is still making $$ w/o charging you.

Good Luck!

 

[HeatherC]

0% is how I bought my Toyota Sienna 3 years ago. It has been great and I wouldn't have been able to do the payments paying 7% or more interest.

What I did was researched the best deal on line through edmunds.com and autobytel. Autobytel gave me prices from a couple different dealers. Luckily, the one closest to me came back with the best price. So I called them after they emailed the price and talked to the sales guy. I told them I was coming in and made sure that the price would not change when I got there. They guaranteed it wouldn't. I also had them tell me the payments I'd have to make sure my numbers matched theirs. Which they did.

So dh and I drove up there and as soon as I got out of the car, the sales guy comes running up. I basically threw my license in his face and said I'm not coming inside until you run my credit and make sure I qualify for the 0% and he needed to be back in 5 minutes or we'd leave. '
He thought I was nuts. But went in and did it. Came back and said I was all set.

So I then asked him to bring me to the car he quoted. He first tried to show me a couple other ones under the pretense of them being a different color for me to choose. (They had more options, which meant more money, however.) I said...Nope...where's my car.
So he took me right to it, we drove it to make sure it handled ok, went in and signed the paperwork. He even told the warranty guy to not bother us since I told him we would not be interested.

Selling you an extended warranty after the sale is one of Toyota's usual techniques by the way.

So the 0% can work very well if you do your homework first and don't get swayed from car to car. That is what they will try to do. You will think you have a price and they will then try to pick another with more options, and/or try to sell you the extended warranty which can add quite a bit to your payments.


Hope this helps!

 

[Darcy03231]

No... one will pay 22,000 and the other will pay $20,000 PLUS interest, which very well might add up to over $2,000 over the life of the loan.

You have to look at the final total both ways and see which works out better for you. If the best interest rate you can get on a used car is 5% then you have to know what your final total paid amount at 5% interest will be vs. 0% on a new car.

I think what the PP was trying to point out is that if you paid cash for the car and didn't finance it you would only pay $20,000 vs the $22,000 you pay with 0% financing. In most cases you have to pick whether you want the 0% financing and pay list price or if you want the cash incentives/rebates.

I bought a new car in July 2009 and got an amazing deal with all the discounts that were applied. There was no financing as I paid cash. I did much better with the rebates/cash incentives than I would have done with 0% financing (about $5000 of the list price of the car).

 

[HeatherC]

But don't forget....you don't HAVE to pay list price to get the car. I didn't as my previous post mentioned. Negotiate the price first....then have them run your credit for 0% and pay the negotiated price.

When I bought mine, I paid $24,200. The "list" price was almost $26,000.

Don't tell them you want 0% until after you have the price agreed on.

 

[gk90]

Thanks everyone for all the tips! Does anyone know whether they're likely to extend the 0% financing at Toyota? The promo offer started Nov and ends tomorrow but according to edmunds .com they still have 24 RAV4s at the dealership near us.

The edmunds site is so much better than the last time I looked at it 3 yrs ago.

 

[Green Tea]

The Costco thing is straight forward. If you don't want to haggle, it is a good deal. But currently if you are willing to haggle, you can find a better price. I almost signed the contract on the Costco price last year, but after thinking about it decided I could do better on my own, and I did.