You will sometimes come across adverts offering zero percent finance.
However, you do need to be wary if that ‘offer’ is based on the full list price rather than a discounted one.
Taking the example I used when comparing new vs 3-year-old cars, zero percent financing on the full list price isn’t the same as it would be on the discounted price available:
List price new, £17,000 – over 4 years at 0% = £354 per month.
Discounted new cost, £15,350 – over 4 years at 0% = £320 per month
From the example above, we can see that the supposed zero percent finance on the list price is actually costing £1,650 over 4 years – equivalent to an interest rate of 5%.
Remember, if you are being offered zero percent finance, always check that the total cost is the lowest you can obtain rather than on the full list price.
Of course, the best option is to pay with cash rather than take financing at all – something I discussed when I talked about how finance is actually just your own money stolen from the future.