The Zero Percent Interest Loans Available Car Dealer Scam

The zero percent interest car dealer scam promises low interest rates to everyone.

The 0% Interest Scam is also known as the “Low-Interest Loan Scam.”  You will see or hear this promoted in dealership radio, television, and online advertisements.

Dealers use the 0% interest advertising scam to get potential car buyers excited and interested in buying a new car.

What is the 0% Interest Scam?

Many manufacturers offer 0% interest financing to their customers from time to time. If you want to take advantage of this opportunity, read the fine print and know the manufacturer’s program guidelines.

The 0% interest advertising scam is used to lure potential customers to a dealer’s lot. A dealer will advertise 0% interest available in their local advertising. They make it look like the offer is open to everyone and anybody. Car buyers assume the 0% interest is public on all makes, models, and terms.

The dealer may only have the 0% interest offer on specific makes and models. Unless otherwise stated, the special rate is on a concise finance term, typically 12 to 36 months. The consumer also must have excellent credit to qualify for the program.

Dealers know most people cannot afford the high monthly payment that comes with short-term financing when buying a new car from a dealership. The dealer’s goal is to have the customer come in off the 0% interest advertisement, fall in love with a vehicle and then choose a longer finance term with a higher interest rate.

How Dealers Apply the Zero Percent Loan Scam

This advertising trick is a simple play on words unless stated in the disclaimer of the car dealer’s advertisement disclosure.

To qualify for the special APR of 0%, you must have excellent credit, and the rate may only be available for a shortened term of 12-36 months.

A shorter-term makes the payment on a new car unaffordable for most people, and they must extend the car loan term to get the payment down to their budget. Of course, the rate is higher the longer you extend the term of the loan.

Sometimes, dealers may run zero percent auto loans for extended terms as long as 72 months to stimulate consumers to get out and buy a new car. A great example would be while the COVID 19 pandemic closed the world for a few months.

I highly suggest always reading the disclaimer or fine print on any dealer’s advertisement to ensure you fully understand what they offer.

How the Low Interest Advertising Scam Works

You see an ad on television promoting “0% interest available this weekend only.” You decide to take advantage of the additional savings and visit the dealership.

You know you have perfect credit and ask the car salesman if 0% interest is available on the car you want to buy. He says, “absolutely it is.” However, he never discloses it’s only for a short finance term.

You picked out a vehicle, agreed to the price, and now patiently wait to meet with the finance manager. You ask your salesman if you qualified for the 0% interest, and he says, “you sure do; your credit is perfect.” Everything seems to be going to plan. All that’s left is the paperwork, and it’s time to relax ~ BIG MISTAKE!

The car salesman and his sales manager have already prepped the finance manager you’re interested in the 0% interest rate. This lets the finance manager know what’s important to you and prepare for your objections in advance.

The finance manager greets you and leads you to his lair (I mean office). He begins with some small talk, then mentions that you qualify for the 0% special financing rate, and then verifies that this is what brought you out to buy a car today. Here is where things start to turn ugly.

A dealer will let you go through the entire car-buying process, not disclosing to you the 0% interest is only available for a concise finance term. The dealer knows this technique is the most effective when you don’t find out until right before you’re about to sign the paperwork because mentally, you’ve already bought the car and are just ready to get out of there.

While reviewing your paperwork, the finance manager states your monthly payments will be $958.33. This is a shock to you, and you ask, “I thought I qualified for the 0% interest rate?” The finance manager says, “you do, but to get 0%, you must finance your vehicle for no longer than 24 months.”

Don’t think this is an accident; the entire presentation by the finance manager is premeditated. He does this many times a day. He’s prepared for you to lose your mind when you hear the outrageous payments.

By this point, the dealer is counting on that you’ve fallen in love with the car and will decide to extend the financing term to make the payments more affordable for your budget. The finance manager is already prepared and will show you several different options with higher interest rates to choose from, guaranteed to make the dealership more money.

Making a car buying decision based on emotions after being side-swiped by this advertising scam can be financially dangerous. You can end up paying thousands of dollars in unnecessary interest charges and bank fees.

Only finance a car with a dealership as a last resort. Get a pre-approved car loan online before contacting a car dealership. You can also use your pre-approval to negotiate a better deal with the dealer.

How to Avoid the 0% Interest Car Dealer Scam

  • Always read the fine print in a car dealer’s advertising. Depending on how the 0% is advertised, there must be a disclaimer of any unique stipulations to the offer.
  • Before car shopping, check current interest rates with your bank, local credit union, or for the best deals with online auto finance lenders. You can use the information from these companies to determine what interest rate you qualify for, and you’ll arm yourself with a powerful negotiation tool when negotiating with a car dealer.
  • Get a pre-approved car loan in place from an online company. If you have marginal or bad credit, apply for a bad credit auto loan before meeting with a dealership’s finance department.
  • Don’t let the finance manager know more about your credit history than you do. Get and review your credit reports and scores from a reputable online company before applying for any loan.
  • Carefully read and understand everything you sign.
  • DO NOT let a car dealer or salesperson talk you into something you don’t want to buy or can comfortably afford.

About the author
Carlton Wolf is the author and founder of Auto Cheat Sheet.My name is Carlton Wolf, and I’ve been in the car business since 1994, both retail and wholesale. I created the Auto Cheat Sheet to better educate buyers about the deceptive sales practices many dealerships use nationwide. Please understand that not all car dealers are dishonest. However, you never know who you’ll be dealing with, though. I’m willing to share my knowledge and experience with anyone who listens. Keep in mind that I’m a car guy, not a writer.