Interest-free auto loans extended into this year
By Lucy Lazarony • Bankrate.com

Those zero-percent financing offers just keep going and going.

Ford, General Motors and DaimlerChrysler are extending interest-free financing promotions into 2002.

GM will be offering a scaled-down version of its popular, interest-free financing program through Jan 2, 2002. The offer, which began Nov. 19, excludes all Cadillac models and two Saturn models.

Ford will continue to offer 36-month, zero-percent financing on many new cars and trucks through Jan. 14, 2002.

DaimlerChrysler will continue to offer interest-free loans on several 2002 vehicles in its Chrysler, Jeep and Dodge divisions through Jan. 8, 2002.

The interest-free financing wave began in late September when GM, Ford and DaimlerChrysler rolled out zero-percent financing deals on a wide range of new vehicles.

Thanks to record sales, the offers, originally set to end Oct. 31, were extended through much of November. The DaimlyerChrysler deal expired Nov. 19, but GM and Ford have extending the promotions yet again.

GM's new zero-percent deal is less generous than the original, which expired Nov. 18. The promotion included zero-percent financing on 36-month loans on all 2002 GM cars and trucks and interest-free loans for as long as 60 months on 2001 passenger cars. GM's new zero-percent deal is good only on 36-month loans, and is no longer good on the Cadillac models.

Other major manufacturers including Toyota, Mazda and Suzuki are offering interest-free promotions as well.

Good time for a bargain
Here's a roundup of the latest deals:

• Toyota is offering zero-percent financing on 2001 Corollas, Tundras and 4Runners. The promotion ends Jan. 2, 2002.
• Mazda is offering interest-free financing and no payments for six months on any 2001 Protege, Miata, MPV, 626, Millenia, Tribute and B-series trucks. The offer ends Jan. 2, 2002.
• Suzuki is offering zero-percent financing for up to 60 months on 2001 models and zero-percent financing for 36 months on 2002 models. The offer ends Jan. 2, 2002.
• GM is offering interest-free, 36-month loans on new 2001 and 2002 passenger cars and trucks. The discounts apply to Chevrolet, Pontiac, Oldsmobile, Buick, GMC and Saturn vehicles. The Chevrolet Corvette, Saturn VUE and Saturn L100 Special Edition and all Cadillac models are excluded from the promotion. The promotion began Nov. 19 and runs through Jan. 2, 2002.
• DaimlerChrysler is offering interest-free financing on 2002 cars and trucks in its Chrysler, Jeep and Dodge divisions. Several vehicles are excluded from the interest-free promotion including the Chrysler PT Cruiser, Chrysler Prowler, Dodge Viper and Jeep Liberty and all Chrysler and Dodge e-minivans (eC, eL, eX). The offer runs through Jan. 8.
• Ford is offering zero-percent financing on 36-month loans on most 2001 and 2002 cars and trucks in its Ford, Lincoln and Mercury divisions. The Ford Escape and Thunderbird and Lincoln Blackwood are excluded from the offer, which ends Jan. 14.

Let's face it: a zero-percent financing rate on an auto loan is quite a deal.

"That's darn good," says Paul Taylor, chief economist at the National Automobile Dealers Association. "Zero-percent financing is awfully attractive, even compared to 2.9 percent, and it's certainly attractive compared to the prevailing auto rates at financial institutions."

Of course, keep in mind these deals are available only for those with squeaky-clean credit. Those with lesser credit ratings can still get a good deal, but probably not zero-interest financing.

Still, it's a good opportunity for those with good credit. Let's look at a $20,000, 36-month auto loan. On a loan with a 7.23 percent interest rate -- the Bankrate.com national average for 36-month auto loans -- you'd pay $2,307.30 in interest over the life of the loan. Even on a loan with a 2.9 percent interest rate, you'd still have to shell out $906.76 in interest.

With an interest-free loan, you don't pay a single penny of interest. Zero-percent financing means you pay zero interest over the life of the loan. You take the $20,000 and divide by 36 to get your monthly payment. That's easy math -- and quite a deal.

Rebates are worth checking
But it's not the only good deal available to car shoppers this fall. Don't overlook cash rebates. If a rebate is hefty enough, there's a chance you could save more money by snatching up the cash and financing your loan through a bank or credit union. This calculator from Bankrate.com will help you crunch the numbers.

Car shoppers looking for bargains will like what they see. Discount financing and hefty rebates are widespread. It was a good time to buy a car even before the latest wave of interest-free incentives hit.

Regardless of where you fall in the credit spectrum, there's a good chance you'll be able to land a nice financing deal this autumn from a bank or credit union. Auto shoppers of all credit levels catch a break whenever the Federal Reserve cuts rates.

Bankrate.com research shows that interest rates on new-car loans tend to shift in lock step with the prime rate. When the Fed cuts rates, the prime rate drops and rates on auto loans from financial institutions soon follow suit.

With all the Fed rate cuts so far in 2001, it's an awfully good time to be shopping for auto financing.

It's a good idea to shop around for financing before you shop for a car. Be sure to check out deals from local banks and credit unions. This Bankrate.com search engine will help you compare car loan rates in your area.

Have an auto loan all set to go before you set foot in a dealership. That way if a dealer wants your financing business, he's going to have to beat the best rate you found on your own.

By shopping ahead, you'll learn what kind of financing deals you qualify for. The dealer won't be able to talk you into signing on for a loan with a higher interest rate than you deserve.

Get the best deal
Be just as diligent when shopping for the vehicle itself.

Intellichoice, Autoweb.com, Edmund's Automobile Buyers Guide, AutoSite, Autopedia, Kelley Blue Book and CarPrice.com are among the sites offering timely pricing information. Make note of the dates when each rebate is set to expire.

Be sure to visit several Web sites when researching pricing information. Everything from sticker price to customer rebate information may vary. It's wise to cover all the bases. When in doubt, contact an auto manufacturer directly.

Here's one last tip, and it's an important one. It's best to think of a new car purchase as three separate negotiations: the price of a car, the price of a trade-in and the financing. A car salesman will try to lump this stuff together. Don't let him.

If you do, you might not notice when the purchase price of the car gets bumped up or the trade-in-value of your old car gets knocked way down.

Some dealers might even tell you that you can't have zero-percent or any discount financing without paying sticker price. Don't fall for it.

Insist on three separate negotiations, and get the best deal you can on each one. Shop as many dealers as necessary to land the deal you want. The best way to land a good deal is to make dealers compete against each other for your business. Be persistent.

And keep crunching those numbers. Snapping up a big discount on the price of the car and signing on for a loan from your bank or credit union could be an excellent deal. It could even beat the interest-free, sticker-price-only financing deal that a dealer keeps going on about. Be sure to do the math.

-- Updated: Nov. 20, 2001