At some point we’ve all run across an advertisement on TV from a car dealer pitching some form of incentive. Manufacturer incentives are special offers designed to entice you to buy a car. Overall they have been found to be very effective in drawing consumers to car lots.
These deals usually come in the form of rebates (cash back) or a low annual percentage rate (APR). The APR is the amount of interest on the loan that you will pay during the year. Of course lowering the interest rate reduces your monthly payment. The lowest APR a manufacturer could offer would be zero percent. This means you pay no interest on the car loan.
Zero percent financing on a car sounds like too good a deal to ignore. Who should pass up free money, right? However, you may want to think twice before signing on the dotted line. There are several reasons these deals could be bad for the consumer.