Auto interest rates are higher today than they have been in several years.  None of the major auto finance companies are offering 0% financing like they used to just a few years ago. As a matter of fact, the best interest rate that you can find for auto financing right now is around 5.5%, but there are a few caveats:

• New car
• Credit score >700
• Term <36 months

This creates a problem for many customer because according to FICO data only about half of Americans have a credit score greater than 700. The average price of a used car is $35,000, median household income is $71,186.00, and the average interest rate on a used car is 10.26%. When you look at all that data, it becomes increasingly frustrating.

For the remainder of Americans that are still in the market for a used car, finding something under $10,000.00 is becoming a much more popular option. A close friend of mine just purchased a 2012 Kia for $8,500.00. What if I told you that you can still finance your next auto loan for 0% interest?

I was having a conversation with a client of mine today, and she wants to buy her 16-year-old son a car.  She doesn’t want to spend any more than $8,500.00. All her credit scores are above 720. She shopped for a car for her son, and she was quoted interest rates as high as 15% with good credit.  The higher interest rate that she was offered was because of the age of the car, and it required a 10 – 15% down payment.

I advised her to use a strategy that would require no money down and 0% interest. She has several credit cards that have sent her checks in the mail for 0% interest for 12 months. She also has healthy credit limits of $20,000.00 and greater. She used one of her 0% interest checks from one of her credit cards to purchase the car.

I also advised her to purchase something that would not cause her balance to be more than 35% of her credit limit so that she would not impact her FICO scores due to a high credit utilization. She can pay a comfortable amount per month for the next 12 months. What happens in twelve months when the 0% interest rate expires? At month eleven she simply obtains a new credit card at 0% interest and transfers the debt to the new card. If she pays $300.00 per month the debt will be paid off in 28 months, or just over two years.

These are the strategies that one can use when one has done the hard work of obtaining and maintaining a good credit score.  You don’t need an 800+ FICO to position yourself to use these kinds of strategies. However, if you don’t have a 700 score, that should be your immediate goal so that you can improve your standard of living. 

Share this strategy with someone whom you know is in the market to purchase a used car, or feel free to contact me to schedule a consulting session regarding how you can improve your situation.