Car Loan With 100% Financing - Should You Do It?

You have seen the car commercials on television. They promise that if you "act now," you may be eligible a 100% financing loan. This means that they are saying they will offer you a loan with no money down required at signing.

Given truth-in-advertising laws, it is of course illegal for a car dealership or manufacturer to advertise this type of deal without it being a true and valid offer. However, given that most car dealerships and makers are in it for the profit, there remain ways they can offer this type of financing but still not be fully honest with you.

How Car Loan With 100% Financing Works

Before considering the advantages and disadvantages of 100% financing on a car loan, it is a good idea to understand just how it works. You see, there is usually a whole string of ifs, ands and buts in the fine print of such offers that they do not tell you in the commercial.

For example, usually these offers are only applicable for customers with near-perfect credit scores over 750, which covers just a small fraction of the population. And, such 100% financing offers usually only apply to certain models that the dealership offers - not all of them.

The Advantages

That said, if you do qualify for this type of offer for the car you want to buy, there are some advantages to getting this type of financing. The most important advantage is that you do not need to come up with any cash upon loan signing. This means that you can get yourself into the car you want right away, without having to save for months and months.

Also, if you have access to some investment opportunities that could potentially yield a higher return than the interest rate of the loan you are considering, then it would probably be wise to put as little cash down on your car purchase as possible.

The Disadvantages

The main disadvantage of this type of financing is that it will drive up the total amount of money that you will be borrowing. This means that your monthly payments will be higher than if you had put some money down for your purchase. And, that also means that you will pay much more in interest over the life of the loan.

100% auto financing may not be all that it is cracked up to be if you were to only listen blindly to the ads. That said, however, it can be the right auto financing solution for some buyers.