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Ask Dave

Zero Percent Is Low Down

Cindy wants to know what Dave thinks of zero percent car loan.

QUESTION: Cindy asks what Dave thinks of zero percent car loans. Dave thinks of them the same way as every other kind of car loan, which is not good.

ANSWER: A new car loses 60% of its value in the first 4 years. A $28,000 automobile will turn into $11,000 in 4 years. That’s roughly $100 a week. I don’t think that’s zero percent. You’re not being charged an interest rate on your loan, but when you have buy a car you can’t afford, then it’s not zero percent because the car goes down in value like a rock. It’s the largest thing we buy that goes down in value.

A zero percent car loan tempts people to buy a car that they shouldn’t buy because they don’t have the money. Pay cash for the car and don’t buy a new car unless you have a $1 million net worth.