What is 0% or interest free finance? | GO Vauxhall

What is 0% or interest free finance?

Available at GO Vauxhall London, South East England

At GO Vauxhall we can offer 0% finance on selected new cars purchases, this is also known as interest-free finance. So, what exactly does this mean? In the simplest terms, this means that you get a loan for the car without paying any more money than the standard price for the car. This contrasts with more traditional finance packages, such as Hire Purchase (HP) and Personal Contract Purchase (PCP), where you are required to pay interest on the capital you borrow for the car.

For example, with an interest-free finance offer, if you choose a car worth £22,000, you will repay £22,000 and no more. If you were to purchase the same car at the same price in a standard finance package with interest payable, you would also have a sizeable amount of interest to pay over the period of the loan. A loan for £22,000 with an interest rate of 10% and payments spread over five years, would require a total repayment of £28,045.80, incurring over £6,000 in interest charges. For some customers this may still be more cost effective or viable than other forms of finance, but it doesn’t seem as attractive as an interest-free option.

0% finance offer terms will vary, but you will usually be expected to pay a deposit up front. However, the loan amount will incur no interest. Whether you are required to pay a deposit or not, a 0% finance deal can give you the opportunity to make significant savings in comparison with a package where interest is payable.

Why do GO Vauxhall offer such a generous package?

At times we may be keen to promote a particular model of car so that stock can be cleared to create space for new models that are due to be released. Alternatively, we may offer 0% finance on pre-registered car. For example, cars with colour options and additional features that have not proved as attractive to customers occupy space on the forecourt, these need to be sold for newer or more popular models.

Is there a catch?

No, there is no catch, but there are some limitations and conditions.

You may be expected to pay a larger initial deposit if you take out a 0% finance deal than you would need to pay for a conventional hire purchase agreement where interest is payable. So, an interest-free finance offer works well if you have some money saved for a deposit, or can borrow some extra money, ideally also at zero percent or a low rate of interest. If you don’t have access to the required deposit, you will need to consider other forms of finance for your car purchase, such as a PCP deal.

It is not always possible to offer the sort of price reduction on a car that you might be able to negotiate if you were buying a car either outright in cash or using a standard HP or PCP agreement. After all, dealers need to earn a living too. You may want to discuss what price discount would be available on the vehicle for alternative financing, such as HP or a cash purchase, before you commit to a 0% finance package. If you can negotiate a good discount, you may decide you are better off paying for the car outright, even if you don’t then have the money earning interest in the bank.

Clearly only a limited range of cars will be made available on interest-free finance. You may get lucky and find the car you already wanted to buy is available on a 0% finance promotion. Otherwise, if you are determined to secure an interest-free finance deal, you may need to be flexible in your choice of car. Your preferred new car may not be available with 0% finance, so you may have to compromise on the model of car you buy in order to get the finance package you want. When you consider the savings you are making with not paying interest, you may well feel it is a small price to pay for getting a brand new car.

If you are interested in buying a new car, it is always worth checking whether we have any 0% finance promotions available by viewing our latest offers or contacting us to see if we have any coming up. Priorities for clearing car stock can change in a matter of weeks, particularly when new registrations are due to hit the showrooms. If you are not in a hurry to make your purchase, you may have the chance to make a considerable saving by waiting for a promotional period to start.

Interest free finance makes car ownership appear very affordable, but it is still important to consider whether you can afford the repayments. Check you have the amount available from your monthly budget, because if you are unable to keep up the repayments, you risk losing the vehicle.

Several factors will determine whether 0% finance is the right option for you. You will need to make a decision based on your personal financial circumstances, weighing up alternatives, and the choice of models and deals available at the time when you want to buy a new car.​