Is Zero Percent Financing a Good Thing?

If you've watched much television lately, you've likely seen back-to-back car commercials touting zero percent financing. As carmakers compete to sell vehicles, nearly all are resorting to "no cost" financing.

Zero percent financing offers often draw consumers to new car showrooms, but the results aren't always advantageous for buyers.

"On the surface, zero percent financing can sound like a no-brainer," said Ethan Ewing, president of Bills.com, a financial advice Web site. "However, consumers must understand that zero percent financing is intended to generate foot traffic for dealers as a bait and switch tactic, and that it is sometimes not as rewarding as alternative incentive offers."

In many cases, zero percent financing can present tremendous opportunities to potential car buyers. However, consumers should first do their homework to ensure that it is actually the bargain it is marketed as by dealers and car companies.

Some things to consider:

• Remember that all dealer incentives are designed to generate car sales. The ultimate goal is to bring consumers into the showroom.

• Zero percent financing is predicated on good credit. Normally, only the best credit customers will qualify for this promotion. If you are purchasing because of the promotion, check your credit score ahead of time so you can know whether to even step foot into the showroom.