[masraum]

I thought this was interesting regarding 0%...
from MX-5 Miata Forum

GM was the first company to use 0% as a selling tool and I was still in banking at the time and we did some jumbo mortgage financing in conjunction with GMAC so got to know one of their regional reps fairly well. His explanation for why 0% financing didn't cost them anything was pretty eye opening.

30% of the people who are attracted by the 0% financing don't qualify and are usually steered into some other GMAC financing vehicle which provides an kickback to the dealer and a good rate of return to GMAC.

Of those that do qualify, about 25% of them default at some point and if you read the fine print, their is usually a default rate built into the contract which is excessively high or, at the very least, a substantial late penalty. The default doesn't have to be extreme - one late payment is often enough to trigger default rates so read the contract carefully.

Another 25% trade or sell that vehicle within eighteen months.
Another 25% traded or sold before the end of the contract but after eighteen months. Why is that significant? GMAC actually had a prepayment penalty (early termination fee) built into a 0% financing contract! I don't think that can be done any longer under revised truth in lending laws but not 100% sure about that. It wasn't a huge number IIRC, maybe a few hundred bucks but it all added up so that their 0% only applied to those who took the contract to term and never defaulted.

GMAC (at the time) charged the dealer a participation rate for the 0% which was then built into the price of the vehicle so it wasn't really free to begin with. Dealers would often offer you another $1000 off for cash since they didn't have to kick into the fund or there were rebates that weren't applicable if you took the 0%.

It's a great sales tool and can be very valuable to those that qualify, don't default and carry the loan to term. Otherwise, it's smart to do a cash price comparison with the finance comparison. Also, money is cheap and you may get a 3% loan on your own and even though you'll pay finance charges, they may add up to less than the cash discount you get by not participating in the 0% plan.

I know lots of folks looking at new Miatas because of the 0% financing that Mazda is doing for the first time ever AFAIK. Just be aware that sometimes not all is at it seems and that the consumer still needs to read contracts and do cost comparisons.