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Zero per cent car finance: too good to be true?

In the run up to January 1st, Covid or no Covid, Ireland’s car importers and dealers will be breaking out the marketing big guns in an effort to get 2021’s sales, and the 211 number plate, off to as good a start as possible.

Part of that marketing barrage will be the deployment of zero per cent finance packages, which must — surely — be a good thing for the bargain-hunting consumer? I mean, it’s free money, right?

Well, the good news is that — yes — they really are a good thing, and yes you are essentially getting a free loan for your new car. That being said, and this being car finance, there are as ever a couple of things to watch for.

First off, the zero per cent finance deals on offer will usually be based on a PCP (Personal Contract Purchase) finance package or a more traditional HP (Hire Purchase) deal. With HP, of course, the benefit is that at the end of the payment period, you own the car outright.

The downside to HP? The monthly payments tend to be higher. Hence the rise of the PCP deal, which is less like traditional ownership, and more like a personal lease with an option to buy the car outright at the end. 

PCPs are great, because you pay a deposit, defer a portion of the car’s value to the end of the deal (which will usually be covered by its residual value) and finance what’s left — hence the lower monthly costs. Car makers like these deals, because it means that today’s customer will, more than likely, be back again in three years’ time for another car. They suit many owners and buyers today, because of those low monthly costs, and because it’s easy to roll the deal over after three years into a new car. 

Zero per cent deals are a little trickier, usually because the acceptance criteria are higher than for a conventional loan or a PCP deal. You’ll probably have to put down a larger deposit, and you’ll need a squeaky-clean credit rating to be able to nail a zero per cent package down.

As ever, with any finance package, make sure you do your homework first, make sure you know what you can afford, and don’t let yourself get talked into taking a deal that will over-stretch your finances. 

In terms of zero per cent offers currently available, Citroen is offering zero per cent deals on the C3 hatchback, C3 Aircross SUV, C4 Cactus, C4 Spacetourer MPV and the C5 Aircross SUV. Kia actually has one of those rare zero per cent Hire Purchase offers in play, and it’s available on the Ceed range, the Sportage, the Stonic, and the Niro Plug-in Hybrid. Mitsubishi has a zero per cent Hire Purchase offer available on the Outlander plug-in hybrid, while Nissan has a zero per cent package available for the 40kWh battery version of the Leaf electric car, on either HP or PCP. The Micra small hatch is also available on a zero per cent HP. SEAT has a zero per cent PCP deal for the Ibiza small hatch, the Arona compact crossover, the updated Ateca SUV and the Tarraco large SUV. Skoda will do you a zero per cent HP deal on a Fabia small hatch, Scala hatchback, Superb saloon and estate, Karoq SUV, Kodiaq large SUV and Kamiq compact crossover. There are also zero per cent PCP deals available across the Skoda range. 

Suzuki has a zero per cent HP and PCP deal available for the Swift small hatch, the Ignis mini crossover and the Vitara compact crossover. Volkswagen has zero per cent PCP deals available for the Golf, Passat, Arteon, Tiguan and seven-seat Tiguan Allspace. Keep your eyes peeled, though, as we’re sure more will be offered in the coming months and into 2021.