Especially at Christmas time, consumers spend a lot of money on expensive Christmas gifts. But what to do if the necessary change is missing? Here is the advertising promise of zero-percent financing just right: Cheap rates and no interest payments. But beware: The interest-free financing can quickly become a debt spiral for consumers.
Many businesses and car dealers advertise with zero-percent financing and attract more and more customers. At the same time, consumers often believe that they can buy cheap products without incurring additional lending rates. However, zero-percent financing is not always the best decision. Because traders hide additional credit costs usually in the purchase price.
In addition, more cash discounts are granted to cash payers. Nevertheless, the trend towards interest-free financing is increasing. Above all, more and more customers are buying expensive and durable products such as smart TVs, dishwashers and fitted kitchens in installments. Here, banks and retailers with the zero-percent financing make the most profit.
How does the zero percent funding work?
Who buys a product through a zero-percent financing, concludes a classic installment loan with a bank- Related Site womensagenda.org/how-to-sell-a-good-unprofitable-business Womensagenda. This means that the customer has to repay a certain monthly installment with a fixed term, but without an interest charge. The borrower pays the amounts to the bank company, which cooperates with the dealer. The purchase price for the goods is then paid directly by the bank to the dealer.
From the point of view of the consumer center, zero-percent financing has the clear advantage of being able to afford things without having to attack savings. In addition, no additional costs are incurred by financing without interest charges for the consumer.
Zero-percent financing: ” An advertising measure to increase sales!”
Many consumers are often unaware of what “such a tempting offer is actually about,” according to the Consumer Center. She warns that it is just “an advertising measure to increase sales “. Because the Werbemasche deceives many consumers that they could easily afford by the zero-percent financing everything. In particular, the low monthly rates encourage consumers to quickly and thoughtlessly burdened financially. This increases the risk that buyers will buy more than they can afford. In addition, they easily lose track of long and cheap terms. Another disadvantage of zero percent funding is the limited discount potential. Because negotiations on the purchase price are often not possible.
Zero-percent financing with the car: Credit costs hide in the purchase price
The zero-percent financing plays an important role, especially when buying a car. Because most car buyers cannot pay their dream car in cash. Therefore, car dealers like to promote their vehicles with installment offers. The promise sounds good: zero interest rates, favorable installments, no down payment. However, with zero-percent financing for a car, buyers often have to pay more than other financing options. Because “the declared list price for new vehicles is clearly too high for almost all manufacturers, so that there is always a price reduction for cash payer,” explains ZDF WISO. While cash-in-cash can negotiate high discounts, buyers with zero-percent financing are often tied to negotiations.
Zero percent financing: a profitable business for traders and banks
Above all, dealers and credit companies benefit from the possibility of financing. Although retailers must pay fees to the banks, they win with the offered zero-percent funding. Because these costs are of course included in the price calculation. In addition, the dealers are looking forward to an increase in sales.
Even for credit institutions, the zero-percent financing, despite lack of interest income is a profitable business. They use the loans provided to collect valuable customer data and can, therefore, analyze their new customers ideally. As a result, banks can offer their new customers more rewarding offers.