Luxury cars 0 financing

NEW YORK (MainStreet) — The zero-percent car loan is less than half as common as it was four years ago, but U.S. consumers who find such deals can expect to save $3, 500 on average, an Edmunds.com analysis shows.

"Sometimes consumers think zero-percent loans are some sort of scam, but they're actually legitimate. It's not a 'bait-and-switch' situation, " says Jessica Caldwell of Edmunds, a car-buying site that recently studied zero-percent deals in depth.

Dealers and automakers often use zero-percent financing to attract shoppers to certain car brands or models, typically offering buyers with good credit three to five years to pay off purchases using interest-free loans.

These deals can cost manufacturers less money than cash rebates or special leases, but still save consumers big bucks.

For instance, Edmunds estimates that shoppers who got zero-percent financing during 2014's first nine months will save $3, 554 on average when compared with what those who got regular financing will spend on interest over their loans' lifetimes. (The firm found that the average loan taken out during the period had a 4.31% interest rate, a $28, 000 principal and a 67-month term.)

Read More: For the Best Prices Buying a Car, Go Shopping on Sundays

Caldwell adds that this year's savings are actually small in historic terms because of today's low interest rates. For instance, consumers who got zero-percent deals in 2007 typically saved around $6, 000 on financing, as regular loan rates averaged 7.3% then.

But Edmunds also found that zero-percent loans are harder to come by these days, accounting for just one percent of all dealer-provided financing.

That's way down from the 23% that interest-free financing represented in March 2010, when Toyota offered lots of special incentives amid the Japanese automaker's "sudden-acceleration" scandal.

Caldwell attributes today's paucity of interest-free loans to the fact that financing deals usually give only automakers a brief sales "pop" rather than a sustained revenue increase.

Edmunds also discovered that the odds of getting a zero-percent deal vary greatly depending on where you live and what kind of car you buy.

For example, the firm found that 19% of dealer-financed van buyers got zero-percent financing during 2014's first nine months, compared with just of 3% of those who bought luxury vehicles.

Caldwell says automakers offer lots of interest-free loans on vans to attract business customers, but tend to put more money into leasing deals when it comes to luxury cars.