Please can someone explain 0% finance?

[fatsatsuma]

I know it basically means borrowing £ and paying 0 interest. But is that actually the full story?

Back story is that we need to replace our car which we've driven into the ground. We have little disposable income but some savings. I feel more comfortable taking the hit and paying outright for the car, as I can't believe that car manufacturers ever lend money for free.

But there are various 0% finance deals around and I know many people who feel they've done well with such deals. Is there any difference between paying the full sum outright from savings and using savings to pay back monthly if there is really no interest to pay?

Btw were planning to buy secondhand but replace after 2-3 years before car starts costing £££ which is what has happened to us before. But for the first time ever I'm wondering if buying a new car is better sense, if we can afford it.

We bought a while ago and 2nd hand so got an 03/53 plate and went for the alhambra - simply because it was much cheaper than the VW or ford for exactly the same car....

I don't if that is true for the newer models though like I said, it does come down to how much you want to pay for the interior differences if mechanically they are all the same.

We've always bought VWs or Volvos (with one never to be repeated Landrover) and have been pretty happy keeping our last Volvo and VW polo for 10 years.

On the finance front, work out how much you would earn in interest on your money in your bank. Then try to negotiate this (at least!!) off the cash price. If you can't beat what you would earn in interest by any cash discount offered, then go with the 0% finance deal.

Also, research the prices available as you may well be able to get an ex demo or slightly older model that has been hanging round on a forecourt somewhere cheaper than the newest most expensive models on a 0% finance deal.

Thanks MistyB those are helpful points.