The simple answer is: Yes, 0% APR car loans are good deals. When you pay no finance charges (interest) on a loan, you save a significant amount of money over the term of your loan — and you reduce the amount of your monthly car payment.

How much do you save with a zero percent loan?

Here’s an example:

Let’s say you buy a new car for $24,000 and you want a 60 month loan. If you were to get an auto loan at a conventional interest rate of 6.5%, your payments would be $470 a month and your total finance charges would be $4175.

If you bought the same car with a 0% APR loan, you would save the $4175 in finance charges and your monthly payments would only be $400 a month, a savings of $70 a month.

Getting a 0% APR loan sounds like a good deal — and it is — but what if the car dealer/manufacturer is also offering a rebate, which is typically offered as an alternative to the 0% loan. You must select one or the other, but not both. Which is better?

How do I buy a car from an individual private seller — not a dealer?

When you buy a car from an individual, you pay with cash, a money order, or a bank cashiers check. The money can come from savings, a checking account, a family loan, or a loan from a bank or financial company. Most sellers do not like personal checks.

Buyers sometimes expect a private seller to “take payments” but any smart seller will not agree to such a plan. It is too risky. As a buyer, it’s better to get your own loan.

Requirements for a car loan

Loans from banks or finance companies require that you have a not-so-bad credit score, have an income sufficient to repay the loan, and have no excessive debts that might interfer with your ability to repay the loan. Loan companies do not want to give money to people who are unable to repay a loan.

Buying a car with bad credit – or no credit

We see this question being asked frequently: “What is the best car to buy?”

Of course, the real answer as to what is the best car can vary, depending on your own personal needs, preferences, and finances. Some people place a great deal of importance on reliability. Others might think safety or cost is more important. And others might feel that the best car should have great looks and high performance. 

Many people believe that to get the best car, you must spend a lot of money — that the best cars are the most expensive one. Strangely, this is just not true. Actually, some of the best cars are the least expensive — and some of the most expensive cars are the least reliable and the least efficient.

One of the best automobiles, overall, is the Honda Civic. Why? Because it has the most perfect combination of all the factors that most car buyers look for — cost, fuel efficiency, reliability, cost of operation, cost of insurance, style, performance, resale value, riding comfort, luxury features, and handling.

Now, we know that the Honda Civic is not the best car for everyone. Some people need more interior room (try the Honda Accord sedan), or more performance, or more luxury, or more cargo space. Some people need a pickup truck. Others want a sports car or convertible. Some just want something other than a Honda (?).

There are certainly other alternative cars that offer the same or nearly the same qualities as the Civic. Following are some of those that have garnered “best car” nominations in their classes by respected automobile reviewers such as Consumer Reports, Motor Trend, Car & Driver, JD Power, and others. We list them here in no particular order.

• Hyundai Sonata
• Hyundai Elantra
• Hyundai Genesis
• Ford Fusion
• Ford Focus
• Ford Taurus
• Honda Fit
• Honda Civic
• Toyota Prius
• Toyota Camry
• Nissan Altima
• Mini Cooper
• Scion tC
• Mazda MX-5 Miata
• Mazda5
• Toyota RAV4
• Honda CR-V
• Acura TSX

Notice that Ford is the only American car maker in our list. Ford has made tremendous strides in improved quality, reliability, and styling.

In summary, the best cars are those with the best combination of qualities that most automotive consumers are looking for.

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Online car buyers exposed to common car scam by criminal sellers

Users of online car buying sites such as AutoTrader, Craigslist, online newspaper classified auto ads, and other non-dealer car sites often find unbelieveable good deals, only to find it was no deal at all, but a common car sales scam.

We often hear the question, “Is this a scam?” from car buyers who have found a “great deal” online. Buyers become suspicious because the price is “too good” and the payment and pickup arrangements seem a little fishy.

Cheap cars advertised on Internet sites can be scams, and it is relatively easy to spot them after the seller has been contacted, but not before. A car-for-sale ad placed by a scammer looks like any other ad — except the price is much lower than normal. They even provide pictures and VIN numbers of real cars (snagged somewhere on the Internet) to make the ads seem more believeable.

As this is being written, this year, 2010, has become the best time to buy a new car in years.

In normal years, we would tell you that the best time to buy a car is when sales are slow at the end of the month, end or the year, or during vacation season. We would tell you that you might still have to negotiate your prices because dealers aren’t just going to give you a good deal because they like you.

BUT……..things are much different now. Sales have been slow for over a year and are still slow right now. As a result, we are now seeing some of the biggest and best car incentives on new cars that we’ve seen in years. Nearly every car manufacturer is now offering a combination of large factory-to-customer rebates, low-interest loan deals, 0% APR loans (even on long 72 month loans), special lease deals, free maintenance, and “secret” factory-to-dealer rebates that dealers usually give to customers.

Why has 2010 become such a good time to buy a car?

Cheap cars can be found in many places — if you know where to look. Following are just some of the places you might find cheap cars:

Independent Used-Car Dealers – Independent used-car lots are a potential source of affordable cheap second hand cars. Many lots have older vehicles that can be real bargains, but might require a little work. You should take care to determine if the price is fair and that the vehicle has no hidden problems. Most used cars are sold “as-is” and come without any kind of warranty or return policy. Check out local used-car lots in your area but also consider large national or regional used-car dealers such as CarMax.

New-Car Dealer Used Car Lots - Many new-car dealers also sell pre-owned cars. Most new-car dealers only offer relatively late model used vehicles that have been taken in trade or are off-lease, and are in good condition — and are relatively expensive. But bargains can be found. Therefore, it doesn’t hurt to check out local new-car dealers but also look at other sources listed below. Some new-car dealers sell “certified” used cars — at a higher price. These cars have been inspected thoroughly and come with a short guarantee.

Buy-Here-Pay-Here (BHPH) Dealers – BHPH dealers are a different kind of used-car dealer that provides in-house financing, usually with no credit check. Most BHPH dealers are local and can be recognized by their “we finance anyone” or “no credit check” banners. Be aware that interest rates are usually very high and payment terms are strict. See “Should I Buy From a Buy-Here-Pay-Dealer Car Dealer” for more details.

What are the most popular used cars — the cars most people are interested in — the best used cars?

We wondered about that question too. Are there certain cars that most people are buying, asking about, seeking information about, and asking for pricing on? What car makes and models are most popular? Are they the best cars to buy?

Well, we went to one of the most-visited used-car web sites, UsedCars.com, and found such a list. Actually, the site compiles a real-time list of the makes and models that their site visitors most often request information about, which is an indicator of the most popular cars.

The most-popular car list can change from day to day, but not by much. A vehicle that is #1 today might fall to #2 tomorrow, and vice versa, because the rankings depend on what online visitors to their web site are asking about and searching for on any particular day.  

Here’s the current list of most popular used cars at the time of this writing:

Who needs a co-signer for a car loan?

New or first-time car buyers are often surprised at being turned down for a car loan because they have no credit history, which unfortunately has about the same effect as having bad credit.

Lenders want to see that a borrower has a good record with previous loans and credit cards. Without a history of credit, a borrower represents a risk to lenders. If they don’t know a borrower’s history, they take the low road and assume the worst.

It’s a familiar “catch-22″ situation in that you can’t get a loan to establish credit without already having credit. So what is the answer?

Lease vs Buy? What’s the Difference?

One of the best ways to decide between car leasing and buying with a loan is to directly compare the attributes of each, which we will show you in this article. We’ll tell you about how payments compare, about how fees are different, about advantages, and disadvantages.

Another way to help make a decision between leasing and buying is to compare the cost of each for a specific lease vs. buy situation. For this, you’ll need a special Lease vs. Buy Calculator.

Now, let’s take a look at how car leasing compares with buying with a loan.

Buying a car with a low credit score?

Having bad credit means that sometime in your past, possibly as far back as seven or ten years, you have had missed or late loan payments, repossessed property or cars, or have declared bankruptcy. You may also have an excessive number of credit cards with high balances. These factors are included in your credit history reports that come from three credit reporting agencies: Transunion, Experian, and Equifax.

Your entire credit history is summarized in a single number, called your credit score. Your score can be different among the three agencies. You can get your FICO credit scores at FICO Scores/Reports .

A Car Loan Story

David, 17, recently graduated from high school, landed a good paying job, and wanted to buy a new car.

His thought was that he would go to his neighborhood Ford dealer where he had been admiring a bright red Focus model that he felt he could afford, and arrange for a convenient loan to pay for it. He could easily get approved for the loan because his father knows the owner of the dealership. 

The car cost $12,000 with discounts and rebates. He thought a 5 year (60 months) loan would be about right because he figured payments to be $200 a month ($12,000 divided by 60 months), which he could easily afford.

David was wrong — in many ways. Let’s see why.

How much down payment do I need for my car loan?

Until relatively recent times, it was standard for car dealers and finance companies to require at least 20% down payment on the purchase of a car. It was for a good reason.

Because cars depreciate in value from the moment they are driven off a dealer’s lot, a down payment helps offset that rapid decrease in value, which may keep the loan from becoming “upside down.”  It also protects the loan company or bank because, if they have to repossess the vehicle, they have a smaller risk of losing money.

Things are different now
Auto manufacturers and dealers are now very competitive and business must be fought for. They are willing to take risks that were unheard of just a few years ago. In many cases, down payment requirements have been reduced or eliminated altogether, primarily for customers with good credit.

If you still owe more on your loan than your car is worth, you are upside down.

You may still be able to buy another car if you are upside down on your previous loan.

There are two ways to go about it.

One way to buy with an upside down loan
You could sell your old car but you will have to add extra cash to fully pay off your old loan. You’ll need to pay off your loan so that you can give a clear title to your buyer. However, coming up with extra cash might be a problem, especially if you are upside down by a large amount. For many people, this solution is not possible.

Let’s look at some other ways.

How to use a Lease vs Buy Calculator

When you use a Lease vs Buy Calculator such as the one at LeaseGuide.com, you should understand how it works and how to get the results you want.

Car leasing is a little different than buying a car with a loan. The language is different, the process is different, and the way that payments are calculated is different. Let’s take a look at how you would use an online lease vs buy calculator to better understand the differences.

Do you need an extended car warranty — car repair insurance?

All new cars come with a new-car warranty from the car manufacturer. There is typcially a general “bumper-to-bumper” warranty that covers just about everything that is not a wear-and-tear item, and a powertrain warranty that covers the engine, transmission, and drivetrain components.

For most new cars, the general warranty is good for 36 month or 36,000 miles, and the powertrain warranty for 60 months or 60,000 miles. Some car brands have higher mileage warranties, as high as 10 years and 100,000 miles.

There are also separate warranties on tires, batteries, and a few other components. 

That’s about warranties on brand new cars. What about used car warranties? Do used cars come with warranties?