Special promotions and offers from car dealerships to purchase a car on credit without interest are extremely popular among Russian car enthusiasts. Any person who dreams of buying a car will definitely inquire about more detailed conditions after seeing the advertisement “car loan 0 percent overpayment.” And this is not surprising, because such offers look tempting. Every potential buyer of a car who does not have its full value would like to purchase a car on credit on favorable terms, without overpaying a penny. That is why such offers are in great demand among car enthusiasts.
It’s just a pity that not every brand of car can be purchased under interest-free car loan programs. As a rule, promotions apply to a specific model range, or individual vehicles of a certain configuration. But it is likely that among such cars you will be able to find one that will suit all your tastes, desires and preferences. It’s no secret that the terms of interest-free car loan promotions are not too long. Usually you need to have time to buy a car within 1-2 months from the launch of the program. Car dealerships that periodically hold similar promotions often warn in advance about the upcoming launch of interest-free loans for specific cars. Therefore, if you need just such a car loan, you will have to wait and follow the advertising news of car dealerships in your city.
Where and how can you get a car loan at 0%
As a rule, a car loan at 0% can only be obtained at a car dealership. But that doesn't mean you'll owe money to the dealer. Any car loans are issued by banks, even interest-free ones. And programs for car loan, 0 per annum according to which they promise in advertising, they are created by dealership car centers together with financial institutions. But if you contact the bank’s office directly, you will not be provided with such a car loan; the agreement for it is concluded only in a specific salon with which the bank cooperates.
Interest-free car loans are characterized by fairly strict conditions. This primarily concerns the timing and amount of prepayment.
As a rule, the period for which you can sign up for an interest-free installment plan for a car can be a maximum of 3 years. But most often it is limited to one or two years. As for the down payment, its amount starts from 30% of the cost of the car. It is worth paying attention to the fact that some lenders require you to contribute 50% of the price. Therefore, interest-free car loans are available only to those individuals who have their own savings to purchase personal vehicles.
As for insurance, CASCO is mandatory when participating in such programs. The car you buy in installments will be used as collateral for the loan, so it must be insured in favor of the bank. It is also worth adding that the borrower often has to purchase a CASCO policy at his own expense. In rare cases, the insurance premium may be included in the car loan amount. As for documents, you will need a complete package, including official confirmation of employment and monthly earnings.
Car loan offers at 0% from the largest car dealer in Russia
For a clear example, let’s look at offers for a car loan, for which the largest network of auto centers “Avtomir” promises us 0 percent overpayment. The dealer's car showrooms are present in almost all major cities of Russia, so if you are interested in any of the distributor's offers, taking advantage of it should not be difficult.
So, let's look at the dealer's popular special offer - the FORD CREDIT 0% program, under which you can purchase the following cars: Ford Mondeo, Ford Kuga, Ford EcoSport, Ford Explorer, Ford Focus and the new Ford Focus only until the end of the promotion - 30.09. 2015. The main conditions are as follows:
- A car loan agreement can only be issued for 1 year.
- The amount of the potential buyer-borrower's own savings intended for prepayment must be at least 60% of the cost of the selected Ford model.
- The interest rate under the program is 0%.
- A car loan can only be obtained in rubles in an amount of at least 100,000 rubles and no more than 3,000,000 rubles.
- Of the documents you will need a complete package, consisting of a passport, driver's license (TIN certificate, international passport, SNILS - one of these documents can replace the license), a certificate confirming wages in the form of the employer or 2NDFL, a copy of the work book or contract, with a mark from human resources department at the place of work. If a car loan is taken out by a young person whose age does not exceed 27 years, he will need a military ID.
- The potential buyer-borrower is only required to have Russian citizenship, permanent residence in the region of application and an age ranging from 21 years at the time of conclusion of the contract, and at the time of closing the loan - no more than 75 years.
The purchased car serves as collateral, so you should definitely buy a CASCO policy. A loan for the purchase of a car as part of the promotion is provided by Cetelem Bank.
There are no fees for opening and maintaining an account, for early repayment, etc.
In addition to Ford cars, a car loan at 0% can also be obtained for a Renault Logan car, costing from 329,900 rubles, for a period of 1 year and upon making an advance payment of at least 30% of its cost. They offer to buy a Renault Sandero car on credit at 0%, costing from 339,900 rubles for one year with a down payment of 30% of its cost. The dealer also offers to purchase a Mazda 2 AT Energy car, costing from 644,500 rubles. A car loan agreement can be concluded for 2 years, subject to making 431,000 rubles as an advance payment - the car loan rate will be zero.
Nissan Finance
It is also worth paying attention to car dealerships of official Nissan distributors. Here you can get car loan, 0 per annum according to which it will be established for 3 years. The promotion applies to the following Nissan models:
- Juke;
- Sentra;
- Almera;
- Terrano;
- Pathfinder.
The first 3 models require an advance payment of 20% of the cost for registration in interest-free installments. Nissan Terrano can be purchased on credit at 0 percent only if you make an advance payment of 50% of the cost, which will be approximately 405,500 rubles. To purchase a Nissan Pathfinder under the same scheme, you will need to contribute at least 60% of its cost. This is approximately 1,476,000 rubles.
Taking out CASCO insurance is a mandatory condition. In addition, as part of the program, it is also required to issue a life insurance agreement under the “Protected Credit” project.
As you can see, to get a car loan at zero percent, you always need a down payment and insurance. That is why some car enthusiasts prefer to take out a car using the classic car loan program, since in this case you can find a bank that does not require prepayment and the purchase of expensive insurance.
Where is the interest hidden on interest-free car loans?
Logically speaking, banks cannot lend money without interest, since it is not profitable for them. After all, the main profit of financial institutions comes from interest on loans. In this regard, the question arises: where do banks make profits when issuing interest-free car loans?
Interest due to discount
Everything is quite simple here. When creating a promotion on interest-free installments, the car dealer enters into an agreement with the bank that the buyer will be given a discount to compensate for the amount of interest on the car loan. Neither the bank nor the salon hides this from the buyer-borrower.
Thus, when you come to a car dealership, a car loan, for which they promised 0 percent overpayment in advertising, is issued to you at a standard bank interest rate. But at the same time, the cost of the car is reduced by an amount equal to the standard overpayment according to banking conditions. As a result, everyone benefits: the bank receives its standard percentage when making payments from the borrower, the borrower receives a car loan without overpayment, since the discount on the car covers the amount of interest, and the car dealership, in turn, receives the required sales volume. It’s not for nothing that only certain cars can be purchased under the interest-free installment program. In this way, car dealerships try to sell off those goods that are rarely bought and take up space on the trading floor. The car dealer is also not left in the red, because initially a good markup was made on the cars covered by the promotion.
Car insurance
But, unfortunately, not all car dealerships and banks are so conscientious. Some lenders, in addition to interest due to the discount, make a profit in other ways. For example, from the purchase of insurance for the collateral by the borrower. Since CASCO is a prerequisite for interest-free car loans, some financial institutions require that you purchase it only from accredited insurance companies. As a rule, such insurers have inflated prices for poles, from which banks receive additional profit. In addition, financial institutions often require that a car purchased on credit be insured for its full value. And since car loans at 0% are always issued with a large amount of prepayment, you need to insure the car for the balance of the car loan debt. Thus, if you pay 50% of the advance and insure the car for 100% of the price, the bank receives 50% of the insurance premium you paid as income from the interest-free loan.
Additional fees
Additional fees charged by the bank when issuing interest-free car loans are quite common. The financial institution may require payment of a fee for opening and maintaining an account or transferring funds to the merchant account. Such fees can be either one-time, that is, you will pay them once when receiving a loan, or monthly - their total amount will be added to the body of the loan and you will pay them every month along with the required contribution. The amounts of such commissions can vary from 5,000 to 20,000 rubles, which is also not small. In addition, some financial institutions provide for drawing up the terms of the agreement for an interest-free loan in such a way that at the slightest violation by the borrower, the loan rate from 0% rises to 20%, and remains so until the end of the loan term.
To summarize, it should be said that when applying for an interest-free car loan, you should always read the agreement carefully. Pay special attention to the clauses that allow the bank to change the terms of the agreement unilaterally, and that allow the bank to confiscate the car in case of non-payment in a pre-trial manner. Also, be sure to check the availability and amount of additional commissions and sign the contract with the insurance company with special attention.
Since 2018, amendments have been made to the Tax Code, which specified the concept of “benefit” and made it possible to indicate in the loan agreement any rate other than zero. Before this, lending rates in banks could not be lower than 2/3 of the refinancing rate (current - 7.25% per annum). Otherwise, saving on loan interest would result in income taxes for the borrower.
Now, the obligation to pay personal income tax does not arise even when receiving a loan at 0% per annum. Such offers existed before, but they were implemented by providing the client with a so-called marketing discount. As credit institutions explain, the algorithm for calculating it was based on providing the client with a discount when purchasing a car, equal to the difference between the bank’s actual rate (reflected in the loan agreement) and the marketing rate, that is, the advertised one. Now this restriction has been lifted, and banks are showing real low rates.
In fact, the amount of the discount previously provided to the client by the dealership or automaker is now sent to the bank, covering the shortfall in income of the credit institution when the rate is reduced. This made it possible to cut off those who took out such loans in order to receive a discount on a car, and then immediately fully repay the debt to the bank.
“Under the old scheme, a loan at a marketing rate of 0% could only be used to obtain a discount in the event of prompt repayment of loan debt. Now, a loan is taken by a person who really needs it, and not by someone who takes it out just to get a discount,” comments Natalya Rusova, director of the auto lending department of Rusfinance Bank.
The first automaker to offer car loans at the lowest possible 0.1% per annum was Chery. In fact, a car of a Chinese brand can be bought in installments for a period of 3 years. But don’t rush to rejoice: the conditions for obtaining such a loan turned out to be stricter compared to other loan offers from the Chery Finance program. In particular, the minimum down payment has been increased to 50% of the cost of the car. In addition, only cars manufactured in 2016 and 2017 are available in installments.
Other automakers are preparing to offer, industry participants say. However, you should not expect mass distribution of installment plans, since this financial instrument is usually used by automakers to stimulate short-term sales for certain models. At the same time, compared to direct discounts, the disadvantages of lending even at 0% per annum include the need to obtain comprehensive insurance for the period of repayment of the debt to the bank. At the same time, auto loans with low interest rates allow consumers with limited funds to speed up the purchase of a new car or own a more expensive model.
Bets decide everything
“The cheaper a loan is for a client, the more in demand it is in the market. Therefore, we assess the prospects for the development of installment plans as high. The main question is whether automakers will be ready to focus on near-zero levels. It all depends on the goals and capabilities of each of the brands represented on the Russian market,” says Andrey Spivakov, chief managing director of Sovcombank.
Meanwhile, the legalization of financial offers with low interest rates will have a positive impact on the development of the car lending market and will make it possible to offer borrowers even more attractive loan rates, the banking industry predicts. This should also be facilitated by increased competition in this segment due to the termination of preferential car loans. In the first quarter of 2018, the share of credit sales in the car market, according to Sovcombank estimates, decreased, despite the fact that the targeted programs “First...” and “Family Car” are still in effect, but they are available.
As VTB notes, the development of installment plans largely depends on interest rates in the car lending market. Currently, the market is looking for additional sources to increase the availability of car loans. In this regard, installment plans can become a popular and profitable tool.
As you know, the cost of loans for borrowers is primarily influenced by changes in the key rate of the Central Bank of the Russian Federation. Since the beginning of the year, it has decreased twice - by a total of 0.5%, to the above-mentioned 7.25%. Together with increasing support for automakers in the face of falling demand for auto loans, this led to a decrease in interest rates. Thus, at the moment, a loan for the purchase of a car can be issued at a rate of 5–7% per annum, which is lower than the level of 2017, according to Sovcombank data. In turn, VTB predicts that if the policy of reducing the refinancing rate is maintained, we can expect a further reduction in car loan rates - by about 1–2% in 2018. However, a surge in inflation risks against the backdrop of the current weakening of the ruble, according to experts, may force the Central Bank to freeze the key rate for the next six months.
“The end of the state program for subsidizing interest rates and the decline in consumer demand require more active actions on the part of automakers aimed at promoting credit products and strengthening their support, including by providing direct subsidies to banks to reduce interest rates,” says Andrei Spivakov.
Photo: ITAR-TASS/Interpress/Rodion Yurga, depositphotos
The main principles of bank lending, enshrined at the legislative level, are urgency, repayment and payment. That is, credit institutions have the right to lend money on the terms of repayment within a clearly defined time frame and only at interest. Therefore, for the borrower purchasing car on credit, 0 Interest overpayments on the loan are possible only if the money paid to the bank is compensated within the framework of special programs.
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You can buy a car on credit at 0 percent as part of joint programs between manufacturers and banks. The latter offer reduced rates, and the manufacturer provides the client with a discount that compensates for the cost of servicing the loan.
Most often, official dealers of the Renault-Nissan alliance offer Russians to get a loan for a new car. They work together with the manufacturer's RN Bank, whose sales points are located directly in car dealerships.
Customers purchasing cars with a 0-year loan are usually required to participate in a personal vehicle renewal program, which allows them to receive an additional discount.
Buy a car on credit at 0 percent for 3 years at a car dealership
Dealers collaborating with Genbank also offer to buy a car with a 0% loan. They offer installment plans with a down payment of 50% of the cost of the purchased car. When applying for a car loan at 0 percent for a Lifan car, the minimum down payment is 30% of the vehicle price.
Genbank, through a dealer, provides a loan at 0 for a car, subject to payment of a one-time commission. Its size varies between 25-260 thousand rubles, depending on the type and cost of the car, as well as the selected interior.
The car dealership issues a loan with a 0 rate for a period of up to 3 years. You can borrow up to 5 million rubles from Genbank.
For clients who decide to buy a car at 0% interest, a loan is provided without proof of income. Even individual entrepreneurs can count on receiving a loan. A 0 percent car loan under the Auto Installment Program is available to citizens of the Russian Federation aged 21-65 years on the date of receipt/repayment of the debt.
Russians seeking to get a car loan at 0 percent should understand that the proposals we discussed above are an exception to the rule. In fact, they appear on the market quite rarely, mainly as part of promotions launched on car loans.
In addition, a car loan at 0 percent is issued only if the client purchases a CASCO policy from an insurance company accredited by the bank, whose rates are usually inflated. In addition, the borrower must take out expensive health and life insurance, which significantly increases the cost of servicing the debt. 
Car loan at 0 percent: taxation
When looking for promotional car loans with a marketing rate of 0 percent, you should pay attention to the fact that the rate specified in the agreement is not lower than 6% per annum. Otherwise, the client will have to pay tax on the material benefit received, because according to the law, the interest on a bank loan cannot be lower than 2/3 of the key rate of the Bank of Russia.
A borrower who has received a car loan at 0-5.9% is required to file an income statement and transfer the personal income tax calculated therein to the budget. Otherwise, he will have to pay a fine and the underpaid amount of tax after receiving an official notification from the fiscal authorities.
You may have probably heard about a car loan at 0 percent. Sounds strange, doesn't it? However, as practice shows, there are actually offers on the automobile market according to which you can purchase a vehicle on credit at 0% per annum. What is the point of such programs? Of course, the essence is the same - to increase the number of cars sold, even if you have to lose profit. However, let's talk about everything in order.
So, several car manufacturers actually offer a zero rate. It looks even more surprising compared to the standard rate for car loans, which is about 15-20% per annum. Of course, in order to use this program, you need to follow several important rules.
- The first is the down payment. If for a regular car loan even 10% of the cost of the car is enough, then in our case you will have to pay no less than 30% of the cost of the car, and sometimes they don’t want to accept less than 50% of the amount. In addition, there will most likely be a commission for payments, although it is small.
- The second is car insurance. This is about . On average, the cost of CASCO is about 3% of the cost of the car per year and this money will have to be paid throughout the entire loan term. In addition, there is no guarantee that the bank will not want to include additional types of insurance (for example, life insurance), which cannot be refused. And this, as you understand, is an additional investment.
- Third, such lending is carried out exclusively by one bank with which the company has signed an agreement. If you are not satisfied with this bank, then you will no longer be able to get a car loan at 0% interest.
Thus, it turns out that the final cost of the car may increase due to additional expenses for the same insurance or commission, so the real price of the vehicle may increase, although only slightly. Be prepared for this.
Requirements for the borrower
The requirements for the borrower are no different from those cases when he wants to get a car loan from any other bank.
The bank primarily looks at:
- Borrower's salary level.
- Workplace (how long a person works in one place, whether he climbs the career ladder).
- Driving experience.
- Registration at the place where the loan was taken.
- Full compliance in documents.
You can find out exactly what documents you need to provide for a car loan directly on the car manufacturer’s website. Some of them even allow you to fill out a form directly on the website and only then contact the car dealership.
Who needs it?
Of course, many buyers do not trust such offers - they say, they will probably be deceived. Vigilance is good, but such generous offers do exist. And they are primarily beneficial to car dealerships, which are willing to make sacrifices and make less profit by paying interest to the bank instead of the buyer, but this allows them to empty warehouses faster and make a profit.
The main thing is not to stumble upon scammers, so buy cars at 0% per annum only from official dealers if they offer such programs.
The difference between an installment plan and a “regular” car loan is a larger down payment and a shorter loan term. Thus, for car loans there are many offers from various banks without a down payment and for a period of 3 years, while installment plans can be issued for up to 2 years with a down payment of 30% of the cost of the car.
But most often, more stringent installment terms are offered - an initial payment of 50% and a repayment period for the remaining amount of up to 1 year. And for many, such a scheme may initially be unacceptable, since it requires the availability of a significant amount and the rapid repayment of the balance in relatively large shares.
Also, when applying for an installment plan, in addition to the initial payment for the car, an additional amount of 10 to 20 thousand rubles will be taken - payment for opening an account and issuing a bank card, through which the debt will be repaid.
A common practice for interest-free loan agreements is a discreetly written condition on impeccable adherence to the payment schedule. Where it is indicated that with a minimum delay of up to 1 day, the “interest-free loan” will be requalified as a “car loan without certificates and guarantors” at 15% per annum. Thus, forgetting about the “dead line” or failing to make ends meet on time, you can not only receive late fees, but become the owner of a completely different loan.
With common effort
At its core, an “installment plan” or “interest-free loan” is a joint financial product of a car dealership, a bank and an insurance company. Here, the car dealer gets an additional opportunity to sell certain models and trim levels for which a “zero percent credit” promotion is announced. At the same time, the partner bank is given a personal discount on the models participating in the promotion (not available to an ordinary buyer), due to which the bank receives its profit from the interest-free loan, since the client is charged the full cost of the car.
In turn, the insurance company that insured the car under CASCO shares its profits with the bank. Therefore, compared to a “regular” car loan, CASCO insurance for a car taken in installments is 2-3% higher. Which, with the car costing 1 million rubles, turns out to be not such a small amount.
Let's look at examples
Nissan offers a loan from 0% on the new Almera sedan and X-Trail crossover. And if the first one is available without interest with a loan for 1 year and a 30% down payment, then the second one can be taken in installments for as many as two years, but only if you pay half the price. Let's look at the purchase of X-Trail in more detail.
The price of a basic car on the website is 951,000 rubles. The advantageous offer page indicates the first (minimum) payment of 50% of the price of the car, equal to 532,750 rubles. That is, the entire amount is already 1,065,500 rubles, but there is a note on the website that the loan is provided for all configurations except the basic one. Also on the website, at the bottom of the page, it is reported that “The Buyer’s costs between the specified rate and the rate in the loan agreement are compensated by a commensurate reduction in the price of the Car.” And further: “The rate in the contract is 12.5%/14%/14.5%/15%/16.5% for 1/2/3/4-5/6-7 years, respectively.” As a result, it turns out that the loan is not interest-free, but the most ordinary one, only Nissan will compensate for the difference by providing a similar discount on the car.
