0% Car Financing Trap

[jeffrey]

The six-year, 0% loans that Ford Motor and General Motors are offering starting this weekend will put a lot of buyers into cars they didn't think they could afford -- and keep them there longer than they expect.

That's because most vehicles depreciate faster than long-term loans are paid off, even when buyers don't have to pay interest. And because the interest-free loans apply only to 2004 models, at a time when about half the vehicles in stock are 2005 models, buyers are starting the depreciation plunge with year-old cars or trucks.

Typically, a six-year borrower would owe more than the vehicle's worth as a trade-in for about four years, making it tough to buy something new until then...

Ford's 0%, 72-month loans can't be combined with other incentives. That could be a big sacrifice. Ford is giving $5,000 rebates on minivans, $4,500 on Explorer sport-utility vehicles, up to $3,500 on F-150 pickups...

GM announced first, saying it would offer the 72-month, 0% loans for 72 hours, Tuesday through Thursday. Ford fired back with the same deal, but starting Sunday, hoping to siphon buyers waiting for GM's program to begin... [read more at usatoday.com]