Zero interest financing can cost more

Offers of zero percent funding can be tempting, but do the numbers add up?

Deals with low interest rates are starting to reappear as car companies try to hide price increases driven by a weaker Aussie or mask big discounts on slow-selling models.

Either way, it can be confusing for car buyers trying to determine if it's a good deal or not.

In many cases it may be better to haggle about the high price and arrange your own finances outside of the dealership. But sometimes the offers in the showroom add up.

We did some math on one deal.

At least one leading brand is currently offering 0 percent financing at a rather high retail price of $24,990 for a small car that has hovered up to $19,990 in the recent past.

With zero funding for five years, the $0 price will be $24,990 per month, assuming there are no other hidden charges or establishment fees.

Make sure you know the total interest and the total amount you will pay over the life of the loan.

But what happens if you buy a $19,990 car and organize your finances yourself?

If you have a good credit history, you can get an 8% interest rate. According to online calculators, this works out to $405 per month for five years with $4329 interest paid, bringing the car's total value to just $24,319.

It's always good to get more than one quote. Make sure you know the total interest and the total amount you will pay over the life of the loan.

Dealers often make more money from financial transactions than from the sale of the car itself.

Another tip: don't just look at the monthly repayment figure (financial experts can reduce this figure by stretching the repayment periods, which means you pay more interest over a longer period).

The longer the repayment period, the greater the chance that the amount of the payment will be greater than the value of the car at the time of delivery towards payment for a new one.