0% APR car deals Do they really make sense? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by offering financial calculators and interactive tools that provide objective and original content, by enabling users to conduct research and compare information for free to help you make informed financial decisions. Bankrate has partnerships with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The offers that appear on this site are from companies who pay us. This compensation could affect how and when products are featured on the site, such as such things as the sequence in which they appear in the listing categories, except where prohibited by law for our mortgage, home equity and other home loan products. This compensation, however, does affect the content we publish or the reviews that appear on this website. We do not cover the universe of companies or financial offerings that could be open to you. @VeraNovember/Twenty20

6 minutes read Read Published March 02, 2023

Michelle Black Written Michelle Black Written by Contributing writer Michelle Lambright Black is a credit expert with more than 19 years of experience. She is an author on a freelance basis and a certified credit expert witness. In addition to writing for Bankrate, Michelle’s work is published in numerous publications, including FICO, Experian, Forbes, U.S. News & World Report and Reader’s Digest, among others. Editor: Rhys Subitch Editored by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are committed to helping readers gain the confidence to control their finances by providing precise, well-researched, and well-researched data that breaks down complex subjects into bite-sized pieces. The Bankrate promise

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We make sure that everything we publish is objective, accurate and reliable. Our loans journalists and editors focus on the points consumers care about the most — the different types of lending options as well as the best rates, the top lenders, how to pay off debt and many more. So you’ll be able to feel secure when making a decision about your investment. Integrity of the editing

Bankrate adheres to a strict code of conduct , so you can trust that we put your interests first. Our award-winning editors and journalists create honest and accurate information to assist you in making the right financial choices. Key Principles We value your trust. Our goal is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure this happens. Our editors and reporters thoroughly check the accuracy of editorial content to ensure that what you read is correct. We maintain a firewall with our advertising partners and the editorial staff. Our editorial team does not receive direct compensation through our sponsors. Editorial Independence Bankrate’s team of editors writes for YOU – the reader. Our aim is to provide you the best advice that will aid you in making informed personal finance decisions. We adhere to rigorous guidelines that ensure our content isn’t affected by advertisements. Our editorial staff receives no direct compensation from advertisers, and our content is verified to guarantee its accuracy. Therefore whether you’re reading an article or a review you can be sure that you’re receiving reliable and dependable information. What we do to earn money

If you have questions about money. Bankrate has answers. Our experts have been helping you master your finances for more than four years. We are constantly striving to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate adheres to strict standards policy, which means you can be confident that our content is honest and reliable. Our award-winning editors and journalists create honest and accurate information to assist you in making the best financial decisions. The content created by our editorial team is objective, factual, and not influenced by our advertisers. We’re transparent about the ways we’re in a position to provide quality content, competitive rates and useful tools for you , by describing how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the placement of sponsored products and, services, or through you clicking certain links posted on our website. This compensation could influence the manner, place and in what order products appear within listing categories, with the exception of those prohibited by law for our mortgage, home equity and other products for home loans. Other elements, like our own proprietary website rules and whether the product is available within the area you reside in or is within your personal credit score can also impact the way and place products are listed on this website. We strive to provide a wide range offers, Bankrate does not include details about every financial or credit service or product. With the monthly average car payment of more than $700 and used around $525, based on data from the fourth quarter of 2022, finding an affordable deal is at the top of the list of priorities. In addition, signing a 0 percent APR car deal is one option to save on your next vehicle purchase. Many automakers offer interest-free auto loans to attract new highly qualified customers, and also to increase sales of cars. When shopping for a new vehicle, it is best to proceed with caution, even if an offer with zero APR is on the table. In some instances, getting an auto loan from an institution could benefit you in the end. Are 0% APR deals worth it?

It is worthwhile if you are able to save money on your monthly payment. But you need an excellent credit score to qualify. Make sure you keep the cost-effectiveness of your loan and the eligibility of your car when going for a test drive.

What exactly is 0% APR? A zero percent APR essentially means you borrow money for free. The monthly installments you pay back you the lender for the money it owes the auto dealer, but no extra money from your pocket goes to the bank account of your lender’s bank account. This differs from the usual method, in which the lender charges in exchange for financing. Fees and interest, after all, are the main ways that lenders earn money. Here’s an example of the difference in the monthly costs that a 0 percent APR could make versus an APR that is more typical. Average rate

0% APR

Amount financed



The term “loan”

60 months

60 months




Monthly payment



Total cost



How does 0% APR work? The idea of financing a car with no interest sounds too appealing to be real. However, these financing offers are a tool that auto manufacturers can use to sell more vehicles. Lenders that offer 0 percent financing are known as captive finance firms and are linked to . Examples of captive lenders are Ford Motor Credit, GM Financial, Nissan Finance, Toyota Financial Services and more. If Ford wants to sell more F-150s because of problems with overstock, it could offer zero APR loans to certain borrowers through its own financing division. The no-interest option is more affordable on the surface however, that’s not always the situation. If car manufacturers offer 0 percent financing, they could try to cover “lost” earnings in different ways. For instance, a dealership may push hard to sell you on the spot or in conjunction with your vehicle. You also might have to forgo benefits like rebates, which typically lower your purchase price. How do you qualify for a 0% APR car deal? Zero percent financing deals typically only available to borrowers with good credit scores generally referred to as a credit score of 800 and above. You should do this prior to when you start shopping for auto financing. Each lender also has its own definition of what constitutes excellent credit and its qualification requirements can differ from one vehicle to the next vehicle. Because zero APR qualification standards vary so widely the best option is to call the auto dealership in advance. Ask what criteria you need to fulfill to qualify for the interest-free financing you need for a particular car. In addition to your credit score the auto lender will consider other aspects when it reviews the application, including: . Employment background. Verification of income and address. Regardless of the condition of your credit score — good, bad, fair or outstanding, it is important to seek approval to from outside financing sources as well. A preapproval is a great way to compare the options available and provide an alternate plan in the event that you’re not eligible for the automaker’s exclusive offer. Limits of interest-free financing might be a great deal for some people. Still, there are a few potential pitfalls you should be aware of when considering this type of loan. Limited selection: Interest-free financing is available only for certain kinds of vehicles. The first thing to consider is that the vehicle you purchase will almost certainly have to be . Automobile manufacturers also offer special financing deals on certain models of cars when they have a surplus in stock that needs to be cleared. Limits on repayment options Based on the offer the repayment options for the 0% financing option may be limited. Often, you’ll have less time to repay the loan as you would otherwise. There’s nothing wrong with repaying the loan quickly, but you should ensure that you are able to manage the greater monthly payments without putting your budget in jeopardy. 0% financing vs. bonus cash . Automakers would like you to buy your next car from their brand, not a competitor. This is the primary reason the 0% financing offer exists to begin with. To attract new customers, auto makers often offer to buyers. Sadly, an auto manufacturer may not permit you to take advantage of both zero percent financing as well as bonus cash. If you’re in this issue, you’ll have choose which savings option is . Tips from Bankrate

Utilizing an application is a way to evaluate zero percent financing with cash rewards. Sometimes, using the cash rebate that a dealership offers with an increased loan APR will result in greater savings overall. In other instances financing at 0 percent could be the best option.

Do you want to take the cash and then refinance it later? You might have to accept standard financing through an automaker’s private lender to be eligible for certain cash incentives. In exchange, there’s a chance that you’ll receive a higher interest rate than you might get through your bank or outside lender. In the case of your particular situation and needs, a new auto loan within a couple of months might be an effective method. However, there are a few disadvantages to consider first. Namely the fact that taking out two auto loans in a row — the original and the one you refinance with — could harm your credit for a while. Multiple loans will have at least two marks appearing reports on your credit. Adding the two loans to your credit report, even though one pays on the other can reduce your average age for accounts in your credit records. In terms of credit scoring the greater the average account is, the better. Key lesson

Cash incentives may reduce the amount you must take out a loan, but refinancing it later for a could cause your credit score to be affected for a short period of time.

If an APR rate of 0% really worth your time? It could be wise to forgo special financing deals from manufacturers in the following situations. The repayment terms don’t fit your budget. Low-interest car loans typically come with shorter finance terms. Based on your income, it could make your monthly payment impossible to afford. For example, if the zero percent car loan lasts for four years, but you normally finance for five years, the cost difference can be meaningful. The average rate

0% APR

Amount to be financed



A loan term

5 years

4 years old




Monthly payment



You can observe, for an automobile with a $25,000 loan through an automaker for four years your monthly payment is approximately $520. A $25k car loan that is financed over five years with a rate of 4 percent interest rate would require a monthly payment of $460. You can use an auto loan calculator to perform the math for your potential loan. Financial experts often recommend the vehicle’s monthly payment to 20 percent or less than your take-home salary per month. And some experts suggest that you pay 10% of your gross income. It’s tempting to buy more expensive vehicles. should not raise your budget for autos just to be eligible for a special financing. If you were planning to pay $10,000 cash for the purchase of an auto loan with a $30,000 price cost just to avail of no-interest financing is probably not the best financial choice. Cash rebates can provide you with more savings Cash-back rebates often aren’t available to those who take advantage of the manufacturer’s financing. If you analyze the numbers and cash rebates provide a larger savings , then a 0 percent financing deal wouldn’t be worth it. Imagine that you could take advantage of a $4,750 cash-back deal on a new car purchase. On a new vehicle with the price of $30,000, that incentive could bring the cost of purchase to $25,250. If you financed $25,250 at the rate of 4 percent in five-year terms, you’d have to pay 26561 in interest. In this case, your total cost would be $27,901 in the event that you didn’t add additional items such as extended warranties or pay any other fees for financing. You could also pay the full $30,000 purchase price and opt for a 0 percent APR. If you don’t include any additional items or charges, you’d be paying $2,099 more in this case than what you’d pay by taking the cash rebate. Do’s and Don’ts of APR-free loans If you review the options available and determine an auto loan is the right choice to make, the following tips and don’ts could help you navigate the process. Don’t


the purchase price before you apply for the APR offer. APR offer.

Take an unrestricted loan with a large monthly payment amount you can’t pay for.

Make sure you are preapproved for an auto loan before visiting the dealer.

Consider a longer-term loan to reduce the monthly cost of your loan in the event that it will cost you more in the long run.

Make sure you are able to manage the monthly payments.

You can choose a zero percent financing option over cash-back incentives without comparing the potential overall savings.

Find out if the manufacturer offers a cash-back incentive program which you can use in conjunction with the special financing offer.

Don’t pay the downpayment If you are able to afford it.

The main point to determining if a zero percent APR car loan is worth your time is to evaluate it with an auto loan from an outside lender and figure out your real monthly costs. Depending on your circumstance the deal might not actually save you money. There are some instances where special financing may not be quite as great as it appears and getting it requires excellent credit. Check current and make sure interest-free won’t end up costing you more overall.


Written by Contributing author Michelle Lambright Black is a credit expert with more than 19 years’ experience. She is an independent writer, and a certified expert witness in credit. Alongside writing for Bankrate, Michelle’s work is included in numerous publications such as FICO, Experian, Forbes, U.S. News & World Report and Reader’s Digest, among others. Editor: Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are committed to helping readers feel confident to control their finances through providing clear, well-researched information that break down complex topics into manageable bites.

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