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 choices by offering financial calculators and interactive tools that provide objective and original content. This allows users to conduct research and compare data for free and help you make financial decisions with confidence. Bankrate has partnerships with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The products that are featured on this site are from companies that compensate us. This compensation may impact how and when products are featured on this site, including, for example, the order in which they may appear within the listing categories in the event that they are not permitted by law. Our mortgage, home equity and other home lending products. However, this compensation will affect the content we publish or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be accessible to you. @VeraNovember/Twenty20

6 minutes read. The publication was published on March 02, 2023.

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

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It is worth the cost if you can save money on your monthly payments. But you’ll need an excellent credit score to qualify. Make sure you keep the cost-effectiveness of your loan and you’re eligible when taking a test drive.

What exactly is 0% APR? A zero percent APR basically means that you can borrow money for free. The monthly installments you pay back the lender for the money it owes the auto dealer, however no additional cash from your pockets goes to the bank account of your lender’s bank account. This differs from the usual way of doing business, where the lender charges to finance. Interest and fees in the end, are the primary ways lenders make money. Here’s an illustration of the difference in monthly cost a 0 percent APR might bring in compared to the more common APR. Average rate

0 percent APR

Amount to be 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 seems too good to be true. However, these financing deals are a tool that manufacturers of automobiles can utilize to increase sales of their vehicles. The lenders that provide zero percent financing are called captive finance firms and are linked to . A few examples of captive lenders include Ford Motor Credit, GM Financial, Nissan Finance, Toyota Financial Services and more. So, if Ford is looking to increase sales of its F-150s because of problems with overstock, it could offer zero-interest loans to select borrowers through its own financing arm. The no-interest option is to be more affordable in the first place, but this isn’t always the scenario. If automakers offer zero percent financing, they might attempt to compensate for “lost” earnings in different ways. For instance, a dealer may push hard to sell you something that you like or in conjunction with your vehicle. You also might have to give up benefits such as rebates, which typically lower your purchase price. What are the criteria to be considered for an 0% APR vehicle deal Zero percent financing deals typically only available to borrowers with good credit scores — typically classified as a credit score that is 800 and above. You’ll want to before you make any purchases for auto financing. Each lender also has their own definition of what constitutes excellent credit and its qualification requirements may differ from vehicle to vehicle. Because zero APR qualification standards vary in a wide range it is best to contact your local auto dealer ahead of time. Find out what requirements you have to fulfill to qualify for interest-free financing on a specific automobile. Apart from your credit score and your income, an auto lender might consider other factors in evaluating your application, such as: . Employment record. Address and income verification. Regardless of the condition of your credit — good, bad, fair or outstanding, you should take the time to obtain financing from outside sources as well. Preapproval can help you compare your options and offer an alternate plan in the event that you aren’t eligible for the automaker’s exclusive offer. Limits on zero-interest financing could be a good deal for some people. But, there are few potential pitfalls you should be aware of when contemplating this type of loan. Limited selection: Interest-free financing is available only for certain kinds of vehicles. First, the vehicle you buy will most likely have to be . Automobile manufacturers also reserve special financing offers on certain models of cars when they have a surplus in stock that must be moved. Repayment options are limited: Depending on the deal the repayment options for the 0% financing option may be limited. In most cases, you’ll have less time to pay off the loan than you would have otherwise. There’s nothing wrong with paying back a loan in a hurry however, you must be sure that you can afford the higher monthly payment without putting your budget in jeopardy. A 0% loan or. bonus cash Automakers prefer that you purchase your next vehicle from their brand and not from a rival. This is one of the main reasons 0 percent financing offers exist in the first place. In the interest of attracting new customers, auto makers frequently offer buyers. Sadly, an auto manufacturer may not permit you to take advantage of both 0 percent financing and bonus cash. If you’re in this dilemma, you’ll have to determine which savings opportunity is . Tips from Bankrate

Utilizing an application can help you compare zero percent financing with cash rewards. Sometimes taking the cash rebate offered by a dealer along with the higher loan APR yields better overall savings. In other situations financing at 0 percent could be the most effective option.

Should you take the cash and then refinance it later? You may have to agree to regular financing from the automaker’s captive lender to be eligible for certain cash incentives. In exchange, there’s a chance that you’ll get a better interest rate than you might get through your bank or external lender. Depending on your situation, your new auto loan in the next few months could be a good method. However, there are a few disadvantages to take into consideration first. In particular, having two loans reverse-to-back — the original as well as the refinance with — can damage your credit rating for a period of time. A number of loans will have at least two negative marks reports on your credit. Adding two loans on your credit report even though one of them pays from the second, will reduce how old your your accounts that appear on credit report. When it comes to credit score the greater the average age of your accounts the more favorable. Important takeaway

Cash incentives can reduce the amount you need to take out a loan, but refinancing it afterward can cause your credit score to suffer a temporary drop.

What is the point at which an APR rate of 0% isn’t worth the cost? It may be beneficial to forgo special manufacturer financing offers in the following circumstances. The repayment terms don’t fit your budget Low-interest car loans often offer shorter financing terms. Based on your income, it can make your monthly payments unaffordable. For instance, if a 0 percent car loan is for four years, while you would typically credit for five years in the future, then that cost difference can be meaningful. Average rates

APR 0%

Amount to be financed



Loan term

5 years old

4 years old




Monthly payment



It is evident that for the basis of a $25,000 vehicle loan from manufacturers for four years, the monthly installment would be about $520. A $20,000 car loan with a five-year repayment at a 4-percent interest rate would require a monthly payment of $460. You can use an auto loan calculator to calculate the math for your prospective loan. Financial experts generally recommend the vehicle’s monthly payment to 20 percent or less than your monthly take-home pay. And some experts suggest that you pay 10 percent of your total income. You’re tempted to purchase a more expensive vehicle You shouldn’t raise your budget for autos just to be eligible for a special financing. If you’re looking to pay $10,000 cash for an automobile, then taking out an auto loan that has a price of $30,000 tag just to take advantage of no-interest financing probably isn’t a wise financial move. Cash rebates can provide you with greater savings. Cash-back rebates typically aren’t available to those who take advantage of the manufacturer’s financing. If you look at the numbers and you find that cash rebates can provide you with a greater savings opportunity, a 0 percent financing rate isn’t worth the cost. Imagine taking advantage of a cash-back offer on a new vehicle purchase. If you buy a brand new car with a $30,000 price tag this incentive could bring the price of your purchase down to $25,250. If you financed $25,250 at the rate of 4 percent over five years, then you’d pay $2,651 in interest. In this scenario the total cost is $27,901 in the event that you didn’t include additional products such as extended warranties or incur any other financing fees. Alternatively, you could pay the full $30,000 purchase price and then choose a zero percent APR. Assuming no add-on items or charges, you’d still pay $2,099 more in this scenario than you’d take out a cash rebate. Do’s and don’ts for 0% APR deals If you’ve analyzed the options available and determine that the 0% APR auto loan is the best option that you make for yourself, then these do’s and don’ts could aid you in your decision-making. Be aware of these rules.


the purchase price before you ask for the APR offer. APR the purchase price before you ask for the 0 percent APR.

You can take an unrestricted loan with a large monthly installment that you are unable to afford.

Make sure you are pre-approved to get an automobile loan prior to visiting the dealer.

Consider a longer-term loan to lower your monthly payment in the event that it will cost you more in total.

Verify that you can pay for the monthly installment.

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

Check if the manufacturer has incentives for cash-back which you can use in conjunction with the special financing offer.

Do not make the down payment when you have the money to make one.

The most important thing to determining if a zero percent APR car loan is worth your time is to evaluate it against an automotive loan from an outside lender and determine your actual monthly cost. Based on the circumstances, the deal may not truly save you money. There are a few instances where special financing may not be as good as it seems and obtaining it usually requires excellent credit. Be sure to check the current rates and ensure that the interest-free loan won’t cost you more in total.


Written by the contributing author Michelle Lambright Black is a credit expert with more than 19 years’ experience, freelance writer, and certified credit expert witness. In addition to writing for Bankrate Michelle’s writing is featured with numerous publications including 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 late 2021. They are passionate about helping readers gain the confidence to manage their finances by providing clear, well-researched information that breaks down otherwise complex subjects into bite-sized pieces.

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