Car deals with 0% APR are they worth it? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial decisions by offering interactive financial calculators and tools, publishing original and objective content, by enabling users to conduct research and compare data for free and help you make sound financial decisions. Bankrate has agreements with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this website are provided by companies that compensate us. This compensation may impact how and where products appear on this site, including for instance, the order in which they may appear within the listing categories, except where prohibited by law. Our mortgage home equity, mortgage and other products for home loans. However, this compensation will have no impact on the information we provide, or the reviews that you see on this site. We do not cover the universe of companies or financial offers that may be accessible to you. @VeraNovember/Twenty20

6 min read published March 02, 2023.

Writer: Michelle Black Michelle Black Written by Contributing writer Michelle Lambright Black is a credit expert with more than 19 years’ experience, an independent writer, and a certified expert witness in credit. Alongside 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. Editor: Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain the confidence to control their finances with concise, well-researched and accurate information that breaks down complex issues into digestible chunks. The Bankrate promise

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They are worth the cost if you can save money on your monthly payment. But you’ll need an excellent credit score to qualify. Be sure to keep both the cost-effectiveness as well as your eligibility in mind when going for a test drive.

What exactly is 0% APR? A zero percent APR essentially means you borrow money at no cost. Your monthly payments reimburse your lender for the amount it owes the auto dealer, but no extra cash you have in your pocket will go directly into your loan’s bank account. This differs from the typical way of doing business, where the lender charges to finance. The fees and interest, after all, are the primary ways lenders make money. Here’s an example of the distinction in monthly expenses that a zero percent APR might bring in compared to an APR that is more typical. Average rate

0 percent APR

The amount to be financed



Loan term

60 months

60 months




Monthly payment



Total cost



What exactly is 0% APR? How does it work? Financing a car interest-free almost sounds too good to be true. However, these financing offers are a tool that auto manufacturers can use to sell more vehicles. Loan providers that offer zero percent financing are referred to as captive finance firms and are connected to . A few examples of captive lenders include Ford Motor Credit, GM Financial, Nissan Finance, Toyota Financial Services and more. Therefore, if Ford plans to sell more F-150s to address problems with overstock, it could provide zero-interest loans to certain borrowers through its own financing arm. The no-interest option is to be more affordable in the first place however this isn’t always the scenario. If automakers offer zero percent financing, they may try to make up for “lost” earnings in different ways. For example, a dealership may push hard to sell you , like or , using your car. It is also possible to forfeit benefits such as rebates, which normally lower the cost of purchase. How to qualify for a 0% APR car deal? Zero percent financing deals are generally reserved for borrowers who have excellent credit ratings generally referred to as having a credit score that is 800 and above. It is important to check this before you begin looking for financing for your car. Each lender also has their own definition of good credit, and the requirements for qualifying may differ from vehicle to vehicle. Because the zero APR qualifications differ so widely, your best bet is to call the auto dealership prior to the time. Find out what requirements you have to meet to qualify for the interest-free financing you need for a particular car. In addition to your credit score the auto lender may consider additional factors when it reviews your application, such as: . Employment background. Verification of income and address. Whatever the condition of your credit score -good, bad fair or outstanding, it is important to seek approval to obtain financing from outside sources as well. Preapproval will help you evaluate the options available and provide an alternate plan in the event that you don’t qualify to take advantage of the special offer from the automaker. Limits of interest-free financing might be a great offer for some borrowers. Still, there are a couple of potential issues to look out for when looking into this kind of financing. Limited selection: Interest-free financing is only available for certain types of cars. First, the vehicle you buy will most likely require . Auto manufacturers also tend to reserve special financing offers for vehicle models where there’s an excess of stock needs to be cleared. Limits on repayment options: Depending on the terms of the deal, your repayment options with zero percent financing might be restricted. In most cases, you’ll have less time to pay back the loan than you would have otherwise. There’s no reason to be wrong with repaying a loan fast but you need to be sure that you can manage the greater monthly payments without putting your budget in jeopardy. A 0% loan vs. bonus cash . Automakers want you to purchase your next vehicle from their brand and not from a competitor. This is one of the main reasons that 0% financing deals are offered at all. To attract new customers, auto manufacturers often offer to buyers. Unfortunately, an auto maker may not allow you to benefit from both zero percent financing as well as bonus cash. If you’re in this issue, you’ll have to decide which savings opportunity is . Tips from Bankrate

Utilizing an application will allow you to compare 0 percent financing versus bonus cash incentives. Sometimes, using the cash rebate that a dealership offers with an increased loan APR yields better savings overall. In other cases, 0 percent financing might be the best option.

Should you take the cash and then refinance it later? It could be necessary to take standard financing through the automaker’s captive lender to qualify for certain types of cash incentives. In exchange, there’s a chance that you’ll receive a higher interest rate than you might through your bank or an external lender. Depending on your situation and needs, a new auto loan in the next few months could be a good strategy. However, there are a few disadvantages to take into consideration first. For instance the fact that taking out two auto loans reverse-to-back — the original loan and one that you refinance it with — could harm your credit for a time. Multiple loans could have at least two negative marks credit marks on your report. Adding the two loans added to credit reports, even though one pays off the other, can decrease how old your your accounts that appear on credit report. When it comes to credit score the more advanced the average account is, the better. The most important message

Cash incentives can lower the amount you have to credit, however refinancing later to repay it may affect your credit score and cause it to suffer a temporary drop.

When is a 0% APR deal really worth your time? It may be beneficial to avoid special manufacturer financing offers in the following situations. The terms for repayment aren’t in line with your budget Low-interest car loans usually offer shorter financing terms. Based on your income, it might make your monthly installment not affordable. For instance, if the 0 percent car loan runs over four years while you typically credit for five years in the future, then that price difference can be meaningful. The average rate

APR 0%

Amount financed



A loan term

5 years

4 years old




Monthly payment



As you can see, for an automobile with a $25,000 loan through an automaker for four years your monthly installment will be around $520. A $25k car loan financed over five years at a 4-percent interest rate requires an annual payment of $460. It is possible to use the auto loan calculator to perform the math for your potential loan. Financial experts generally recommend keeping your monthly vehicle payments to 20 percent or less than your take-home salary per month. Some experts recommend you should be paying 10 percent of your gross income. You’re tempted to purchase an expensive car. You shouldn’t decide to increase your car budget in order to get a loan. If you’re planning to buy a car for $10,000 in cash an automobile, then taking out an auto loan that has a price of $30,000 tag just to take advantage of no-interest financing is probably not a wise financial move. Cash rebates provide additional savings. Cash-back incentives typically don’t apply to buyers who take advantage of the manufacturer’s financing. If you analyze the numbers and find that cash rebates offer you a bigger savings opportunity, a 0 percent financing offer isn’t worth it. Imagine taking advantage of a $4,750 cash back deal on a new car purchase. If you buy a brand new car with an estimated price of $30,000 the incentive could reduce your purchase price down to $25,250. If you borrowed $25,250 at an interest rate of 4 percent for five years, you’d have to pay the interest of $2,651. In this scenario, your total cost would be $27,901 — in the event that you didn’t include additional products such as extended warranties, or incur other financing fees. Or, you can pay the full price of $30,000 and opt for a 0 percent APR. In the event that there are no additional charges or products, you’ll be paying $2,099 more in this case than you would take out a cash rebate. Do’s and Don’ts of APR-free loans If you’re looking at your options and decide that a 0 percent APR auto loan is the best option for you, these tips and don’ts can aid you in your decision-making. Don’t


the purchase price prior to when you apply for the 0 percent APR offer.

You can take a short-term loan with a large monthly payment amount you can’t pay for.

Make sure you are preapproved for an auto loan prior to visiting the dealership.

Opt for a long-term loan to reduce your monthly payment if it will cost you more overall.

Make sure you are able to manage the monthly payments.

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

See if the manufacturer offers an incentive program for cash back that you can mix with the special financing offer.

Skip the down payment if you can afford one.

The bottom line The key to determine if a 0 percent APR deal on a car is worth it for you is to compare it against the cost of an automobile loan from an outside lender and determine your actual monthly cost. Based on the circumstances it may not actually save you money. There are some situations where special financing isn’t quite as great as it appears, and qualifying often requires excellent credit. Be sure to check the current rates and ensure that you don’t have to pay interest if it will cost you more in the long run.


Written by Contributing Writer Michelle Lambright Black is a credit expert with more than 19 years of experience. She’s freelance writer, and certified expert witness on 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 writing and editing for Bankrate since late 2021. They are passionate about helping readers to control their finances with concise, well-studied and well-researched content that break down complex topics into manageable bites.

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