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0% APR car deals Do they really make sense? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial choices by offering interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare data for free – so that you can make financial decisions with confidence. Bankrate has partnerships with issuers including, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The products that are featured on this site come from companies that pay us. This compensation may impact how and when products are featured on this site, including such things as the order in which they be listed within the categories of listing in the event that they are not permitted by law for our mortgage or home equity products, as well as other products for home loans. But this compensation does not influence the information we publish, or the reviews that you read on this site. We do not contain the universe of companies or financial offerings that could be accessible to you. @VeraNovember/Twenty20

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

Writer: Michelle Black Michelle Black Written by Contributing writer Michelle Lambright Black is a credit expert with over 19 years experience. She’s an author on a freelance basis and a certified credit expert witness. In addition to writing for Bankrate Michelle’s writing is published in 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 editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to take control of their finances by providing concise, well-researched and accurate information that breaks down complicated topics into manageable bites. The Bankrate guarantee

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They are worthwhile if you are able to reduce your monthly bills. 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 while taking a test drive.

What exactly is 0% interest? A 0 percent APR or basically means that you can borrow money for no cost. Your monthly payments reimburse you the lender for the amount it owes the auto dealer, however no additional cash from your pockets goes into the lender’s bank account. This differs from the typical way of doing business, where the lender will charge you in exchange for financing. The fees and interest in the end, are the primary ways lenders make money. Here’s an illustration of the difference in the monthly costs that a 0 percent APR might bring in compared to an APR that is more typical. Average rate

0% APR

Amount financed



Loan term

60 months

60 months




Monthly payment



Total cost



What is 0% APR and how does it work? Financing a car interest-free almost seems too good to be true. However, these financing offers are a method that auto manufacturers can use to sell more vehicles. Loan providers that offer zero percent financing are called captive finance companies and are connected to . A few examples of lenders that are captive include Ford Motor Credit, GM Financial, Nissan Finance, Toyota Financial Services and more. So, if Ford plans to sell more F-150s due to overstock issues, it might offer zero-interest loans to certain borrowers through its own financing arm. No-interest financing seems to be more affordable in the first place, but it’s not always the situation. If car manufacturers offer 0 percent financing, they could try to make up for “lost” earnings in different ways. For example, a dealership might try to convince you , like or , with your vehicle. It is also possible to forfeit benefits such as rebates that would normally lower the purchase cost. What are the criteria to be considered for an 0% APR vehicle deal? Zero percent financing deals are typically reserved for those with excellent credit usually referred to as having a credit score of 800 and above. It is important to check this before you make any purchases for auto financing. Each lender also has its own definition of excellent credit and its qualification requirements may differ from vehicle to vehicle. Since zero APR qualifications differ so widely, your best bet is to contact your local auto dealer ahead of time. Ask what criteria you need to satisfy to be eligible for the interest-free financing you need for a particular automobile. Aside from your credit score the auto lender may consider additional factors when it reviews the application, including: . Employment record. Verification of income and address. Regardless of the condition of your credit score — good, bad, fair or outstanding, you should take the time to from outside financing sources as well. A preapproval is a great way to compare your options and offer a backup plan if you don’t qualify for the exclusive offer offered by the automaker. Limits of interest-free financing can be a fantastic deal for some people. However, there are a few potential traps to look out for when contemplating this type of loan. The limited options for interest-free financing may only be available for certain kinds of vehicles. The first thing to consider is that the vehicle you purchase will almost certainly need to be . Manufacturers of automobiles also offer special financing deals for models of vehicles when there’s surplus stock that needs to be cleared. Limited repayment options Based on the deal the repayment options for zero percent financing might be more restricted. Most of the time you’ll have a shorter time to pay back the loan as you would otherwise. There’s no reason to be wrong with paying back the loan fast, but you should be sure that you can manage the greater monthly payments without stressing your budget. A 0% loan vs. bonuses Cash offers from automakers would like you to buy your next vehicle from their brand and not from a rival. This is one of the main reasons that 0% financing deals are offered to begin with. To draw new customers, car manufacturers often provide buyers with. Sadly, an auto manufacturer may not allow you to benefit from both zero percent financing as well as bonus cash. If you’re faced with this situation, you’ll need choose which savings option is . Tip from Bankrate

The use of an app can help you compare zero percent financing with bonus cash incentives. Sometimes taking the cash rebate offered by a dealer along with an increased loan APR yields better overall savings. In other cases the financing with 0% interest rate could be the clear winner.

Do you want to take the cash and refinance later? You may have to agree to standard financing through Automaker’s own 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 with your bank or an external lender. Depending on your situation, your new auto loan in the next few months might be an effective method. However, there are some disadvantages to take into consideration first. Namely, taking out two auto loans in a row — the first one loan and one that you refinance it with — could harm the credit score for quite a while. A combination of loans can cause at minimum two negative marks credit marks on your report. In addition, adding two loans to your credit report, even though one pays off the other, can lower how old your your accounts in your credit records. When it comes to credit score the greater the average age of your accounts the better. The most important takeaway

Cash incentives can lower the amount you have to credit, however refinancing it later for a could cause your credit score to suffer a temporary drop.

What is the point at which a 0% APR deal not worth it? It may be beneficial to avoid special financing deals from manufacturers in the following scenarios. The repayment terms don’t fit your budget. Low-interest auto loans usually offer shorter financing terms. In the case of your income, a can make your monthly payments impossible to afford. For instance, if the zero percent car loan lasts over four years while you typically finance for five years, the cost differs and can be significant. Average rates

APR 0%

The amount to be financed



The term “loan”

5 years old

4 years




Monthly payment



You can observe, for the basis of a $25,000 vehicle loan through an automaker for four years your monthly payment is approximately $520. A $25k car loan that is financed over five years at a 4-percent interest rate would require an annual payment of $460. You can use an online auto loan calculator to perform the math for your prospective loan. Financial experts generally recommend that you limit your monthly car payments to 20 percent or less of your take-home salary per month. Experts suggest you should be paying 10 percent of your total income. If you’re looking to buy an expensive car. You should not increase your car budget in order to qualify for special financing. If you’re planning to pay $10,000 cash for a , taking on an auto loan that has a price of $30,000 charge just to get the benefit of no-interest financing is probably not a wise financial move. Cash rebates can provide you with greater savings. Cash-back rebates typically do not apply to customers who are using the manufacturer’s financing. If you crunch the numbers and you find that cash rebates provide a larger chance to save money, a zero percent financing offer isn’t worthwhile. Imagine that you could take advantage of a cash-back deal on a new car purchase. On a new vehicle with the price of $30,000 this incentive could bring the cost of purchase to $25,250. If you were to finance $25,250 with an interest rate of 4 percent in five-year terms, you’d have to pay $2,651 in interest. In this scenario your total expense is $27,901 as long as you didn’t add additional items such as extended warranties or pay any other fees for financing. Or, you can pay the full price of $30,000 and choose a zero percent APR. Assuming no add-on items or charges, you’d still pay $2,099 more in this case than what you’d pay by taking the cash rebate. Do’s and Don’ts of APR-free deals If you’re looking at your options and decide a 0 percent APR auto loan is the best choice to make, the following tips and don’ts could assist you with the process. Don’t


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

Accept a short-term loan with a significant monthly payment amount you can’t manage to.

Be pre-approved to get an automobile loan prior to visiting the dealership.

Choose a long-term loan to lower your monthly payment in the event that it will cost you more overall.

Verify that you can manage the monthly payments.

Choose 0 percent financing instead of cash-back rewards without comparing the overall savings.

Find out if the manufacturer offers a cash-back incentive program that you can combine with the financing special offer.

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

The most important thing to determine if a 0 percent APR car deal is worth the price is to evaluate it to the cost of an automobile loan from an external lender and figure out your real monthly costs. In the case of your particular situation, the deal may not be a good deal for you. There are also a few circumstances where special financing might not be as good as it seems and obtaining it usually requires excellent credit. Be sure to check the current rates and ensure that interest-free won’t end up costing you more in total.


Written by Contributing author Michelle Lambright Black is a credit expert with over 19 years experience, a freelance writer and a certified expert witness in credit. 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. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers feel confident to take control of their finances by providing concise, well-studied and well-researched content that breaks down otherwise complex topics into manageable bites.

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