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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 aim is to assist you make better financial choices by offering interactive financial calculators and tools, publishing original and objective content. This allows users to conduct research and compare information for free to help you make informed financial decisions. Bankrate has partnerships 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 site are 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 may appear within the listing categories, except where prohibited by law. This applies to our mortgage or home equity products, as well as other home lending products. But this compensation does have no impact on the information we publish, or the reviews you see on this site. We do not cover the vast array of companies or financial offerings that could be available to you. @VeraNovember/Twenty20

6 minutes read Read Published March 02, 2023

Written by Michelle Black Written by Contributing writer Michelle Lambright Black is a credit expert with over 19 years of experience. She’s an author on a freelance basis 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. Edited by Rhys Subitch Edited 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 manage their finances through providing precise, well-researched, and well-researched data that breaks down otherwise complex issues into digestible chunks. The Bankrate promise

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You have money questions. Bankrate can help. Our experts have been helping you manage your finances for more than four decades. We are constantly striving to give our customers the right guidance and the tools necessary to make it through life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and precise. Our award-winning editors and journalists produce honest and reliable content to help you make the best financial choices. Our content produced by our editorial staff is factual, accurate and uninfluenced by our advertisers. We’re open regarding how we’re capable of bringing high-quality content, competitive rates, and helpful tools to you by explaining how we earn money. is an independent, advertising-supported publisher and comparison service. We are compensated for the promotion of sponsored goods and, services, or through you clicking specific links on our site. So, this compensation can impact how, where and when the products are listed within categories, except where prohibited by law for our mortgage and home equity products, as well as other home lending products. Other factors, like our own rules for our website and whether or not a product is offered in your area or at your personal credit score can also impact the way and place products are listed on this site. While we strive to provide the most diverse selection of products, Bankrate does not include details about every financial or credit product or service. With the average monthly car payment of more than $700 and used around $525, based on data for the quarter ending in the last quarter of 2022, securing an affordable deal is at the top of the list of priorities. Signing off on the 0 percent APR vehicle deal is a great way to save money on your next car purchase. Many automakers offer interest-free auto loans to draw new, highly qualified customers, and also to increase sales of vehicles. When shopping for a new car, you must always exercise cautiousness, even if the option of a zero-interest rate is offered. In some instances, getting an automobile loan from an institution could work out better over the long term. Are 0% APR deals worth it?

They’re worthwhile if you are able to lower your monthly payments. But you’ll need excellent credit 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 0 percent APR or simply means that you take out a loan for no cost. Your monthly payments pay you the lender for the money it paid to the dealer, but no extra cash from your pockets goes directly into your loan’s bank account. This is different from the standard 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 monthly expenses that a zero percent APR can bring compared to a more standard APR. Average rate

0 percent APR

The amount to be financed



A 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 seems too appealing to be real. But these financing deals can be a tool manufacturers of automobiles can utilize to increase sales of their vehicles. Lenders that offer 0 percent financing are known as captive finance companies , and are connected to . Some examples of lenders that are captive include Ford Motor Credit, GM Financial, Nissan Finance, Toyota Financial Services and more. If Ford wants to sell more F-150s because of concerns about overstock, it may offer zero-interest loans to a select group of borrowers via its own financing division. The no-interest option is more affordable on the surface however this isn’t always the scenario. If automakers offer zero percent financing, they could attempt to compensate for “lost” income in other ways. For instance, a dealership might try to convince you something that you like or in conjunction with your vehicle. It is also possible to forfeit benefits such as rebates that would normally bring down your purchase price. How do you qualify for an 0% APR vehicle deal Zero percent financing deals typically only available to borrowers who have excellent credit ratings generally referred to as a credit score of 800 and over. You should do this prior to when you start shopping for financing for your car. Every lender also has their own definition of good credit, and qualification requirements may differ from vehicle to vehicle. Because zero APR requirements for qualifying vary in a wide range, your best bet is to contact your local auto dealer prior to the time. You can inquire about the criteria you will need to meet to qualify for an interest-free loan on a particular vehicle. Aside from your credit score the auto lender will consider other aspects when evaluating your application, such as: . Employment history. Verification of income and address. No matter the state of your credit score -good, bad fair or excellent — you should take the time to obtain financing from outside sources as well. Preapproval will help you evaluate your options and give you a backup plan if you’re not eligible for the exclusive offer offered by the automaker. Limits on interest-free financing can be a fantastic offer for some borrowers. However, there are a few potential traps to be aware of when you are considering this type of financing. The limited options for interest-free financing is available only for certain types of cars. First, the vehicle you buy will most likely need to be . Automobile manufacturers also make special financing deals available on certain models of cars when they have surplus stock that needs to be cleared. Limited repayment options Based on the deal the repayment options for the 0% financing option may be restricted. In most cases, you’ll have less time to pay off the loan than you might have otherwise. There’s nothing wrong with paying back the loan fast however, you must ensure that you are able to afford the higher monthly payment without putting your budget in jeopardy. 0% financing or. bonus cash Automakers prefer that you purchase the next car from their business and not from a rival. This is a key reason 0 percent financing offers exist in the first place. To draw new customers, car manufacturers often offer to buyers. Sadly, an auto manufacturer might not let you benefit from both the 0% financing rate and the bonus cash. If you’re facing this dilemma, you’ll have to determine which savings opportunity is . Tips from Bankrate

Utilizing an application is a way to evaluate the 0 percent loan rate versus bonus cash incentives. Sometimes taking the cash rebate offered by a dealer along with the higher loan APR yields better overall savings. In other situations, 0 percent financing might be the most effective option.

Do you want to take the cash and refinance later? You may have to agree to regular financing from an automaker’s private lender to be eligible for certain types of cash incentives. In the event of a loan, it’s possible that you’ll get a better interest rate than you might through your bank or an external lender. In the case of your particular situation the new car loan in the next few months might be an effective method. But there are some downsides to take into consideration first. Namely that having two loans back-to-back — the first one and the one you refinance it with — could harm the credit score for quite a while. A combination of loans could cause at minimum two marks appearing reports on your credit. Adding 2 loans to your credit reports regardless of whether one is paid from the second, could decrease your average age for accounts on your credit reports. Regarding credit scoring, the older the average age of your accounts, the better. Important lesson

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

When is a 0% APR deal really worth your time? It may be beneficial to skip specific financing options offered by manufacturers in the following circumstances. The terms for repayment aren’t in line with your budget. Low-interest auto loans typically have shorter terms for financing. Depending on your income, this could make your monthly payment unaffordable. For example, if the zero percent car loan runs for four years, while you would typically finance for five years, the differs and can be significant. The average rate

APR 0%

Amount financed



A loan term

5 years old

4 years old




Monthly payment



You can observe, on a $25,000 car loan by an automaker for four years your monthly payment will be around $520. A $20,000 car loan financed over five years with a rate of 4 percent interest rate will require the monthly payment to be $460. You can make use of an auto loan calculator to perform the math for your prospective loan. Experts in finance often suggest keeping your monthly vehicle cost to 20 percent or less than your monthly take-home pay. Some experts recommend you at 10 percent of your total income. You’re tempted to purchase more expensive vehicles. shouldn’t decide to increase your car budget in order to qualify for special financing. If you’re looking to buy a car for $10,000 in cash an automobile, then taking out the cost of a new car loan that has a price of $30,000 tag just to take advantage of no-interest financing probably isn’t an appropriate financial decision. Cash rebates can provide you with greater savings. Cash-back rebates typically don’t apply to buyers who take advantage of the manufacturer’s financing. If you analyze the numbers and find that cash rebates provide a larger savings , then a 0 percent financing deal wouldn’t be worth it. Imagine taking advantage of a $4,750 cash-back offer on a brand new car purchase. On a new vehicle with a $30,000 price tag this incentive could bring your purchase price down to $25,250. If you financed $25,250 at the rate of 4 percent over five years, then you’d be paying the interest of $2,651. In this scenario the total cost is $27,901 as long as you didn’t add additional items such as extended warranties, or incur additional financing charges. Alternatively, you could pay the full $30,000 purchase price and then choose a zero percent APR. If you don’t include any 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 for 0% APR deals If you’re looking at all options before deciding the 0% APR auto loan is the best option that you make for yourself, then these tips and don’ts may assist you with the process. Be aware of these rules.


the purchase price before you request the 0 percent APR offer.

You can take an unrestricted loan with a high monthly payment that you cannot manage to.

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

Consider a longer-term loan to lower your monthly payments if it will cost you more in the long run.

Verify that you can manage the monthly payments.

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

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

Don’t pay the downpayment when you have the money to make one.

The bottom line The key to determine if a 0 percent APR car loan is worth your time is to assess it to an automotive loan from an external lender and determine your actual monthly cost. Depending on your circumstance the deal might not actually save you money. There are some circumstances where special financing might not be quite as great as it appears and getting it requires excellent credit. Make sure you are current on your credit and that you don’t have to pay interest if it will cost you more overall.


Written by a contributing Writer Michelle Lambright Black is a credit expert with more than 19 years’ experience. She is a freelance writer and a certified expert witness in credit. In addition to writing for Bankrate, Michelle’s work is featured with numerous publications including FICO, Experian, Forbes, U.S. News & World Report and Reader’s Digest, among others. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers feel confident to take control of their finances with precise, well-studied information that breaks down otherwise complex topics into digestible chunks.

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