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Car deals with 0% APR are they worth it? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by providing you with interactive tools and financial calculators that provide objective and original content. This allows users to conduct studies and compare data at no cost – so that you can make sound 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 Money The deals that are advertised on this site are from companies that pay us. This compensation could affect how and where products appear on the site, such as such things as the sequence in which they appear in the listing categories and other categories, unless prohibited by law. This applies to our mortgage, home equity and other home lending products. This compensation, however, does have no impact on the information we publish, or the reviews that you see on this site. We do not cover the universe of companies or financial offerings that could be accessible to you. @VeraNovember/Twenty20

6 minutes 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 independent writer, and an accredited 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 Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers gain confidence to manage their finances through providing concise, well-researched and accurate information that breaks down complex issues into digestible chunks. The Bankrate promises

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If you have questions about money. Bankrate can help. Our experts have been helping you manage your money for over four decades. We are constantly striving to provide our readers with the professional advice and tools needed to be successful throughout their financial journey. Bankrate adheres to strict standards , so you can trust that our content is truthful and accurate. Our award-winning editors and journalists produce honest and reliable content to help you make the best financial decisions. Our content produced by our editorial staff is factual, accurate and uninfluenced from our advertising. We’re transparent regarding how we’re able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for the placement of sponsored products or services, or when you click on specific links on our site. This compensation could affect the way, location and in what order products appear within listing categories, unless prohibited by law for our mortgage and home equity products, as well as other home loan products. Other factors, such as our own rules for our website and whether the product is available within your area or at your own personal credit score could also affect the way and place products are listed on this site. Although we try to offer an array of offers, Bankrate does not include information about each credit or financial product or service. With the monthly average cost for new cars exceeding $700 and averaging around $525, according to data for the quarter ending in the last quarter of 2022, finding an affordable deal is at the top of mind. And signing off on an APR of 0 percent on your vehicle deal is a great option to save on your next purchase. Many automakers offer interest-free auto loans to draw new, well-qualified customers and sell more cars. However, when shopping for a new vehicle you must always exercise caution, even if the option of a zero-interest rate is on the table. In certain instances, taking an automobile loan from a lender could be more beneficial over the long term. Are 0% APR deals worth it?

It is worth the cost if you can save money on your monthly payments. But you need an excellent credit score to qualify. Keep both its cost-effectiveness and the eligibility of your car when taking a test drive.

What is 0% APR? A 0 percent APR or simply means that you take out a loan for no cost. The monthly installments you pay back the lender for the money it paid the auto dealer, however no additional cash from your pockets goes directly into your loan’s bank account. This differs from the usual approach, where the lender charges to finance. 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 might bring in compared to a more standard APR. Average rate

0% APR

Amount financed



The term “loan”

60 months

60 months




Monthly payment



Total cost



How does 0% APR work? Financing a car interest-free almost sounds too amazing to be true. However, these financing offers are a method that manufacturers of automobiles can utilize to increase sales of their vehicles. Lenders that offer 0 percent financing are called captive finance companies , and are linked to . Examples of lenders that are captive include Ford Motor Credit, GM Financial, Nissan Finance, Toyota Financial Services and more. If Ford is looking to increase sales of its F-150s because of concerns about overstock, it may provide zero-interest loans to select borrowers through its own financing division. No-interest financing seems more reasonable on the surface, but it’s not always the situation. If automakers offer zero percent financing, they could try to make up for “lost” earnings in different ways. For instance, a dealer may push hard to sell you , like or , with your vehicle. Also, you may have to give up benefits such as rebates, which normally lower the purchase cost. How do you qualify for a 0% APR car deal? Zero percent financing offers are typically reserved for those who have excellent credit ratings usually referred to as a credit score of 800 and above. You should do this prior to when you make any purchases for auto financing. Every lender also has their own definition of excellent credit and its qualification requirements can differ from one vehicle to the next vehicle. Because zero APR requirements for qualifying vary in a wide range it is best to call the auto dealership prior to the time. Ask what criteria you need to satisfy to be eligible for interest-free financing on a specific automobile. In addition to your credit score, an auto lender may consider additional factors in evaluating your application, for example: . Employment history. Income and address verification. Regardless of the condition of your credit score -good, bad, fair or excellent , you must seek out to seek out financing from other sources, too. Preapproval will help you evaluate the options available and provide an alternative plan in case you don’t qualify for the automaker’s exclusive offer. Limits of zero-interest financing might be a great deal for some borrowers. Still, there are a few potential traps to be aware of when you are contemplating this type of finance. Limited selection: Interest-free financing is only available for certain kinds of vehicles. The first thing to consider is that the vehicle you buy will most likely need to be . Manufacturers of automobiles also offer special financing deals for models of vehicles when there’s a surplus in stock that needs to be cleared. Limits on repayment options depending on the offer the repayment options for zero percent financing might be limited. Most of the time you’ll be given less time to pay off the loan than you would have otherwise. There’s nothing wrong with paying back a loan quickly however, you must ensure that you can manage the greater monthly payments without straining your budget. A 0% loan is different from. bonus cash . Automakers would like you to buy your next car from their company and not from a rival. This is the primary reason 0 percent financing offers exist at all. To attract new customers, car manufacturers frequently offer buyers. Sadly, an auto manufacturer might not let you take advantage of both zero percent financing as well as bonus cash. If you’re in this situation, you’ll need choose which savings option is . Bankrate tip

Using an is a way to evaluate zero percent financing with bonus cash incentives. Sometimes, taking cash rebates offered by a dealer along 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 later? It could be necessary to take regular financing from an automaker’s private lender to qualify for certain cash incentives. In the event of a loan, it’s possible that you’ll get a better interest rate than you might with your bank or an external lender. In the case of your particular situation, your new auto loan in the next few months may be an effective strategy. However, there are a few disadvantages to think about first. Namely that making two loans reverse-to-back both the original one as well as the refinance by — could damage your credit rating for a while. A combination of loans can have at least two negative marks reports on your credit. In addition, adding the two loans on your credit report regardless of whether one is paid on the other could lower the average age of accounts in your credit records. In terms of credit scoring the more advanced the average account is, the better. Key takeaway

Cash incentives may reduce the amount you must borrow — but refinancing later to repay it could affect your credit score and cause it to suffer a temporary drop.

When is an APR rate of 0% really worth your time? It might make sense to skip special manufacturer financing offers in the following circumstances. The terms for repayment aren’t in line with your budget. Low-interest auto loans typically come with shorter finance terms. In the case of your income, it could make your monthly payment unaffordable. For instance, if a 0 percent car loan lasts 4 years and you normally finance for five years, the cost differs and can be significant. Average rate

0% APR

The amount to be financed



A loan term

5 years

4 years old




Monthly payment



It is evident that for a $25,000 car loan through manufacturers for four years, the monthly payment is approximately $520. A $25,000 car loan with a five-year repayment at a 4 percent interest rate would require a monthly payment of $460. It is possible to utilize an online auto loan calculator to do the maths for your possible loan. Experts in finance often suggest keeping your monthly vehicle cost to 20% or less of your take-home income per month. Some experts recommend you should be paying 10 percent of your gross income. You’re tempted to purchase a more expensive vehicle You should not increase your car budget in order to get a loan. If you’re planning to buy a car for $10,000 in cash a , taking on an auto loan with a $30,000 price tag just to take advantage of no-interest financing is probably not the best financial choice. Cash rebates offer you greater savings. Cash-back rebates typically don’t apply to buyers who take advantage of the manufacturer’s financing. If you look at the numbers and find that cash rebates can provide you with a greater chance to save money, a zero percent financing deal wouldn’t be worth the cost. Imagine that you could take advantage of a $4,750 cash-back offer on a brand new car purchase. If you buy a brand new car with a $30,000 price tag the incentive could reduce the price of your purchase down to $25,250. If you financed $25,250 at the rate of 4 percent in five-year terms, you’d have to pay $2,651 in interest. In this case your total expense would be $27,901 — as long as you didn’t add additional items such as extended warranties or incur any other financing fees. Or, you can pay the full price of $30,000 and choose a zero percent APR. In the event that there are no additional items or charges, you’d have to pay an additional $2,099 in this scenario than you’d take out a cash rebate. Do’s and don’ts for APR-free deals If you review all options before deciding that a 0 percent APR auto loan is the best choice to make, the following tips and don’ts can help you navigate the process. Don’t


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

Take a short-term loan with a large monthly payment that you cannot pay for.

Get pre-approved for an auto loan before visiting the dealership.

Consider a longer-term loan to lower the monthly cost of your loan even if it costs you more overall.

Make sure you are able to manage the monthly payments.

Select 0% financing over a cash-back incentive without comparing the possible savings.

Check if the manufacturer has incentives for cash-back that you can mix with the financing special offer.

Do not make the down payment If you are able to afford it.

The main point to deciding if a 0 percent APR car deal is worth the price is to assess it with an automotive loan from an external lender and determine your actual monthly cost. Depending on your circumstance it may not truly save you money. There are a few circumstances where special financing might not be as effective as it appears, and qualifying often requires excellent credit. Check current and make sure you don’t have to pay interest if it will cost you more in the long run.


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

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