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The ins and outs of 0% car loans

A car buyer’s dream or too good to be true?

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Fact checked

Editor's choice: Carvana

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  • Most credit types welcome
  • 45-day preapproval
  • Seven-day guarantee
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Many manufacturers advertise 0% financing, but it's difficult to qualify — you typically need to have near-perfect credit and a high income compared to your current debt load to be eligible.

0% financing sounds too good to be true. What's the catch?

At first glance, a car loan with a 0% APR is exactly as it appears: You purchase the car at the agreed-on price, and then make monthly payments on the principal of the car with no interest. However, keep these points in mind:

  • 0% interest may only be offered for part of the loan term
  • To be approved, you'll need spectacular credit
  • Negotiating the car price will be difficult
  • 0% typically for new models with premium trims
  • You may not get as much money for your trade-in vehicle
  • The loan structure will likely be set in stone

How to find 0% APR deals

Manufacturers and dealerships are the most common places to find 0% financing options. Search on the manufacturer's website for current deals — these change every month or quarter, and not every model will be eligible.

Do I qualify?

Despite what some car ads appear to promise, you generally can't qualify for 0% financing unless you have excellent credit, typically with a score of 700 or higher. You also might have trouble qualifying if you already have a lot of debt obligations compared to your income.

To avoid feeling like you were lured into a dealership with the promise of 0% financing that you weren't eligible for, try calling the dealer ahead of time to make sure you qualify.

Don't qualify for 0% financing? Compare other car loan options

Data indicated here is updated regularly

Name Product Filter Values Minimum credit score APR Loan term Requirements
Carvana
No minimum credit score
3.9% – 27.9%
1 to 6 years
18+ years old, annual income of $4,000+, no active bankruptcies
car.Loan.com Car Loans
300
Varies by network lender
Varies by lender
Must be a US citizen with a current US address and employed full-time or have guaranteed fixed income.
Apply with a simple online application to get paired with a local auto lender. No credit and bad credit accepted.
SuperMoney Auto Purchase Loans Marketplace
600
Varies by lender
Varies by lender
Fair to excellent credit, an income source, US citizen or permanent resident, 18+ years old
Find an offer and get rates from competing lenders without affecting your credit score.
CarsDirect auto loans
Varies by network lender
Varies by network lender
Must provide proof of income, proof of residence, and proof of insurance.
Save time and effort with this lending service specializing in beginner-friendly or subprime car loan.
Auto Credit Express Car Loans
300
Varies
Varies
Must be employed full-time or have guaranteed fixed income of at least $1,500/month and be a current resident of the US or Canada.
Get connected with an auto lender near you, even if you have bad credit.
Monevo Auto Loans
500
3.99% to 35.99%
3 months to 12 years
Credit score of 500+, legal US resident and ages 18+.
Quickly compare multiple online lenders with competitive rates depending on your credit.
LightStream Auto Loans
Good to excellent credit
Competitive
2 to 7 years
Good or excellent credit, enough income or assets to afford a new loan, US citizen or permanent resident, 18+ years old
Quick car loans from $5,000 to $100,000 with competitive rates for borrowers with strong credit.
LendingTree
Good to excellent credit
Starting at 3.09%
Varies by lender
18+ years old, good to excellent credit, US citizen
Compare multiple financing options for auto refinance, new car purchase, used car purchase and lease buy out.
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Compare up to 4 providers

Manufacturers offering extra discounts during the coronavirus outbreak

With the economy on the down swing, many manufacturers and dealerships are expanding incentive programs to draw in customers. However, you typically need to be a well-qualified buyer with a spotless credit history to qualify for one of these 0% APR offers.

  • Buick. Interest-free financing for seven years is available on many 2020 Buick SUVs. And most models also come with deferred payments for 120 days.
  • Chrysler. Chrysler Capital has nationwide 0% financing deals available for many of its models — including Dodge, Jeep and Ram — with terms of five or seven years.
  • Genesis. Interest-free financing for seven years is available for the Genesis G70 with payments deferred for up to 120 days. Genesis will also cover up to six months of payments if you lose your job because of the coronavirus.
  • GMC. Most 2020 GMC Sierra 1500, Acadia and Terrain models are eligible for 0% financing for seven years. GMC also offers deferred payments for 120 days.
  • Hyundai. Many of Hyundai's models are eligible for 0% financing for five or seven years, as well as deferred payments for 120 days. And Hyundai has made its car-buying process entirely online to help reduce the risk of exposure to COVID-19.
  • Jaguar. Some models are eligible for interest-free financing for six years with a 90-day payment deferral period.
  • Kia. Find 0% financing offers with terms up to 75 months and payments deferred for 120 days.
  • Land Rover. Interest-free financing is available for all six of its models with terms from two to six years and payments deferred for 90 days for new buyers.
  • Mazda. Most new Mazda models are eligible for 0% financing for up to five years. It's also currently offering a 90-day payment deferral period for both new and certified preowned models.
  • Subaru. Interest-free financing is available for many 2019 and 2020 Subaru models, and you might be able to defer payments for up to 90 days.
  • Volkswagen. Most new models are eligible for 0% financing for six years and deferred payments for up to 180 days.

While not all models have 0% APR offers available, you might be able to find other incentives like deferred payments, reduced rates on used models or extra bonus cash.

What are the benefits of 0% financing?

When it comes to 0% financing, there are a few aspects that may work in your favor:

  • Pay off your loan faster. Zero-interest financing typically comes with shorter loan terms, meaning you'll likely pay off your car faster than the average five to seven years.
  • No interest. Your payment goes directly toward the principal of the car.
  • Optional extras. You may be able to roll the cost of alloy wheels, a leather interior, a sunroof or any other luxury items into the financing.

Can I get a 0% car loan with no down payment?

It's possible to get a car loan with no down payment — but it might not be the best idea. That's because there's a higher risk of ending up with an upside down car loan, where you owe more than your car is worth. If possible, try to save up for a few months instead.

Is 0% financing a bait-and-switch sales tactic?

Some dealerships use it to draw in buyers, but 0% financing is real — provided you qualify. Most borrowers won't be able to get a 0% car loan, but those with high incomes and impeccable credit could walk away with no interest due on their car loan.

Before you set foot on a car lot, you should know your credit score and already have an idea of the interest rate you could get by applying for preapproval. And even if you don't quite meet the requirements necessary to get an APR of 0%, you may still qualify for a below-market rate. Just be sure you compare loans from banks and other lenders first. This way, you have more negotiating power with the dealership, which can potentially score you lower rates.

5 tips to make the most of 0% financing

Here are a few strategies you can use when buying a car with 0% financing to get the most bang for your buck:

  1. Keep your loan under five years. There are longer car loans on the market that may seem attractive because of the low monthly payment. However, you'll pay loads more in interest. And by the time the car is paid off, it will have depreciated in value greatly.
  2. Up the down payment. By making the largest down payment your budget allows, you'll lower the principal and may be able to take on a shorter loan term to own the car faster.
  3. Get preapproved. Getting preapproved for a loan will not only give you bargaining power when shopping for a car, but you'll also know exactly how much is in your budget.
  4. Pick the car you love. Don't rush into buying a car just because you've been offered a great financing deal. If the car isn't the right fit for you, keep shopping so you don't make a purchase you'll regret later.
  5. Opt for an extended warranty. Although an extended warranty can add a little more to your car's overall cost, it can be worth it for the peace of mind. And since you have a 0% APR, you won't have to pay interest on that little added cost.

What not to say to a car salesperson

Is a 0% car loan cheaper than a regular car loan?

If you make all of your payments on time and get a competitive price on the car, it can be. However, 0% car loans tend to have shorter terms, resulting in higher monthly payments.

But if you've been approved for a 0% car loan from a dealership, odds are good that you have great credit. This means you'll likely be able to score competitive deals with a private lender as well.

0% car loans vs. rebates

Dealerships will often give the customer the option of a 0% car loan or a cashback rebate to be used toward the purchase price of the car. The 0% financing offer is usually the better option, though you should crunch the numbers just to be sure.

Bottom line

Before you lock yourself into 0% financing at the dealership, compare car loan offers from banks and private lenders to see if they offer terms that are better suited to your financial situation.

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