Editor's choice: Carvana
- 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.
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:
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.
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.
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.
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.
When it comes to 0% financing, there are a few aspects that may work in your favor:
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.
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.
Here are a few strategies you can use when buying a car with 0% financing to get the most bang for your buck:
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.
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.
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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