What You Should Know About 0% APR Car Deals Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure
Advertiser Disclosure
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited 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 compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: On This Page
@VeraNovember/Twenty20 August 26, 2022 Michelle Lambright Black is a credit expert with over 19 years of experience, a freelance writer and a certified credit expert witness. 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. 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 clear, well-researched information that breaks down otherwise complex topics into manageable bites. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are 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 are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. With the average monthly payment for new cars close to $680 and used around $515, according to data from the second quarter of 2022, finding a bargain is top of mind. And signing off on a 0 percent APR car deal is one way to save money on your next car purchase. Numerous automakers offer interest-free auto loans to attract new, well-qualified customers and sell more vehicles. However, when shopping for a new vehicle, you should always proceed with caution, even if a zero APR offer is on the table. In some instances, getting an auto loan from an might work out better in the long run. Lightbulb Are 0% APR deals worth it? They are worth it if you save money on your monthly payments. But you need excellent credit to qualify. Keep both its cost effectiveness and your eligibility in mind when going for a test drive. What is a 0% APR
A 0 percent APR or interest-free auto deal essentially means you borrow money for free. Your monthly payments reimburse the lender for the money it paid the auto dealer, but no extra money from your pocket goes into the lender’s bank account. This differs from the when you take out a vehicle loan where the lender charges you in exchange for financing. Interest and fees, after all, are the primary ways that lenders make money. As you repay the loan, you reimburse the lender for the money it paid the auto dealer on your behalf. The interest you pay helps the lender earn a profit. How does 0% APR work
Financing a car interest-free almost sounds too good to be true. But these financing deals are a tool that auto manufacturers can use to sell more vehicles. Lenders that offer 0 percent financing are known as and are linked to the auto manufacturers themselves. Some examples of captive lenders include Ford Motor Credit, GM Financial, Nissan Finance, Toyota Financial Services and more. So, if Ford wants to sell more F-150s due to overstock issues, it might offer zero APR loans to select borrowers through its own financing arm. No-interest financing seems more affordable on the surface, but that’s not always the case. When auto manufacturers offer 0 percent financing, they may try to make up for “lost” income in other ways. For example, a dealership may push hard to sell you , like or , with your vehicle. You also might have to forgo benefits like rebates that would normally bring down your purchase price. How to qualify for a 0% APR car deal
Zero percent financing deals are generally reserved for borrowers with excellent credit — typically classified as a credit score of 800 and above. You’ll want to on your own before you start shopping for auto financing. Each lender also has its own definition of excellent credit, and qualification requirements could vary from vehicle to vehicle. Because zero APR qualification standards vary so widely, your best bet is to call the auto dealership in advance. Ask what criteria you need to meet to qualify for interest-free financing on a specific vehicle. Aside from your credit score, an auto lender may consider additional factors when it reviews your application, such as: Debt-to-income ratio. Employment history. Income and address verification. Regardless of the condition of your credit — good, bad, fair or excellent — you should take the time to from outside financing sources as well. Preapproval can help you your options and give you a backup plan if you don’t qualify for the automaker’s exclusive offer. Limits of 0% APR financing
Interest-free financing might be a great deal for some borrowers. Still, there are a few potential pitfalls you should look out for when considering this type of financing. Limited selection: Interest-free financing may only be available for certain types of vehicles. First, the car you purchase will almost certainly need to be . Auto manufacturers also tend to reserve special financing offers for vehicle models where there’s a surplus in stock that they need to move. Limited repayment options: Depending on the offer, your repayment options with 0 percent financing may be more limited. Often, you’ll have less time to repay the loan than you might have otherwise. Of course, there’s nothing wrong with repaying a loan quickly, but you should be sure that you can afford the higher monthly payment without straining your budget. 0% financing vs bonus cash
Automakers want you to purchase your next vehicle from their company, not a competitor. This is a key reason 0 percent financing offers exist in the first place. In the same interest of attracting new customers, auto manufacturers often offer to buyers. Sadly, an auto manufacturer might not let you take advantage of both 0 percent financing and bonus cash. If you’re faced with this dilemma, you’ll have to decide which savings opportunity is . Bankrate tip: Using an can help you compare apples to oranges when it comes to 0 percent financing versus bonus cash incentives. Sometimes taking the cash rebate an auto dealer offers along with a higher loan APR will make the most sense as far as overall savings. In other instances, 0 percent financing might be the clear winner. Should you take the cash and refinance later
You might have to accept standard financing through the automaker’s captive lender to qualify for certain types of cash incentives. In exchange, there’s a chance that you’ll receive a higher interest rate than you might through your bank or an outside lender. Depending on your situation, your new auto loan in a few months might be an effective strategy. But there are some downsides to consider first. Namely, taking out two auto loans back-to-back — the original and the one you refinance it with — could harm your credit for a while. Multiple loans will result in at least two hard on your credit reports. Adding two loans to your credit reports, even though one pays off the other, can reduce the average age of accounts on your credit reports. In terms of credit scoring, the older the average age of your accounts, the better. Loan Auto Key takeaway When is a 0% APR deal not worth it
The repayment terms don t fit your budget
Low-interest car loans often come with shorter finance terms. Depending on your income, a shorter loan term could make your monthly payment unaffordable. For example, if the 0 percent car loan lasts for four years in instances when you would typically finance for five years, the cost difference can be meaningful. On a $25,000 car loan through the manufacturer for four years, your monthly payment would be about $520. By comparison, a $25,000 car loan financed over five years at a 4 percent interest rate would feature a monthly payment of $460. You can use an auto loan calculator to do the math for your prospective loan. Financial experts often recommend keeping your monthly vehicle payment to 20 percent or less of your monthly take home pay. And some experts suggest that you at 10 percent of your gross income. You re tempted to purchase a more expensive vehicle
Cash rebates offer you more savings
Cash-back rebates often don’t apply to buyers who use the manufacturer’s special financing. If you crunch the numbers and cash rebates offer you a bigger savings opportunity, a 0 percent financing deal wouldn’t be worth it. Imagine you can take advantage of a $4,750 cash back offer on a new vehicle purchase. On a new vehicle with a $30,000 price tag, that incentive could bring your purchase price down to $25,250. If you financed $25,250 at a 4 percent interest rate for five years, you’d pay $2,651 in interest. In that scenario, your total cost would be $27,901 — as long as you didn’t add on extra products like extended warranties or incur any other financing fees. Alternatively, you could pay the full $30,000 purchase price and opt for a 0 percent APR. Assuming no add-on products or fees, you’d still pay $2,099 more in this scenario than you’d pay by taking the cash rebate. Do s and don ts of 0% APR deals
If you review your options and decide that a 0 percent APR auto loan is the right choice for you, these do’s and don’ts may help you navigate the process. Do Don’t Negotiate the purchase price before you ask for the 0 percent APR offer. Accept a short-term loan with a large monthly payment amount you can’t afford. Get preapproved for an auto loan before you visit the dealership. Opt for a long-term loan to lower your monthly payment if it will cost you more overall. Confirm that you can afford the monthly payment. Choose 0 percent financing over a cash back incentive without comparing the potential overall savings. See if the manufacturer offers a cash back incentive program that you can combine with the special financing offer. Skip the down payment if you can afford one. The bottom line
The key to deciding if a 0 percent APR car deal is worth it for you is to compare it against an auto loan from an outside lender and find your true monthly cost. Depending on your circumstance, the deal may not truly save you money. There are also a few situations where special financing isn’t as good as it seems and qualifying often requires excellent credit. Check current and make sure interest-free won’t end up costing you more overall. Learn more
SHARE: Michelle Lambright Black is a credit expert with over 19 years of experience, a freelance writer and a certified credit expert witness. 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. 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 clear, well-researched information that breaks down otherwise complex topics into manageable bites. Related Articles