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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. How 0% financing works and why it is legit
If you get an auto loan with an APR of 0 percent, you won’t pay interest over the entire loan term. It may seem too good to be true, but 0 percent financing isn’t uncommon. It’s offered through captive finance companies, which the manufacturer owns. The manufacturer uses these to draw in buyers, but only a few people can qualify. To make up for money lost on interest, this type of financing is reserved for new models. Buyers still have to pay , such as documentation, title and license fees. Dealerships may also press you to , or an . These are optional, so be firm if you don’t want them. And don’t be afraid to negotiate the total cost. Zero percent financing is just a small portion of the car-buying process. How to qualify for 0% financing
Each lender has unique eligibility criteria. However, meeting these guidelines can strengthen your approval odds: is the primary requirement. Lenders want to ensure that you have a near-perfect history of making payments and handling your debt before offering you no-interest financing. A credit score of 781 or higher will get you the best deal on financing, but you can still qualify for a if your score is between 661 and 780. A steady source of income is also important. Because your loan term may only be 48 months — resulting in high payments — a lender will want to know you can afford your car payments. You may need a larger down payment. Even if you aren’t required to put money down to qualify for financing, many lenders require a hefty down payment to qualify for a 0 percent interest auto loan. Lenders also want to see a low . A low DTI confirms your income is sufficient to cover this new debt atop other payments you may be making.
No-interest financing is a good choice if you already plan on buying a new or (CPO) vehicle. Manufacturers typically don’t offer it on base models, so you’ll be paying for extra features. Provided you qualify, you’ll want to separately from the financing — and come to the dealership with financing from a lender. By doing this, you’ll be able to calculate exactly how much you’ll save on interest with 0 percent financing. If you can afford the payment and know you’ll save a few thousand on a car you want to buy, is the way to go. Otherwise, consider it carefully alongside other financing options. Downsides to a no-interest car loan
A no-interest car loan isn’t always the best way to save. Manufacturers and dealerships want to make up for the money they’re losing. Expect 0 percent financing to only be available on select models with added features — and for shorter loan terms. Manufacturers offer limited loan terms with no-interest car loans. The usual term is 24 to 48 months. Loans of 60 or 72 months are uncommon. Since your loan term is shorter, your monthly car payment will be higher. Ensure that you can afford the monthly payment. Rebates or bonus cash may not be available. While you won’t pay anything in interest, you’ll likely be missing out on a . If total interest is less than the rebate or bonus cash, a no-interest loan won’t save money. Most no-interest financing is only for new cars beyond the basic model. Some manufacturers may also offer it on .
No-interest financing can be a solid way to save on a new car. If you already have plans to get a pricier model, you can avoid paying a few thousand in interest. And if you don’t mind a higher monthly payment on a shorter loan term, you should be safe from paying more for your car than it is worth. However, very few people qualify for a car loan with no interest. Even if you do, you might not save as much as you would get through bonus cash or a new car rebate. It pays to get financing before you start shopping and between what you’ll spend on interest versus what you’ll save with other options. Related Articles: SHARE: 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