Quick Facts About 0% Financing
- 0% APR financing is real but limited to select models and buyers with superior credit.
- It can be a good deal if the loan fits your budget, the term length is reasonable, and the offer beats rebate/low-interest alternatives.
- Checking your credit, factoring in ownership costs, and negotiating the out-the-door price first are essential steps before financing.
You’ve probably seen eye-catching offers when shopping for a new car — cash back incentives, low-interest specials, and even 0% APR financing, so you pay only the car’s price spread out over time.
But is 0% financing always the smartest move? Here’s what it really means, how it works, and when it makes or doesn’t make sense.
- What Does 0% Financing Mean?
- How Do 0% Car Deals Work?
- Checking and Understanding Your Credit
- When Is 0% a Good Deal?
- When to Avoid 0% Financing
- How to Get 0% Auto Financing
- Bottom Line on 0% APR Financing
What Does 0% APR Mean?
Having 0% financing on a car loan means you pay no interest to the lender on the money borrowed to buy the car. A 0% APR car loan is an opportunity to pay the same amount of money as a cash buyer, even though you’re spreading your payments over a longer term.
When you take out a car loan, you’re borrowing money to pay for a car, and that much is obvious. But the lender typically doesn’t give you that money for free. Instead, you pay interest and fees to the bank for lending you the money. APR stands for annual percentage rate, which calculates how much the lender charges to borrow the money.
With a 0% APR financing deal, you repay the money you borrow and nothing more.
How Do 0% Car Deals Work?
A 0% APR is usually offered through the automaker’s finance arm, not a bank. It’s called captive lending. Instead of making money from your interest payments, the automaker profits from the car sale itself. These deals often:
- Apply only to select models or trims
- Replace cash rebates or discounts
- Encourage add-ons like warranties or service plans
Always compare the 0% loan to a rebate plus low-interest financing to see which saves you more. Taking advantage of bonus cash incentives is sometimes better than 0% financing.
Pros and Cons of 0% Loans
| Pros of 0% APR Car Loan | Cons of 0% APR Car Loan |
| No interest payments: Repay only the dollar amount borrowed. | Limited approval: Only shoppers with superior credit qualify. |
| Faster equity: Pay down the loan principle and build equity faster when not paying interest. | Limited inventory: Availability is often limited to specific models and trim levels. |
| Great deal: Potentially save thousands of dollars versus market rate loans. | Higher payments: Deals may require shorter loan terms, which create higher monthly payments. |
Is 0% Financing a Scam?
No. 0% car deals are real. However, they’re usually limited to certain models and only for buyers with top credit scores (around 740 and up).
What’s the catch? Automakers use these offers to get shoppers into showrooms. Many buyers discover they don’t qualify and are offered a higher rate instead. That doesn’t make it a scam, but it does mean you should:
- Check your credit score before shopping to know if you’re likely to qualify.
- Read the fine print: 0% often applies only to short-term loans and specific trim levels and excludes case rebates.
- Have backup financing from your bank or credit union if you don’t qualify for the best offer advertised.
A 0% APR loan is legitimate, but only a small group of shoppers can actually take advantage of it.
Checking and Understanding Your Credit
To qualify for 0% financing, you’ll need very good credit. Most lenders look for a FICO score of 740 or higher. The best deals may go to exceptional scores above 800.
Check your credit score with any of the three credit reporting bureaus: Experian, Equifax, and TransUnion. Get your free report at AnnualCreditReport.com. As of 2025, consumers can access weekly credit reports.
Here are the general credit score categories.
- Poor: 300-579
- Fair: 580-669
- Good: 670-739
- Very Good: 740-799
- Excellent: 800-850
According to Experian, the average credit score will be 715 in 2025. That means many shoppers will not qualify for a 0% interest loan.
MORE: 5 Tips for Financing a Car With Bad Credit
When Is 0% a Good Deal?
Financing at 0% is a good deal only if you can afford the loan. When you begin car shopping, check Autotrader’s Car Affordability Calculator and review this checklist:
- ✅ My credit score is 740 or higher
- ✅ I’m comfortable with the monthly payment in my budget
- ✅ I have included related ownership expenses and insurance in my budget
- ✅ 0% loan comes out ahead when compared against low-interest offers that include rebates
- ✅ I plan to keep the car for several years and not trade it in early
- ✅ The loan term is 60 months or less
- ✅ The vehicle is a model I actually want and meets my needs
- If most of these apply to your situation, 0% financing is an excellent way to borrow money and pay no interest.
MORE: Can You Return a Car You Just Bought?
When to Avoid 0% Financing
A 0% APR car loan can sound irresistible in 2025, but it isn’t always the smartest move. Here’s when to think twice:
- If you can’t comfortably afford the payments. Even with no interest, payments may still be too high if the loan term is short. Many 0% deals in 2025 are offered only on 36- or 48-month loans, which means larger monthly payments. If stretching your budget is the only way you can qualify, it’s not a good deal.
- If a cash rebate saves you more. In today’s market, automakers often force you to choose between 0% APR or thousands in rebates. Before signing, compare the two options using a loan calculator. Sometimes, taking the rebate plus a low-interest bank or credit union loan saves more than 0% financing.
- If the loan term is too long. Some lenders now offer 72- and 84-month loans at 0%, especially for EVs or high-priced SUVs. While that lowers your monthly payment, it keeps you in debt longer and increases the chance you’ll be “upside down” (owing more than the car’s worth) if you need to sell or trade in. A good rule of thumb: stick to five years or less.
- If you’re tempted into a car you don’t need. Automakers use 0% APR as a marketing tool to move slow-selling models. Don’t buy a car just because the financing looks attractive — especially if you weren’t planning to buy one in the first place.
- If insurance and ownership costs are overlooked. Monthly payments are just one part of transportation expenses. Car insurance rates are still elevated in 2025, especially for EVs and newer tech-heavy models. Before signing for a loan, get insurance quotes to ensure the car fits your overall budget.
MORE: How Much Money Should You Put Down on a Car?
How to Get 0% Auto Financing
If you’re aiming for a 0% deal, here’s how to maximize your chances in today’s auto market
- Check your credit first. 0% APR is usually reserved for buyers in the top credit tier (740+), though some captive lenders may approve slightly lower scores if you have a strong history.
- Get preapproved elsewhere. Walk into the dealership with a backup loan offer from your bank or credit union. This gives you leverage if you don’t qualify for 0% APR, or if the dealer tries to offer a higher-than-expected rate.
- Negotiate price before financing. Always agree on the out-the-door price of the car before discussing financing. Dealers often push add-ons (extended warranties, gap coverage, service plans) to make up for lost profit on 0% deals.
- Compare 0% vs. rebates. In 2025, automakers might offer either 0% APR or a rebate, such as $2,000-$5,000 off the manufacturer’s suggested retail price (MSRP). Use a calculator to compare which option truly costs less over the loan term. Don’t assume 0% is always the better choice.
- Be ready to walk away. If you don’t qualify for 0%, the dealer may present a “second-best” rate. Don’t feel pressured. Check your backup pre-approval or shop at another dealership. Remember that automakers frequently refresh promotions, so another 0% deal may appear soon.
MORE: How to Negotiate a Car Deal: What You Need to Know
The Bottom Line on 0% APR Financing
Finance offers with 0% interest are an excellent incentive for qualified shoppers already in the market for a new car. A 0% financing deal shouldn’t be the sole determining factor in your new car purchase. If you’ve done all the proper planning for your new car purchase and you find a 0% deal on a loan that works within your budget, it can be a great way to save money by not paying loan interest.
Editor’s Note: We have updated this article since its initial publication. Doug Demuro contributed to the report.
There are a few things to keep in mind when financing. Never tell the dealership how you plan to pay. Negotiate up front and get the best deal. Don’t let them know you have a trade in either, and it at all possible, sell your vehicle yourself to get the best return. My husband and I won’t buy a car unless we know that we can pay it off quicker if we wanted to. Be smart about how much car you can afford. Sometimes, it’s not wise to buy a new car if you know you will trade later. You can end up upside down on your value/payments. Do your research. There are a handful of cars/trucks/suvs that do hold their year to year value with average miles driven. It’s all about research and budget. Do not let anyone run your credit until you’ve done due diligence on what they will accept and if it’s really what you want. I have seen too many people jump into buying a car because they “fell in love with it” but don’t know anything about it other than it looked nice and was fun to drive. There are a lot of comments on here that are negative, but sometimes, it can be worth the debt if you travel a lot for work and need the dependably. Again, don’t go to a dealership until you know what you need the car for, how much you can afford (take into account interest, taxes and insurance), and the pros/cons of the vehicles. For certain people,72 months 0% is a great deal. For others, it might be best to go another route. …..Research, research, plan……
Does the dealer need to be part of the manufacturer 0 percent loan? I want to keep everything separate I only want to purchase the car from the dealership,I dont want them involved in the financing or trade in of the old vehicle..
A condescending article.
0% financing is extremely expensive
for example, VW has a 0% financing, but the fine print (always read it) says “monthly payment for every $1,000 you finance for 60 months is $16.67″…. if you do the math, 16.67 a month times 12 months, that is $200 per year…. $200 per year per $1000, we are talking 20% interest…… you can certainly get better rate from any bank…. that is just a misleading advertisement…. super bad deal
“monthly payment for every $1,000 you finance for 60 months is $16.67”.
This is not a charge at all, it’s just telling you how much your payment will be per 1000 you borrow….if you borrowed 1000 at 0% for 60 months your payment would be 16.67/month….if your car was 30,000 your payment would be 30 x 16.67 = $500/ month. 0% really is 0%, there is no trick or catch.
This is a ridiculous comment. $1000/60 = $16.67. For every $1000, you’ll pay that every month for a 5 year loan. They are required to disclose this so the buyer knows there are no hidden fees or misleading interest charges. 0% is 0%. It’s same as cash for an extended period. Your math is completely wrong in this case.
I am gobsmacked at the utter innumeracy and gullibility of most of the people posting to this forum. The only ones that seem to have their act together are those advocating keeping a car for a long time, taking good care of it and making it last. The “zero interest” and “cash-back” shell games played by the auto industry are so easy to win when they’re playing with innocent pilgrims who don’t understand math. Education in America has failed miserably in this respect.
The cheapest car is the one you own. That said, with a growing family, I’m interested in keeping them safe. I wish I could have it both ways.
Amen, brother. Thanks for your insight.
I traded a 16 year old Dodge Durango with 316,000 miles. Rocker panels completely gone and rust everywhere. They gave me $3800 trade in on a new Durango. Total hocus-pocus mathematics!
I was told they couldn’ negotiate a price because I’m already getting 0 percent interest.
There is no such thing as 0% interest loans. The author is missing a critical point here, although he hit on it briefly. A 0% interest loan means you’ve lost on the negotiated price of the car. The car dealership is taking a portion of its profit from the spread between the invoice price it paid and the negotiated price you paid and is paying the finance company interest up front. That’s why you see advertised deals to the effect of “$5,000 cash back or 0% interest”–if you take the 0% interest the dealer takes the $5,000 in additional profit it makes to pay the loan interest down to 0. You may end up paying a higher interest rate than market by getting your “0% interest loan.”
I find this is so confusing, even this article.
I’m currently trying to get into a GMC. I’ve been saving for quite a while to buy with cash and skip the yolk and additional fees associated with loans. I became interested in the 0% loan idea, but the dealer is saying you can’t get dealer rebates plus the 0% interest loan. Guess I’m back to saving…
One thing you could do, is say you want to buy a 50,000 truck, you can get the dealer incentives to say 40,000 put down 20,000 and finance the other 20,000 and you will be better off then doing a 0% loan.
You’re forgetting about the “service charge” on each thousand you borrow! Total SCAM!!!!
Please elaborate. How does that work?
I recently purchased a vehicle with 0% financing. The Lender I qualified with was giving me 4.24% and finance charges were over $3k. Dealer offered me zero percent for 60 months and saved my $3k in finance charges. My credit is excellent too. Thanks for this very informative article
There was a 0 percent interest rate when I bought my 2016 jeep,I had a 802 credit rating,they acted like they didn’t know anything about it when I told them that I seen it on tv,and that is the reason I was going to buy one.I ended up paying 30,000 dollars for the Jeep.
There is something I would like to ask about the “0 interest” auto financing. Is there interest accruing that you do not owe as long as you have made your payments on time during the 5 year period and have paid the price of the vehicle off?? I worked in the furniture industry for 16 years, and they also offer “0 interest” financing for up to 5 years. However, with some of those offers, the small print indicates that with one late payment, your “0 interest” deal is voided and from that day forward, you are paying interest on your purchase. I’m just curious if car loans work the same way??
I have a friend who has just purchased a new Ford under this type of financing plan. She is notorious for paying things late, so I’m a little nervous for her……..
Good informative post. One also needs to be wary that the dealership hasn’t ballooned the cost of the vehicle- never accept the sticker price, find out what dealership paid the manufacturer and negotiate from there.
How can one find out the actual invoice price?
This is really helpful particularly for those who are not savvy about 3rd party financing. Thanks.
The main thing you ignore on 0 interest loans is by applying for them you generally forfeit any eligibility to get cash back or rebate offers. In other words, as with most things in life, nothing’s free.
So that is a trade off, you forfeit cash back or rebates for a 0% interest rate, nothing’s free?? The loan is free… which is awesome, no interest for the life of the loan, as if you paid cash except you get 5 years to pay it off. It’s a good deal no matter how you try to spin it…
I’ve bought two new cars at zero percent financing now. The first car was in 2010, I was fresh out of college, barely had any credit, no mortgage, and my credit score was about 600 (from lack of credit). The only thing on my credit was a $3000 college loan I was paying on and $5000 for my previous used car (paid off). I also did not need anyone to cosign for me and I was 26 years old at the time.
I qualified for zero percent just on that. I drove that car for 4.6 years and then I decided to trade it in for cash back on a newer model of the same car. I got $9000 cash back on the 2010 and stepped into a brand new 2015 also at 0 Percent.
And that’s probably going to be my game for the rest of my life. Every 4-5 years I’ll sell my car while it’s still worth a lot and I’ll step into a brand new one and will never have a car more than 4 or 5 years old.
Also I stepped into the new car at the same payment as the previous one so it’s like I just keep paying 286 a month forever, then after 4 years I get 50-75% of that loss back. In the long run it’s like I’m only paying for 60% of 1 car.
Of course this tactic only works if you care for your car and drive low miles. E.g. in 4.6 years I only put 54,000 miles on the car driving it back and fourth to work and an occasional trip to the beach (occasional = once a year). Keep good service records, have zero accidents, and keep the car clean and free of salt’s and grimes.
People that do this is why used cars even exist. You know when you drive by a dealership and you see that 2013 Corolla sitting there with 47,000 on the odometer and a 13$k price tag? That’s someone doing the trade in 0 percent tactic.
Another flip side to this tactic is you can trade up. For example, say instead of taking a cash back check on my car for $9000 I had used it as a down payment on a Scion FRS. I had a corolla at $17,500 (new) and the frs is $26,000 (new). So if I had wanted to I could have put the $9000 from my trade down on the FRS bringing it down to 17,000 which would make the new FRS the same price as what I paid for my 2010 corolla. Meaning I could have walked into the FRS for the same payment (286 a month) at zero percent. Then say I drive that for 4.6 years and go in and trade it in and get 15,000 for it (worth more) on trade in. I could trade up again (maybe into a Supra if it’s out by then).
But trading up has side costs, higher insurance and higher taxes.
There is no way that you get 50-75% of your purchase price back after 4.6 years. You would be lucky to get 40%. I currently have a 2012 ford fusion that was 25000. Going trade in rate is 8500-9500 and I haven’t even hit 4.6 years. What u are missing in your example is that you are using the dealers negotiations as car value. Many have unannounced dealer rebates and incentives, especially Chevy.The msrp is usually exaggerated 10-15% on the vehicle’s window(msrp). The more expensive the car the more larger number they give you for your car. Service records mean very little. They use interest rates and length of loan in every transaction to get you. Dont believe me then think of the last deal you had in front of you. They start by offering you vety little for your trade and usually put down a high payment. That is because they attach a higher rate to that quote and show you 36 and 48 months. Then they will come back and give a modest increase on your trade but extend the loan 6 months. It gives the illusion that they are really lowering the cost, but they arent. As u play the game wait until u get the term and interest you desire. Then haggle over the proice of your trade. Look at eBay to find out what your car is worth. Never look at kbb or Edmund’s. Those prices are inflated and u will never come close to getting that value.BTW, have you ever seen a crappy looking dealership? Answer is probably no. Heed my advice, the dealer will make 5000-7500 off each transaction with you. It is a numbers game and they always win.you are way better off buying a new car and running it until it falls apart. I have done this for a living for a long time and know it well.
Forgets to mention that the term of the loan is extended every time. You owe for a long time – they own you.
Car salesman, right?
This method also never gets you out of having a car payment. I haven’t had a car payment in 5 years.
You’re perpetually spending money on new vehicles every few years, which although sounds fun on the surface – means you’re constantly in debt?
So many things wrong with this logic lol. You’re not taking into account that after you pay off your car loan you can keep using it. It doesn’t just vanish once you’ve paid it off…
No, you are totally leaving out negative equity which every car will have because every car depreciates…..that is how people get into massive debt, they go to trade in while still owing and run unto thousands of negative equity…..
Can’t you first inquire what credit score is required for the 0% finance offer, before going to Dealership. That way you’re not disappointed after you emotionally “bought the car”, and then have to walk away ?
Yes, and you should do exactly that. Our point is that you should be ready to find that the threshold for 0 percent is high – you need excellent credit to get. Either way, you should know your score before you go to the dealership.
We just bought a new car with 0%interest for 84 months. Thanks for the infos., just want to solidify that I am not paying hidden interest on a new car.Some sites says to avoid 0% interest with longer loans on new car payment.
Zero percent is zero percent. We usually advise buyers don’t finance longer than 5 years, but in your case it’s not costing you anything extra. For fun, you should add up the cost of a 2.9 percent loan and see exactly how much money you’ve saved.
Wow.Thanks!This probably the most easy to understand info on 0% Financing I’ve come across.