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As you shop for a car, you’re likely going to come across a variety of incentives — one of which may be a 0% APR car loan. While no-interest loans can sound too good to be true, they are legitimate. However, they tend to come with strict eligibility requirements and a few tradeoffs. For example, one might eliminate your interest costs but come with a higher monthly payment amount and sale price.
If you’re wondering if a 0% APR offer could be a good fit for you, read on for a closer look at how they work and when one can make sense.
If you see a 0% APR offer when buying a car, it means that the dealer is offering an interest-free loan for that vehicle. The car’s cost will be split up into payments over a set term with no interest added. While that can potentially help you save, there are a few catches.
No-interest loans are only available on select vehicles and to well-qualified borrowers. They can also result in a higher sale price and monthly payment amount than you’d get with traditional financing.
Auto loans with a 0% APR are generally offered by captive finance companies, which are the financing arms of auto manufacturers (e.g., Toyota Finance, Nissan USA, etc.). These companies typically sell vehicles and offer to finance them with traditional auto loans, and they will sometimes offer interest-free loans to well-qualified buyers to help move certain new or certified pre-owned vehicles.
While 0% APR financing can help you save hundreds to thousands of dollars in interest, it may mean paying a higher sale price. Since the captive finance companies aren’t profiting from the financing, they’re often less willing to negotiate vehicle prices. That can drive up your total cost and potentially make GAP insurance a necessary add-on. Still, depending on the numbers, the interest savings of 0% APR financing could outweigh the tradeoffs.
0% APR financing deals can come with several advantages, including:
But why should you avoid interest rate deals like zero-percent interest loans? Here are a few potential reasons:
To qualify for 0% APR financing, you often need to be a very well-qualified borrower. That means an excellent credit score — usually 800 or higher — as well as steady income and a low debt-to-income ratio. Many lenders also prefer that you make a sizable down payment, such as 10% to 20%, which reduces their risk.
However, requirements can vary by company, and some may be more flexible than others. If you’re interested in a specific 0% APR offer, it’s best to ask the finance company about their qualification requirements and process.
Bonus cash refers to a promotional incentive offered by car manufacturers that reduces the price of the vehicle. For example, Nissan USA may offer $1,000 bonus cash on this year's Pathfinder.
Whether a 0% APR or a bonus cash deal is better will depend on the offers available to you. You’ll need to apply to see your options and run the numbers to find out which will be cheaper upfront, per month and overall. From there, you can make a decision on which is the best fit for your needs and preferences.
For example, suppose you want to buy a $40,000 new 2025 Pathfinder and plan to make a down payment of $10,000. Here’s how two financing options compare, one with a bonus cash promotion and one with 0% APR financing.
Note: These numbers are for illustrative purposes only. Actual offers will vary.
In this case, the 0% financing is cheaper by $2,728 overall and results in you paying off the car two years earlier. However, it will cost around $110 more per month. The bonus cash option would be preferable if you don’t mind paying a bit more overall to get a lower monthly payment. But if you prefer a lower overall cost and faster payoff, the 0% APR financing is the better choice. You can run a similar comparison to decide which financing option best suits your situation and preferences.
Tip: If a dealer’s bonus cash offer is great but their APR isn’t, you can consider taking the deal and refinancing later to get a better APR.
A 0% APR financing offer tends to work well when you have excellent credit, don’t need a long loan term, and aren’t sacrificing a better discount to get the 0% rate. Since you won’t pay any interest, every payment goes directly toward your car — potentially saving you a significant amount over time. However, it may not be the best choice if the dealer is asking for too high a sale price, down payment or credit score. In those cases, you may save more by negotiating the car price, taking a rebate instead, or securing financing through your bank or credit union.
Still have questions? Learn more about 0% APR car deals.
A 0% APR loan can be a great deal. Since you won’t pay any interest, you can save significantly compared to traditional financing. However, these deals often come with shorter loan terms, which can increase your monthly payments, and higher sale prices. You’ll need to shop around and run the numbers to find out if it’s a good deal for you.
It can be difficult to get approved for 0% financing, as dealers generally require excellent credit. If you do get approved, the terms are often shorter than with regular financing, which can lead to higher monthly payments. Further, dealers are often less willing to reduce the sale price of a car when they’re not profiting from financing it.
Dealerships make money by selling the car itself, often without any discounts on the sale price. It can be a way for them to move slower-selling models and increase sales when traffic is slow.
It’s always good to read the fine print when buying a car and agreeing to a payment plan. Dealers may charge fees that are confusing or that weren’t clearly communicated upfront. Keep an eye out for dealer add-ons, documentation fees, market adjustment fees, etc.
A 0% APR financing deal can increase the sale price of the car. The dealer won’t be making money on the financing as usual, so they may be less willing to discount the vehicle’s price through rebates, discounts or negotiations.
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