back to articles | December 31, 2018 | Dale Peterson

Categories: Auto Loans & Financing

0% Auto Financing

Can I Get 0% Auto Financing?

0% auto financing, and all zero percent or low interest car loans, should be examined closely. New car dealers often offer 0% financing, along with other unusually low financing rates, as a special promotion. With the major auto manufacturers offering 0% financing on many of their popular makes and models, the general auto buying public has been mesmerized by the seemingly attractive low rates.

Zero Percent Financing: A Good Deal?

While 0% financing offers are enticing, you should read the fine print and know the facts before you head off to your local dealer. Teaser rates such as 0% rates have always been offered to drive more business to the car dealers, but often, zero percent offers are not beneficial to everyone. The variations of interest rate, like pricing, can change from dealership to dealership, but knowing what to look for and which questions to ask the dealer will help you decide if a 0% auto loan is the best deal for you. Here are a few of the facts and restrictions that often apply:

  • Almost perfect credit may be needed to qualify for 0% car loans
  • You may be required to give up a manufacturer's rebate to get zero percent financing
  • 0% financing usually means shorter loan terms and often large monthly payments
  • 0 percent rates are usually offered on a limited number of models
  • You may be limited to dealer stock and not be able to choose the exact vehicle you are interested in purchasing with 0% auto financing

0% Financing: Research Low Interest Rates

If you see a 0% interest rate, or low interest loan, call or visit the dealer to get details about the interest rate. In addition, you can research many zero percent auto loans online. The truth is that zero percent financing is nothing more than a brilliant marketing tool that is dishonest and borders on qualifying as a credit scam. It is very similar to the old "bait and switch" tactics used by sales people for decades. They lure you in to the show room with the offer of zero percent, then they tell you you don't qualify and try to sell you merchandise anyway.

Qualify for Zero Percent Financing

Before you fall for their sales pitch, here are a few facts about zero percent financing:

(1) Only about 5% of all car buyers qualify for zero percent financing. You must have an excellent credit rating and a certain amount of income to qualify. They also don't tell you in their advertising that to qualify for zero percent auto financing; you must pay off the car (or other merchandise) in a relatively short period of time, perhaps 2 or 3 years. Most customers can't afford the monthly payments on such a short term loan.

(2) Even if you do manage to qualify for zero percent financing, sellers often make up for the lost finance charges by jacking up the price of the product. They can do this quite easily because the customer is so thrilled with the zero percent auto financing that he forgets or overlooks the fact that he is overpaying for the product. This is particularly true of automobile purchases.

0% Auto Financing: Ask Questions

If you see a 0% loan advertised, ask these questions: 1. To qualify for the low interest rate, will you be charged a higher price for the car? 2. Does the 0% financing rate require an unusually large down payment, like 25 or 30%? 3. Are you required to repay the auto loan in a shorter than usual length of time to qualify for 0%? 4. Is there a large balloon payment due at the end of the auto loan? 5. Are you required to buy extras, such as rust proofing, to qualify for the 0% auto financing? 6. Is the financing rate available for a limited time only? Some dealers limit special deals to a short period of time, or require a certain delivery date. 7. Does the 0% rate apply to all cars in stock? 8. Do you have to forfeit the manufacturer's rebate to qualify for zero percent?

Very few people who qualify for zero percent financing will actually negotiate with the car dealer over the price since they think they're getting such a good deal. This doesn't mean you should ignore zero percent offers, but pay attention to the offer, read all the fine print in the contract, and walk out of the show room when they tell you that "your credit rating isn't good enough to qualify for the zero percent rate, but I'm sure we can arrange affordable financing for you."