What You Should Know About 0% Auto Loan Deals

What Is a 0% APR Car Loan Deal?

As its name suggests, a 0% APR car loan offer doesn't charge interest, either for an introductory period or the full life of the loan. Manufacturers with captive financing arms typically offer these loans on new vehicles as an incentive.

In most cases, these offers can last anywhere from three to six years, but some may be shorter. Using Kelley Blue Book's average new car price of $48,641 in January 2025, here's what a 0% APR auto loan deal might look like compared with the average interest rate for a new auto loan, according to fourth-quarter (Q4) 2024 data from Experian's State of the Automotive Finance Market report:

Sources: Experian data as of Q4 2024 and Kelley Blue Book

How to Qualify for a 0% Car Loan Deal

No-interest auto loan offers are typically only available on new cars. Other 0% APR car loan requirements typically include excellent credit, a stable income and a low debt-to-income ratio (DTI).

That said, manufacturers don't disclose specifics, such as the minimum credit score, annual income or DTI needed to qualify. If you're interested in a 0% APR offer, you'll need to fill out a credit application with a dealer to gauge your eligibility.

Learn more: How to Get the Best Auto Loan Rates

Benefits of 0% Car Loan Deals

• Interest savings: With no interest for as much as the full life of the loan, a 0% APR auto loan could save you hundreds or even thousands of dollars in interest.
• Potential for lower payments: While some deals come with shorter repayment terms, others may match the terms you can get with a traditional auto loan. In that case, you can expect lower monthly payments because there's no interest component.
• More flexibility with prices: With no interest charges, a 0% APR auto loan may allow you to get into a more expensive vehicle than you might be able to afford with a conventional auto loan.

Drawbacks of 0% Car Loan Deals

• Limited selection: Manufacturers typically only offer 0% APR deals on certain models, often when there's a surplus of inventory or sales are slow. So, if you have your heart set on a specific model or trim, there may not be interest-free offers available to you.
• Higher prices: To get a 0% APR auto loan, you typically have to pay full sales price, meaning there's no room for negotiation. In some cases, manufacturers may even increase the price to minimize the risk of losing money on the deal.
• Dealer extras: With a lower monthly payment compared to a traditional auto loan, dealers may be more aggressive with add-ons, such as vehicle upgrades, maintenance contracts, credit insurance and various fees.
• Fewer repayment options: With a traditional auto loan, you may have the option to choose your repayment term, allowing you to adjust your monthly payment to fit your budget. With a 0% APR deal, however, you may have to accept what the manufacturer offers. If it's a shorter term, the payment could put a strain on your budget.

When to Choose a 0% Car Loan Deal

It's important to evaluate your situation and research your options to determine if a 0% car loan is right for you. However, here are some general scenarios where it could make sense:

• You have excellent credit. Unless your credit score is in stellar shape, you may not be eligible for a zero-interest auto loan.
• You can afford the monthly payments. While repayment terms can vary, it's important to make sure you can comfortably afford the payments without sacrificing your financial goals or impacting your other obligations.
• You're willing to be flexible. Because 0% APR loans are offered on specific models and have limited repayment terms, you may need to be flexible with your vehicle choice and budget.
• You can be firm about add-ons. Dealer extras can add thousands of dollars to your purchase, eating into or potentially even neutralizing your interest savings. Firmly declining add-ons you don't want or need is crucial for maximizing the benefits of a 0% APR car loan.

How to Get a 0% APR Car Loan

Due to the nature of zero-interest auto loans, the process for getting approved is a little different from traditional car loan options. Here are some steps you can take:

1. Check your credit. You'll need great credit to get approved, so it's a good idea to check your credit report and FICO^® Score^☉ before you start the research process. If your score isn't in the high 700s or 800s, you may need to work on improving your credit before proceeding.
2. Review your budget and savings. With limited repayment options, you'll need to review your budget to make sure you can afford a potentially higher monthly payment. Also, check your savings to see how much of a down payment you can afford. The more money you put down, the less you'll need to borrow, resulting in lower payments.
3. Research offers. Visit manufacturer websites and local dealership websites to get a feel for available offers. If you don't have a specific model in mind, it can help to check offers with multiple manufacturers and dealers to better inform your decision.
4. Try to negotiate. While some 0% interest auto loans may require you to pay full price, you could potentially get past that by negotiating a sales price before indicating your interest for special financing. Also, be firm about dealer extras that can pump up the sales price.
5. Apply for and finalize the loan. Once you've gotten the terms squared away with the dealer, submit a credit application to see if you qualify for the loan. If you get approved, be sure to review the loan agreement before signing it.

Learn more: How to Get a Car Loan

The Bottom Line

A 0% APR car loan can be a great way to save money on interest, but it's not always the best option. While these deals can offer significant interest savings, they often come with inventory restrictions, higher prices and limited flexibility.

Before committing, it's important to evaluate your credit, budget, and vehicle preferences to ensure it aligns with your financial goals. Researching offers and negotiating wisely can help you maximize savings and secure the best possible deal for your new car purchase.