The 0% Auto Loan: What it Takes to Qualify

To try to bring new customers to the show room, many car dealerships will offer special incentives like cash back offers and 0% interest auto loans. Qualifying for a 0% financing, however, can be difficult and is often reserved for those with better credit ratings and cash in the bank. 

Requirements of the 0% Auto Loan

Offering low or no-interest loans is a marketing method to draw new customers to the showroom. The dealership wouldn't make the offer if they weren't still making a profit. When you read the fine print, you may find that it is more difficult to qualify for the loan than you would expect. The requirements from most dealerships to obtain 0% financing include:

  • Down payment: These special no-interest loans often require a large down payment -- as much as 25%. On a $10,000 car, that's $2,500; on a $25,000 car, that's $6,250! The dealership wins, because it has a good portion of the car's cost up front, but unless you have a lot of spare cash lying around, this might not be the easiest requirement to meet.

  • Shorter repayment terms: Most no-interest loans require a repayment term of 36 months or less, meaning your monthly payment will be much higher than if you were to finance over 48-60 months.

  • Near-perfect credit score: While not always required, particularly if you have 25% down and can afford the high payments of a 36-month repayment plan, many dealerships have a minimum credit score requirement in order to qualify for 0% financing to obtain the auto loan.
  • 0% Financing may not be the Best Deal

Feel like the requirements for no-interest financing aren't worth the trouble to obtain an auto loan? There's good news. Quite often, you can save more money by obtaining your auto loan from your bank or an online lender and then take advantage of cash back incentives offered by the dealer instead of the financing incentives. A low interest rate and $3000 cash back applied to your down payment can mean hundreds of dollars in savings over the 0% interest option.

Take your time and shop around for the best auto loan; don't be tempted by dealership incentives unless you can make them work for you. Always compare what the dealership has to offer with what kind of financing you can obtain outside of the dealership. You may be able to save money by shopping around.


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