What You Should Know About 0% APR Car Deals

As car loan interest rates soared over the past few years, no-interest car loans have become a better deal. However, it’s nearly impossible to qualify for a 0 percent APR without excellent credit, and it tends only to be worth it if you can save money on your monthly payment.

What is 0% APR on a car loan?

When you borrow an auto loan with 0 percent APR, it essentially means borrowing money for free. These offers are only available for new or certified pre-owned (CPO) cars, and you’ll need excellent credit and a solid financial profile to qualify. Because there is no interest or fees, your payments go directly toward the principal balance of your loan.

This differs from the usual approach, where the lender charges interest in exchange for financing. This is the primary way lenders make money. You may also face a limited selection of high-end models and trims to choose from as well as limited repayment terms of just a few years. This can make your monthly payment expensive, even without having to pay interest.

When auto manufacturers offer 0 percent financing, they may try to make up for “lost” income in other ways, like with add-on products or gap insurance. In some cases, you also might have to forgo benefits like rebates that normally bring down your purchase price.

How common are no-interest auto loans?

Auto loan incentives vary based on the economy and the state of the auto loan industry. Car prices have been rising since 2020, when the COVID-19 pandemic disrupted supply chains. High interest rates, fears of inflation and new trade tariffs have created a challenging environment for both car buyers and manufacturers.

In April 2025, some manufacturers announced new strategies for absorbing the cost of tariffs instead of raising car prices. While this has kept car prices stable for consumers, it has led to a decline in incentives as manufacturers try to control their losses. In their Q2 finance trends report, Edmunds announced that 0 percent financing deals sank below one percent for the first time since 2004.

How does a 0% APR auto loan work?

The only difference between a 0 percent APR auto loan and a traditional auto loan is that you won’t pay interest. For example, the difference between the monthly payments and interest paid on a $41,500 car loan with a 60-month term is significant. You’ll save about a hundred dollars every month, but over the life of the loan, you’ll avoid paying thousands of dollars in interest.

This hypothetical uses industry averages, so use an auto loan calculator to estimate how your terms would look.

If a manufacturer wants to sell more of a particular model due to overstock, it might offer interest-free auto loans to select borrowers through its own financing arm. Because 0 percent car loans are generally only available through a manufacturer’s captive finance company, you will need to apply for direct financing or on the manufacturer’s website.

When is 0% APR financing a good idea?

No-interest financing is a good choice if you plan on financing a new vehicle — although you may save more with a rebate. You will need to commit to a more expensive trim because manufacturers typically don’t offer 0 percent financing on base models, so you’ll pay for extra features.

Come to the dealership with a preapproved financing offer from a lender. By doing this, you can calculate how much you’ll save on interest with 0 percent financing.

If you can afford the payment and know you’ll save a few thousand on a car you want to buy, no-interest financing is the way to go. Otherwise, consider it carefully alongside other financing options when you’re looking to get the best rate on your auto loan.

When is a cash rebate better than 0% financing?

If you qualify for no-interest financing, you may also qualify for a cash rebate. One downside of no-interest deals is that they usually require a shorter term and higher monthly payments. Cash rebates don’t, so if you want a deal but can’t afford larger monthly payments, then the cash rebate may be better for you.

But there are times when no-interest financing is the better deal. Dave Thomas, Director of Content Marketing at CDK Global, explains that if you have a large amount of cash on hand, taking the cash back incentive requires you to give up your cash for the 0 percent offer. One alternative would be to take the no-interest offer and invest your cash — possibly in a high-yield savings account or CD — to make a return that outperforms the amount of the cash-back offer.

“For the majority of buyers who finance, if you’re doing a term of five years or more, it’s unlikely that the cash offer would offset paying a 4 percent or higher interest rate,” he says, “but every deal is different.”

An online car loan payment calculator will easily show you the amount of money you could be paying in interest and if a cash-back offer offsets it.

Steps to get a 0% APR car loan

If you’re considering a no-interest car loan, here’s how to move forward and tips to strengthen your approval odds.

• 1. Make sure your credit is excellent
  

  Lenders want to ensure you have a near-perfect history of making payments and handling your debt before offering you no-interest financing. An excellent credit score — 781 or higher — will get you the best deal on financing, but you can still qualify for a competitive interest rate if your score is 670 or higher.

  A steady source of income is equally important. These loans are often only available for shorter loan terms — up to 48 months — resulting in high payments. The lender will want to know you can comfortably afford your car payments and that there’s little or no chance you’ll default on the loan agreement.

• 2. Save up for a down payment
  

  You may need a larger down payment. Even if you aren’t required to put money down to qualify for financing, many lenders require a hefty down payment to qualify for a 0 percent interest auto loan.

  Lenders also want to see a low debt-to-income (DTI) ratio. A low DTI confirms your income will cover this new debt atop other payments you may be making.

• 3. Research 0% APR car deals from manufacturers
  

  Unfortunately, you won’t find no-interest auto loans through traditional banks, credit unions or online lenders. You’ll need to do some legwork to identify auto manufacturers with captive finance companies offering these deals.

  If you prefer particular manufacturers, visit their websites and view the page listing current financing offers. Look for deals from at least three manufacturers before moving to the next step. You can also search for deals by model or contact the dealer directly before shopping for vehicles to learn more.

• 4. Negotiate and apply
  

  Zero percent financing is just a small portion of the car-buying process. You should still avoid common car loan mistakes and negotiate the car’s price like any other buyer.

  If possible, avoid disclosing your 0 percent auto loan before negotiating the purchase price. Remember, the dealer wants to maximize their profits on these deals. So, disclosing your intentions of applying for a no-interest car loan before agreeing on a price point could hurt your chances of truly getting the best deal on a new ride.

  Dealerships may also press you to opt for added features, gap insurance or an extended warranty. These are optional, so be firm if you don’t want them.

  Once you’ve negotiated the purchase price of the vehicle with the dealer, the next step is to formally apply for financing.

Bottom line

The key to deciding if a 0 percent APR car deal is worth it for you is to compare it against an auto loan from an outside lender and find your true monthly cost. Depending on your circumstances, the deal may not truly save you money. There are also a few situations where special financing isn’t as good as it seems, and qualifying often requires excellent credit. Check current auto loan rates and ensure an interest-free option won’t cost you more overall.