0% Car Financing

JD Power has published a Dealer Finance study showing that zero percent car financing has been one of the strongest sales incentives ever developed.  These programs gained great popularity in the wake of the 9/11 attacks.  GM introduced their program called “Keep America Rolling,” which offered zero interest loans on nearly every model in their line.  Other manufacturers followed suit.  These helped to bolster weakening auto sales.

>> Click Here to See if You Qualify for 0% Financing

In theory, 0% financing can save you a LOT of money on your next car.  For example, a $20,000 auto loan at a 3.9% interest rate and paid off over five years would cost slightly more than $2000 in interest — that’s 10% of the vehicle’s purchase price.  With a zero percent loan, on the other hand, you would pay nothing in interest.

0% Auto Loans — Getting Qualified

Zero percent auto financing sound too good to be true? Well, there is a catch:  getting qualified.  Statistics report that only about 30% of consumers who come onto the lot wanting zero interest financing end up qualifying for and being able to afford it. Here’s why:

1. 36 Month Terms:  to qualify for their zero-percent programs, the auto finance companies typically want you to pay off the loan in three years or less.  That means much higher monthly payments than a 60 month term, for instance.  Given our $20,000 loan, for instance, payments could be nearly $200 higher per month:  $350 versus $550, roughly.
2. Credit Score:  to qualify, your credit score has to be pretty much immaculate.  One finance officer, speaking of GM’s 72 Hour 0% Finance Sale, has stated that a credit score of 750+ is most likely to get you approved, though we’ve heard of qualifications down into the low 700’s.  If you have money to put down, 10% to 20%, and your income to debt ratio is stellar, you could even qualify down into the mid-600 range.  Still, that disqualifies the vast majority of the US consumer population.
3. Select Models:  many offers are limited to select models.  If you want a different one, you might be out of luck.
4. Cash Rebates vs Zero Percent:  another catch is that 0% car financing often cancels out any dealer rebates offers going on, and vice versa.  These two kinds of offers are often cross-canceling, so even if you qualify for 0% financing, be sure to do the math with your finance officer and make sure you save more on one than the other.

Despite these challenges, for those who qualify, a zero percent auto loan offers the best of both worlds.  You get the long-term savings of buying a car with cash, outright, while not having to shell out the full purchase amount at the time of sale.

>> Click Here to See if You Qualify for 0% Financing