Finding 0 interest auto loans may seem like a great deal. Who wouldn’t want to buy finance a new car without ever having to pay any interest? Many major auto makers regularly provide 0 interest auto loans to help stimulate consumer buying and unload old inventory. Savvy consumers who take advantage of 0 interest loans may save thousands of dollars in interest over the course of the loan, but at what cost?

Are 0 Interest Auto Loans a Good Deal?

While 0 interest auto loans may seem to be a great deal on the surface, it’s important to fully understand all of the terms and details regarding your new loan before signing on the dotted line. It’s especially important to know if the 0 interest applies to the entire loan or if it’s simply a teaser rate to get you signed up. Here are a few more things to consider.

  • You may need to have near perfect credit to qualify for 0 interest auto loans. If you’ve made any late payments in the last 2 years you can probably forget about getting a zero interest loan.
  • You may only get 0 interest financing if you are willing to give up a manufacturer’s rebate. Typically getting the rebate will save you more money up front while the lower interest rate will save you more in the long run.
  • 0 interest auto loans typically require a much shorter period to be paid back (2-3 years rather than 5 years) which will raise the monthly payment quite a bit.
  • Only certain makes and models will qualify for 0% interest rates. This will limit your selection quite a bit when selecting a new car or truck.
  • Most of the time you will also be limited to dealer stock with 0% financing. This means you have to choose from what’s already on the lot and won’t be able to pick any custom colors or options.

Qualifying for 0 Interest Auto Loans

Before applying for a 0 interest auto loan you should consider the following:

  • You Might Not Be Approved - The sad truth is that only about 1 in 20 people will be able to qualify for a 0 interest auto loan. You will need to have almost perfect credit to qualify.
  • Don’t Pay Too Much - Often times you won’t get any special discounts or rebates when you get 0% financing. You may actually do better getting a vehicle at a discounted rate with incentives than trying to get a 0% financing rate. Always make sure you’re getting a fair price AND 0% interest.

0 Interest Auto Loan Questions to Ask

To understand exactly what you’re getting yourself into when applying for 0 interest auto loans you should be asking the following questions:

  • Will I be paying more for the car with 0% interest?
  • Will 0% financing require a large down payment?
  • How long will I have to pay back the loan at 0%?
  • Will there be a balloon payment due at the end of the loan?
  • Do I have to buy anything extra (think rust protection) to qualify for 0% financing?
  • How long is this 0% financing offer available?
  • Does the 0% financing apply to all the cars in stock or just some makes and models?
  • Will I have to forfeit any rebates or incentives to qualify for 0% financing?