What You Need to Know About 0% Financing

What Car Shoppers Need to Know

• Zero percent financing eliminates thousands of dollars normally spent on interest.
• Qualification is strict, generally requiring excellent credit.
• The goal should be minimizing total out-of-pocket cost through a combination of low rates and other incentives, including rebates and cash back.

Zero percent financing can save you thousands of dollars on the cost of a new car, particularly in this age of longer loan terms, higher-than-ideal interest rates and the average price of a new car hovering around $50,000. It all adds up to savings that can be substantial, especially as prices continue to rise and loan terms of five, six and even seven years are increasingly common.

Related: Every New Car Offering 0% Financing in March

How You Save Money

Let’s say you’re considering borrowing $40,000 to finance a new car with a 5% annual percentage rate on a 60-month loan. With those terms, at the time of this writing, your monthly payment would be a substantial $755 per month, and you’d pay more than $5,000 in interest over five years. But with 0% financing, you’d pay absolutely nothing in interest charges, putting that $5,000 back in your pocket. Plus, your monthly payment would be about $100 less.

The Catch

The opportunity to save $5,000 over five years might make 0% financing seem like a no-brainer, and it often is. But that’s true only if you qualify for a no-interest loan, and many buyers will not. About 80% of new-car buyers finance their purchases, according to the National Automobile Dealers Association, but only those with excellent credit will likely qualify for a loan at 0%. That generally means a credit score of 800 or higher.

Buyers with a lower credit score can expect to pay a higher rate. It’s also important to know that 0% financing is generally offered only through an automaker’s financing arm (such as Ford Credit, GM Financial or Toyota Financial Services). It’s also only offered on new or certified pre-owned vehicles, and often only on more expensive, higher-trim models or shorter-term loans.

Consider the Whole Picture

Securing a no- or low-interest loan is only one option to save on a purchase, and other incentives or rebates might result in a better deal for you. Rather than focusing solely on a low interest rate, it is critical to factor in any other available offers the manufacturer or dealer may put on the table to put together the best package for your needs and budget.

It’s also key to know that even if you do qualify for 0% financing, dealers may try to make up the lost income by offering things like extended warranties or gap insurance, which you may not even need but are probably available for less elsewhere if you do. Your auto insurance provider or a credit union may offer cheaper gap insurance. Numerous companies offer extended warranties, so those are always worth shopping for the best deal.

The good news is there are dozens of 0% financing deals available on a wide variety of models right now, including family SUVs, new electric vehicles, pickup trucks and even commercial vehicles. Just keep in mind that only about a third of these offers apply to 2026 models; the rest are older 2025 inventory that manufacturers are more eager to move.

The most important thing to remember is that getting the best finance rate you can is only part of the negotiation process. The object of the game is to minimize your out-of-pocket cost, whether that means through low finance rates, other incentives, cash-back offers or some combination of the above. Always make sure you completely understand what you are committing to, and question any cost that seems questionable to avoid unnecessary charges.

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