What Does 0% APR Financing Mean?

It’s quite common to find advertisements that promote 0% APR financing for a vehicle or set of vehicles when shopping for a new car. To put it simply, this means that you’d owe absolutely no interest with each loan payment when you finance a car purchase — you’d ultimately only pay the exact cost of the vehicle throughout the length of the loan. However, finer details usually make this incentive more difficult to attain than it may appear.

Who Qualifies for 0% APR Financing?

Unfortunately, 0% APR financing offers are usually very exclusive because they only apply to prospective buyers with excellent credit scores. This is because these shoppers are low-risk borrowers; they’re highly likely to make each payment on time and may even pay the entire loan balance early.

When pursuing an active 0% financing offer, always be sure to check whether you qualify before researching affected models and visiting a dealership. Not only will you avoid the disappointment of finding out you don’t qualify after you’ve already put in effort, but you’ll also avoid the pressure of an employee still trying to make a sale before you’ve had a chance to assess the financial impact of not qualifying.

It’s also worth noting that, as of April 2020, some automakers are offering 0% APR financing to all shoppers in order to generate business amid the COVID-19 coronavirus pandemic. Most of these rare incentives have an upcoming expiration date, so be sure to determine how long they’re active if you’re in the market for a car. And don’t forget to inquire about a home delivery option.

Is 0% APR Financing a Good Deal?

For qualifiers who are active in the car buying process, 0% financing is a great deal if you can afford the loan. As long as the total cost of the car fits your budget and you can afford to make the monthly payments on time, 0% APR financing could save you thousands of dollars in interest throughout the loan term.

However, the risk outweighs the reward if you’ve been approved for 0% financing, but the vehicle cost surpasses your budget allotment. Additionally, it might not be a good idea to buy a new car if the 0% financing incentive is your sole motivation and you’re otherwise happy with your current car — always be sure you can afford the purchase.

Should I Know Anything Else About 0% Financing?

Be sure to maximize your down payment and limit the length of your loan term as much as possible, even if you qualify for 0% financing. Though you won’t be paying any interest throughout the length of the loan, you’ll still want to be mindful about rapid depreciation and avoid having a loan balance greater than the car’s value.

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