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    What Does 0% Auto Financing Really Mean

    By Wasatch Peaks on August 25, 2021

    Topics: Auto Loan

    You may have seen a dealer or financial institution offering 0% APR financing on auto loans, but what does that really mean? Is it as good of a deal as it sounds? We’re here to help you understand what this offer includes and how to decide if it’s a good fit for you.

    What is 0% Financing?

    In exchange for providing the funds for your auto loan, lenders will charge you interest on the amount they have loaned you. The amount of interest you pay back is determined by an agreed upon interest rate and the loan amount, and the interest is paid by being included in your monthly payment.

    When a lender or dealership is offering 0% APR on an auto loan, they are allowing you to borrow the funds without having the pay extra interest charge for borrowing the money.

    How Does it Work?

    That sounds too good to be true, doesn’t it? When lenders offer 0% APR on auto loans, there’s often a bit more to it than it initially seems. These offers can save you money on your loan, but there are still fees and other costs that may be associated with these loans, meaning that you’ll still pay to borrow those funds, just in other ways. Additionally, it may be difficult to qualify for the offer in the first place.

    This offer is often used as an introductory interest promotion, meaning that you will pay 0% interest during the introductory period. Once this period of time has passed, the loan amount will then be charged a new interest rate. You’ll still end up paying interest on the loan, but you may have the opportunity to save money during that introductory period. However, you'll need to verify what the interest rate will be and be prepared for your payment to potentially increase with that additional interest charge.

    Alternatively, if the lender is associated with the dealership and auto company, there may be other costs that enable them to offer the 0% financing. This could include limiting the offer to specific models or financing plans, along with add-on products or additional features. These options may fit what you’re looking for or enable you to upgrade from what you had initially considered. You’ll have to compare the costs of the financing and other available offers to know how much you’ll be able to save, and which offer is best for you.

    Pros and Cons

    There are pros and cons to be considered when it comes to choosing your auto loan financing, especially when you’re looking at a 0% APR. This can be an awesome way to save money, but it may not give you the most savings in all situations.


    Save Money: You can save thousands of dollars over the life of your loan with this offer. This can bring the overall cost of a car down into a budget that you’re more comfortable with.

    Lower Monthly Payments: You may find that with this offer, you’ll enjoy lower monthly payments. This can make your car much more affordable to you.


    Requires Great Credit: In order to qualify for a 0% APR offer, you’ll need to have great credit. These offers are only available to those with top-tier credit.

    Restrictions, Limits, and Fees: There are limits to which vehicles are eligible for the financing, along with other restrictions and fees on the loan. It's up to you to make sure you explore and understand the fine print of the offer.

    Not Always the Best Option: You’ll need to do some research to see if this option actually saves you the most money. There may be other offers that allow you to save on the price on the car or a cheaper car that better fits what you’re looking for.

    Is this beneficial for you?

    Should you choose a 0% APR offer? It depends on your situation. You’ll need to weigh the pros and cons, along with the overall costs of the loan before making your decision. It’s important to stay within your budget, but you may also be able to save money if it makes sense.

    Here are some things to remember: There may be other costs to be aware of that come with the 0% APR financing. For example, this type of advertising is often available on specific, new vehicles that the company has overstocked and those may be out of your price range. Additionally, this promotion may make you ineligible for rebates or special pricing on the vehicle. This special pricing may actually save you more over the life of the loan.

    Learn more: How to find the best auto loans near you

    Wasatch Peaks

    Written by Wasatch Peaks