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What Are 0% APR Auto Loans?
If you’re in the market for a new car, you may hear about 0% APR car loans. With 0% APR auto loans, you won’t owe any interest on your loan amount. You’re basically able to take a car off the lot, with the agreement you’ll pay back whatever you didn’t pay in full at the time of purchase, interest-free. Certain carmakers offer these types of loans on selected new models. You might also find 0% APR financing options from dealerships trying to get rid of inventory or sell more of a certain model.
In terms of interest savings, 0% APR loans are considered some of the best car loans. But while they may have the lowest car loan rates, they can also limit your options compared to some of the other best auto loans you can get from car loan companies.
- Auto Credit Express
Min. LoanN/AFixed APRN/AEligible DegreesN/AOffer Details
- Bad Credit Auto Loans
- $5,000 to $45,000 Approvals
- No Credit Rejected
- Get Financing for a New or Used Car
- Apply & Drive Today!
- CarsDirect
Min. LoanN/AFixed APR3.00% – 12.90%Eligible DegreesN/AOffer Details
- Rates as low as 0% on select cars, trucks and SUVs
- Free Online Quotes – Get Your CarsDirect Target Price Today
- Local dealers compete to provide the best rates for both new and used vehicles
- LightStream
Min. Loan$5,000Fixed APR2.49% – 11.89% w/AutoPayEligible DegreesN/AOffer Details
Disclaimer: Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Excellent credit is required to qualify for lowest rates. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay may be higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice.
Payment example: Monthly payments for a $10,000 loan at 4.99% APR with a term of 3 years would result in 36 monthly payments of $299.66
© 2020 Truist Financial Corporation. SunTrust, Truist, LightStream, the LightStream logo, and the SunTrust logo are service marks of Truist Financial Corporation. All other trademarks are the property of their respective owners. Lending services provided by Truist Bank.
- MyAutoloan
Min. Loan$7,500Fixed APR3.49%–21.08%Eligible DegreesN/AOffer Details
- You and/or co-qualifier must be at least 18 years of age; Minimum income: for Purchase, Private Party and Lease Buyout loan types, $21,000 Gross Yearly Income; for Refinance loan type, $18,000 Gross Yearly Income
- Lives in a state where we are currently doing business, (we are in 48 states, not in Alaska or Hawaii) – Minimum Vehicle Requirements: 125,000 maximum mileage; 10 years old or newer
- Minimum Loan Amount: for Purchase, Private Party and Lease Buyout loan types, $8,000; for Refinance loan type, $5,000
- FICO scores of 575 or greater
- Applicant has not submitted a loan offer form in the past 31 days for the same loan type
- Customers intent when submitting the loan offer form was to finance a new or used vehicle or refinance an existing vehicle
- PenFed
Min. Loan$500Fixed APRStarting at 1.39%Eligible DegreesN/AOffer Details
New Auto Loans: Loan rate applicable to new vehicles only. New vehicles are where you are the original owner and the untitled vehicle is a current (2020) or prior model year (2019). Up to 110% financing is available. Vehicle weight restrictions apply. Minimum loan amount is $15,000 for 61-72 month term. Rate also depends on term.
Used Auto Loans: Maximum used car loan advance will be determined by PenFed using a NADA value. Financing is available up to NADA average retail value plus tags, title, taxes and extended warranties not to exceed 110%. Some restrictions apply. Call 1-800-247-5626 for details.
Financing for 61-72 month term is valid for model years 2015 – 2020. Rate depends on term. Other restrictions including vehicle and mileage limitations may apply.
Refinance Auto Loans: New vehicles are where you are the original owner and the vehicle is a current (2020) and prior model year (2019). For used vehicles, maximum used car loan advance will be determined by PenFed using a NADA value. Up to 100% financing is available to qualified members. PenFed does not permit internal refinances of an existing PenFed auto loan.
How do 0% APR auto loans work?
You might be able to find one of the best 0% APR auto loan options directly from a carmaker looking to move inventory. Car dealers may also offer special financing terms to create the best car loan with 0% APR for you. The car dealer may cover the interest you’d pay when you qualify for a low APR loan to entice you to buy a car.
Typically, 0% APR loans are only offered to those with excellent credit scores. However, if you have a lower credit score than excellent, you still may be eligible for some 0% APR loans. A carmaker or dealer may offer a 0% APR loan because they’re making enough money off the car sale to justify the terms.
Edmunds states 0% APR loan options tend to pop up more in summer to increase sales for outgoing model years.
How can I qualify for a 0% APR loan?
Edmunds reports 0% APR loans are typically reserved for those with “Tier 1” credit, not a specific minimum score. A Tier 1 distinction usually indicates excellent credit, but don’t be deterred if your credit score is lower. Tier 1 may mean different forms of credit to different carmakers and dealers. It may also fluctuate depending on what inventory needs to be moved.
If you don’t qualify for what Tier 1 means today at the carmaker or dealer of your choice, you may be interested in the best bad credit car loans. Or, you may able to improve your credit to get a 0% APR auto loan.
One way to improve your credit score is to make sure you’re paying all your bills in full, on time. Set up automatic payments so you don’t have to worry about missing them.
You might also want to put a credit freeze on yourself. Only use your debit card for purchases you can afford now. Make paying off your credit card debt your priority. Avoid opening or closing new credit card accounts. You want to keep your credit history intact while also avoiding hard inquiries into your credit report.
Even if you don’t qualify for a 0% APR auto loan now, you may qualify for a low APR auto loan. In some cases, the dealer may offer to pay your interest on that loan if you buy the car, so you’re still getting 0% APR refinancing.
Finding a 0% APR auto loan
According to Edmunds, carmakers like Kia, Subaru and Ford offer these types of loans on selected models. You might find them from dealerships trying to get rid of inventory or sell more of a certain model.
Also, some dealerships may promote 0% APR loans because they’re getting an incentive from the carmaker. Check out dealership or carmaker websites, or call dealers to compare 0% APR auto loan offerings.
Even if you’re able to purchase a car in all-cash today, you still may be interested in a 0% APR loan. The benefit is that you’ll be able to keep more of your money on you now, to invest or spend how you need to.
What to know about 0% APR financing
In some cases, a 0% APR loan or financing may not make sense for you. One situation is where you’re offered a cash bonus that’s a higher amount than what you’d save with a 0% APR loan. In that case, it may be better to take the cash now and pay interest on the loan over time to save money long-term. You could also look for a refinance auto loan after agreeing to a low-interest loan and taking a rebate to lower your rate and save even more.
It also helps to get pre-approved for a car loan with your bank or credit union before you go car shopping so you have something to compare loan offers to. Especially if you’re presented with a cash offer, a low-interest loan you’ve been pre-approved for can help you make a better financial decision when considering a 0% APR loan.
Carefully look at the terms of a 0% APR loan. When the loan is for five years or more, you run the risk of being stuck paying for a car you may not want in the future, or for a car whose value has greatly depreciated. You also want to be aware that some 0% APR loan terms will require you to purchase add-ons, like gap insurance or an extended warranty.
Some dealers may drive up the car cost to make up for the 0% APR financing. You’ll want to compare cars and costs among dealerships to make sure you’re not paying extra.
Too long, didn’t read?
If you need a loan for a car, a 0% ARP loan is one of the best auto loans available — as long as it’s for a car you’re happy with. You’ll want to consider all the financial options, including if you could walk away with more money by taking out a low-interest loan and getting a cash bonus. You’ll also want to make sure the car is valuable enough that you’ll be happy driving it off the lot and paying back what you owe through a loan.
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Reviewed by
Courtney Mihocik
Finance EditorCourtney Mihocik is an editor at The Simple Dollar who specializes in insurance, personal finance, and loans. Previously, she wrote and edited for Interest.com, PersonalLoans.org, Ballantyne Magazine, Thread Magazine, The Post, ACRN, The New Political, Columbus Alive and the Institute for International Journalism.
