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Is 0% Financing the Best Deal?

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Zero Percent Auto Financing on Car Lot

Many dealers are offering special financing on new cars. It’s important to look closely at all the facts, because 0% or low-rate financing may not always be the best deal for buyers. Will you qualify for the special financing? Only those with excellent credit histories are usually eligible. Credit blemishes could mean a higher loan rate.

There may be strings attached to the deal such as:

  • Vehicle restrictions — Not all vehicles will qualify for special financing. You’re often limited to certain models or dealer stock.
  • Price restrictions — You may not be able to negotiate the price and could end up paying more.
  • Rebate restrictions — If you take the financing deal, you may not get a cash rebate.
  • Term restrictions — Some deals require a shorter term, which means higher monthly payments.
  • Down payment requirements — You may be required to provide a larger down payment, such as 10% down.

Dealers usually offer a choice between special financing and a cash rebate. It’s important to evaluate your options. Taking the dealer’s cash rebate and financing at your credit union could be a better deal. For example:

60-month car loanDealer financing 0% APRCredit union financing 5.74% APR
Car sales price$20,000$20,000
Dealer rebate- $0- $3,000
Amount financed$20,000$17,000
Total interest paid over 60 months+ $0+ $1,412.81
Total amount you'll pay$20,000$18,412.81
Total savings---$1,587.19
Estimated monthly payment$333$302.39

APR = Annual Percentage Rate. This APR is for example only; please see our current rates for complete details. Your rate may vary based on your credit history, loan amount and repayment method.

Our affordable car loans offer you the same low rate whether your car is new or used.

  • Related Resources

    See More Resources

  • Types of Financing

    There are various financing options available to you when you purchase a vehicle. Be sure to look at all of them and choose the one that best fits your needs.
  • Negotiating a Deal

    Once you’ve decided on a car, it’s time to talk about price and a deal that suits both you and the seller.