Can you afford a 0% interest auto loan?

Reality: Few qualify

You’ve seen auto dealers offering 0% interest on car loans, and maybe you’ve wondered how they can afford to make that offer. It’s simple: very few people actually qualify for the 0%. The 0% financing is typically reserved for buyers with the best credit. If that’s not you, count on not qualifying for the rate.

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Check other special offers

If you do qualify, before you say yes, check out any other special offers the dealer may have, like cash-back rebates, or try negotiating a lower price for the car. If you have a choice between 0% financing and dollars off the sticker price, do the math to see which is better. In many cases you will be better off to take the lower price. You can calculate this using an online loan calculator here.

Negotiation: stay ahead

Even if you qualify for the 0%, you may find the dealer unable to negotiate a lower price when combined with the 0% offer. If you can waive the offer and negotiate a few thousand dollars off the price of the car, you’re still ahead.

Chart a course for auto-loan savings

The chart below illustrates how a 0% loan compares to a cash-back rebate or negotiated discount on a 60-month loan at 3% interest.

  0% APR vehicle loan 3% APR vehicle loan 3% APR vehicle loan
Discount or rebate $0.00 $2,000 $3,000
Vehicle price after rebate or discount $20,000 $18,000 $17,000
Number of payments 60 60 60
Monthly payment $333.33 $323.44 $305.47
Total cost $20,000 $19,406.40 $18,328.20

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