The truth is few car buyers qualify for 0 percent financing. Aside from an excellent credit rating, you usually have to earn a high monthly income and be willing to take out a short-term loan. Before you decide if a zero percent auto loan is the best financing deal for you, find out what factors other than your credit score are involved in getting the loan.
FICO Score
Your credit score can help you get financing easier and faster. Lenders use credit scoring to make credit decisions by considering only those factors that relate to a borrower's credit worthiness. Credit scoring takes into account both the good and bad information contained in your credit report, according to myFICO. Some items carry more weight than others with past mistakes meaning less as time passes. Creditors have different guidelines and cutoffs as to what they consider a good credit score. Car dealers are no exception, although a score above 720 usually qualifies for the lowest interest rates.
Buyer Beware
When it comes time to close the deal on a 0 percent finance, car buyers often are surprised to find that they can only take out the loan for 24 to 36 months. This increases the amount of the monthly payment, making it unaffordable for some consumers. Most car dealerships offering 0 percent financing also limit car buyers to purchasing vehicles, which are in stock. You have to be careful, too, as a dealer often increases a car's sticker price to make up for the lost interest charges.
Getting the Best Finance Deal
For car shoppers, an offer of 0 percent financing is not always the best deal. Some new car dealerships give you the option of choosing between 0 percent APR or getting a rebate. In some cases, a manufacturer or dealer rebate may be the wiser financial move. Most car buyers don't qualify for the 0 percent financing anyway, so taking the cash-back rebate and applying for an auto loan with the lender of your choice can actually be the better deal. If you have a reasonably good credit score, you should be able to negotiate favorable loan terms.
Other Requirements
Even if you qualify, what's not included in the dealership's ad offering 0 percent financing can kill the deal. Often 0 percent financing is only for a limited time. After the specified grace period passes, you can find yourself paying a high annual percentage rate. If you make a late payment, you lose the 0 percent and could find yourself paying back interest as a penalty. Most dealers don't allow you to negotiate a lower price but require you to pay the manufacturer's suggested retail price for the car. You might also have to make a hefty down payment and buy additional options to qualify.
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