It seems that more and more auto dealerships are offering 0% financing as an incentive, and it's easy to see why such a deal would be appealing. However, there is usually fine print involved in these offers, and very few people will actually qualify to pay absolutely no interest on their loans.
Qualifying to Pay No Interest
According to Experian Automotive, the average credit score of borrowers who are able to secure interest rates of 1% or less on auto loans is 748. And senior director of automotive credit for Experian Automotive, Melinda Zabritski, has reported that only 8% of car buyers have scores that qualify.
A bar graph from Credit Karma indicates that 70% of Americans have credit scores that are below 700, so it looks like Zabritski's estimate is probably accurate. This information may seem pretty discouraging until you take a look at the stipulations that are typically involved in 0% financing. After knowing the facts, you may come to believe that you're not really missing out on much.
0% Financing: The Fine Print
Believe it or not, there are car buyers who qualify for 0% auto loans who opt to take low interest financing instead. Sometimes the numbers just work out better this way.
- Usually, 0% financing requires a shorter-term loan. While some dealerships are starting to offer this deal on average-term auto loans, it is still more common to see 0% applying exclusively to 36-month loans.
What does this mean? If you finance $30,000 for 36 months, your payments, even with no interest, will be approximately $833 a month. That's probably more than most buyers are comfortable with paying.
- Only certain cars will qualify for a 0% deal. There is a good chance that a deal like this will only apply to the inventory that is currently on a dealer's lot. This means that you won't be able to get this rate if your car has to be ordered. Special option packages will also not qualify.
- You can't double up with cash rebates. If rebates are available, a dealer will typically make you choose between money back and 0% financing. You probably won't get both.
- With 0% financing, sometimes the price is the price. This means that many dealers will be reluctant to negotiate a cheaper price for the car if you opt for 0% financing.
All of this seems to indicate that if you can get a low interest rate on your auto loan, you may wish to do the math and see if you will actually come out ahead by taking advantage of other incentives and skipping the 0% financing.
When Buying a Car is More Challenging
Over half of all Americans actually have a credit score that is considered "subprime." This means that for many, many car buyers, it isn't a question of which deals and incentives to take advantage of, but, rather, "Can I buy a car at all?" You absolutely can, and Auto Credit Express can help. Regardless of what your credit situation looks like, we can connect you with a dealer who can get you an affordable auto loan.
Just fill out our fast and secure online application to get started today.