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Financing a Car with 0% Interest

Christine Spencer

Auto Loan Expert

Purchasing a car is probably the second largest purchase you’ll make second only to purchasing a home. As a rule, we generally don’t get as low of interest rates with car loans as we do with auto loans. Additionally, cars depreciate in value unlike real estate, which generally increase in value. Therefore, you’re going to want to get the best possible interest rates when you purchase a car. Imagine financing a car with 0 percent interest. Learn how you may be able to make this happen.

It’s All about Credit

When you apply for financing for your new car, the first thing the lender will do is check your credit scores. They will determine, more than anything else will, if you get low interest rates or are eligible for 0 percent interest. Credit Karma reports that consumers must have very good credit to be eligible for 0 percent interest.

Auto dealers generally want scores to be at least in the 700s. In fact, Credit Karma is a great way to not only find out what your credit scores are for free, but it also allows you to monitor your scores and know when there are any changes to your score and why they occurred.

It's important to find out what your credit scores are prior to visiting the auto dealer. It’s better than having the auto dealer run your scores and learning they are unpaid debts that you were unaware you had. Once you know where you’re at in terms of credit scores, you can clean up your credit so to speak.

In addition to looking at your regular FICO credit scores, auto dealers will usually look at your auto-enhanced scores. Whereas your regular FICO scores are based on how you pay all your debts, the auto-enhanced scores are based on how you’ve repaid auto loans.

Generally, if you have good credit scores, your auto loans were probably paid on time. It’s very important to know what your scores are so you can have your credit looking as good as possible when you see the auto dealer. This is how you’ll get the best interest rates.

Improving Credit

Once you’ve determined what type of credit scores you have, you’re in a position to improve them. Your credit scores are determined by your credit history, payment history, type of credit, current debts and new credit applications. Some of these things can’t immediately be changed, but you may be able to change your current debts.

Your current debts make up 30 percent of your credit score so the more you can pay off on your debts, the more your credit scores will improve. It may take a couple of weeks for the scores to actually change on your credit report, so you may want to give it a little time before visiting the dealership. If you find any errors on your credit report, now is the time to contact the credit bureau and get them corrected.

Shop for the Best Deal

Financing an auto with 0 percent interest can save you thousands of dollars over the life of the loan, particularly if you’re purchasing a vehicle with a high price. Financing with 0 percent interest won’t save you as much as you’d like if you’re not getting a good deal on the price of the car.

If your credit scores indicate that you’re a good credit risk to an auto dealer, there will be more than one auto dearer wanting your business. Shop around and make sure you get the best terms possible and the most for your money.

U.S. News & World Report states that you can save a lot of money by shopping online because you’ll find dealers that may not be in your area but are offering great savings. Additionally, you may find sales on cars that are in your area but that you were not aware of before.

U.S. News also also offers a Best Price Program, which can help you save money by buying your auto locally. Ratings on cars, which can provide you with valuable information, can also be found on the U.S. News & World Report site.

Get Preapproved

When you visit an auto dealer and apply for financing, they’re going to check with various banks they deal with regularly. Your chances of financing your new car with 0 percent interest may not be as good as if you get direct financing by looking at car loans online first. Getting rid of the middle-man can save you time and money and improve your chances of getting 0 percent financing. Consider visiting your local bank or credit union and see about being preapproved prior to visiting the dealership.

Even if you’ve never imagined financing a car with 0 percent interest, you may find it’s easier than you think once your credit is in good condition and you know where to shop. Now all you have to do is enjoy start shopping for your dream car!