The Truth About 0% Auto Financing

Zero percent financing is heavily advertised by the big auto makers to get people into their dealerships. But is 0% financing as great as it seems?


This page:

  • Briefly describes how 0% auto financing works

  • Explains how you could save more with the dealer's rebate

  • Lists some additional benefits of independent financing

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How 0% Auto Financing Works

Car manufacturers (GM, Ford, DaimlerChrysler, and to a much lesser extent, Japanese manufacturers) advertise their zero percent financing deals heavily, because it is a great hook that gets everyone in the door.

But is zero-percent financing right for you?

0% Auto Financing can be a dream come true for people with excellent credit. But for many car shoppers, zero-percent financing is simply not feasible.

Statistics from CNW Research (a consumer advocacy organization) show that only about one-third of buyers who apply for zero-percent financing actually qualify.* And among those, only around 10 percent actually close the deal, according to the National Automobile Dealers Association.**


Why do so few people benefit?
Because of drawbacks like these:

  • Shorter loan terms. Some dealers offer 60-month terms, but 36 months is more typical--which means higher monthly payments. (Although we genrally recommend that you keep the number of payments low to keep the total loan cost low)

  • Fewer models to choose from. The customer may be limited to what's in stock, and therefore, not able to buy the vehicle they truly want.

  • No rebate. The customer may be asked to choose either zero-percent financing or a cash rebate.

Can you do better than zero-percent financing? Sure. By financing with a low rate from Capital One and taking a dealer's cash rebate (if available), you could really save big:



(Yes we realize that the chart is outdated, but the principle holds with today's higher rebates and interest rates).

With a Capital One Blank Check® you gain a strong negotiating advantage. (Many people lured by zero-percent financing get so distracted by the offer that they forget to negotiate the price of the car.) With a Blank Check®, you don't to worry about financing and can concentrate on negotiating the lowest price.

*Source: Consumer Reports online; November 2002.
**Source: NADA Chief Economist; November 2002

Learn how to save even more:

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