Created by: Dave Harland | 10 October 2019

The truth behind 0% car finance

If you’re thinking of buying a car, you’ve probably come across 0% finance deals. But what are they and is it all a bit too good to be true?

Before signing up for any finance, it’s important to research every deal and make sure you’re equipped with the correct knowledge.

What is 0% car finance?

If you can’t afford to buy a car in one payment, there’s the option to take out a loan to borrow money to pay for the car. Many car dealers and sellers offer a 0% car finance deal, meaning you can buy a car and pay no interest over the term of the loan.

To put it simply, you pay the same amount of money as a cash buyer, even though you're spreading your payments over a longer period.

But, 0% finance deals can be very difficult to qualify for, because you need a high credit score.

Tips when looking at 0% car finance deals

  • Read the terms and conditions
    You should never sign anything that you don’t understand, and if you’re not sure what it means, ask. Remember to make sure that the 0% interest rate offer isn’t an introductory rate which will change after a few months – instead, it needs to be a fixed rate for the entire contract.
  • Always have another option
    Not everyone will qualify for a 0% interest car deal so why not have another option? You shouldn’t feel pressured into accepting a higher interest rate from the same dealer just because you haven’t bothered to look elsewhere.
  • Try and stay up to date with payments 
    Late payments could mean extra charges and fees. Before signing your contract, make sure you know about any additional costs.
  • Shop around
    As with any credit, it’s a good idea to shop around and compare deals. Research how much the car sells for elsewhere and compare local competitors. You could find cheaper monthly payments with another dealer.

Four steps to securing a great deal

  1. When you arrive at the dealership, confirm that the 0% rate is available. 
  2. Take the car for a test drive and negotiate a price. 
  3. If the dealer explains that you can't be financed at 0%, think about whether you’re happy with the new rate. 
  4. If the rate is too high, remember there are other options.

Benefits of a 0% car finance deal

  • If you can’t afford a car it can spread payments over a set period.
  • You don’t have to pay interest on the car loan.
  • You’ll only pay what the car costs.

Disadvantages of a 0% car finance deal

  • If you buy a car outright with cash, you’ll own the car from the outset.
  • If you decide to sell the car, you’ll have to use the money to pay off your finance. 
  • If you get into financial difficulties, you’ll still have to keep up with monthly payments or risk losing the car.

While 0% car finance deals may have their benefits, you might not qualify for the offer. Remember, before signing for any finance it’s important to look at your outgoings and work out whether you can afford it.

If you do get behind with any payments, talk to your finance company or lender as soon as possible.

Interest 0% car finance