To qualify for a 0% APR car loan, you generally need excellent credit, a solid income and a low debt-to-income ratio. But even if you qualify, your vehicle options may be limited.
It may sound too good to be true, but getting a car loan with a 0% annual percentage rate (APR) is possible. However, not everyone will qualify for no-interest financing, youll still be responsible for other costs and 0% APR loans may only be available on certain makes and models. If youre in the market for a new car, heres what you need to know about getting a 0% APR car loan.
Getting a new car is an exciting experience But it can also be a stressful one, especially when it comes to financing Many people are attracted to 0% financing deals offered by car manufacturers, which allow you to get a new car without paying any interest. But what credit score do you really need to qualify for 0% auto financing?
Overview of 0% Car Financing
0% financing, also known as 0% APR financing, allows you to take out a car loan and pay no interest over the life of the loan. The most common 0% financing offers last 36 months, but some can last 48, 60, or even 72 months.
With 0% financing, you only pay back the original loan amount in monthly installments, without any added interest fees. This can save you thousands of dollars compared to a standard car loan.
However, 0% financing deals are only offered on select new car models. The manufacturers use these attractive financing offers as incentives to move specific models off the lot. You may be limited in your vehicle selection if you want 0% financing.
What Credit Score Is Needed for 0% Car Financing?
In most cases, you’ll need excellent credit – generally a score of 720 or higher – to qualify for 0% car financing. However, the exact credit score requirements can vary:
- Toyota and Lexus often require a minimum score of 760.
- Honda and Acura may require 720 or higher.
- Ford, Chrysler, and Nissan tend to require scores of 690-700.
- General Motors and Mazda may accept applicants with scores as low as 660.
As you can see the credit score needed depends largely on the auto manufacturer. The good news is that some offer 0% financing to applicants across a wider range of credit scores.
Other Factors Beyond Your Credit Score
While your credit score is important, it’s not the only criteria lenders consider. Here are some other key factors:
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Down payment amount – A larger down payment reduces the lender’s risk, increasing your chances of approval. Putting 20% down or more is ideal.
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Debt-to-income ratio – Lenders look at your total monthly debt payments compared to your gross monthly income. A ratio below 30% improves your odds.
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Loan term requested – You’re more likely to be approved if you opt for a shorter term, like 36 months.
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Trade-in equity – If you have positive equity in a vehicle you’re trading in, meaning you owe less than it’s worth, that’s seen favorably.
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Co-signer – Adding a co-signer with better credit may help you qualify.
How to Improve Your Chances of Getting 0% Financing
If your credit score falls a little short, there are steps you can take to boost your odds of getting that coveted 0% car financing:
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Pay down balances – Reducing balances on credit cards and other debts will likely increase your score.
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Become an authorized user – Ask a friend or family member with great credit to add you as an authorized user on a credit card account.
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Limit credit inquiries – Each application for new credit results in an inquiry, so avoid applying for other loans or cards you don’t need.
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Ask for a goodwill deletion – If you have any late payments, ask the creditor to remove them from your credit report as a courtesy.
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Apply with a co-signer – Adding someone with stellar credit as a co-signer can offset any dings on your own credit.
Alternatives if You Don’t Qualify for 0%
If you need a car but don’t qualify for 0% financing even after trying to improve your credit, here are some options to consider:
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Shop for used cars where you may find more flexible financing terms from dealerships.
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Explore financing from a bank or credit union, which may offer lower interest rates than the dealer.
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Look at certified pre-owned (CPO) vehicles that combine the reliability of a new car with the affordability of a used model.
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Weigh taking a loan with a low interest rate, such as 3-5%, rather than 0%.
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Save up to buy a quality used car with cash.
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Consider leasing if you want lower monthly payments and plan to get a new car in 3 years or less.
The Takeaway
While 0% financing can save you a lot of money on a new car purchase, excellent credit is usually required to qualify. Scores of 720 or higher have the best approval odds for most manufacturers, but other factors like your down payment and debt levels also come into play. With some work, you may be able to boost your credit and improve your chances of getting that coveted 0% interest rate.
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What to Know About 0% Financing
Financing your vehicle purchase with a 0% APR loan can be a good way to get you into a new car, but it may not be right for everyone. Before opting for a no-interest loan, there are a few things to know.
- You may not have your pick of vehicles. Dealers dont usually offer 0% APR financing on all makes and models. If you want to score a 0% APR financing deal, your choices will likely be limited.
- Your payment may still be high. Theres no doubt that a 0% APR loan will save you money on interest, but that doesnt necessarily mean you can afford the loan. Run the numbers to determine whether the payment will fit into your budget and how repaying your loan may affect your ability to achieve other important financial goals.
- Repayment timelines can vary significantly. Some 0% APR offers come with relatively short repayment timelines like 36 months, and others may have extended timelines like 72 months. Lengthier terms reduce your monthly payments, but locking yourself into a long-term financial commitment can make saving for other goals more challenging.
- No interest doesnt mean no cost. Not paying interest can save you thousands over the life of a loan, but it wont eliminate all the costs associated with buying a car. Youre still responsible for taxes, title, registration and other fees. Additionally, the dealer may offer you add-on products like extended warranties, credit insurance and gap insurance. Do your homework on optional products before heading to the dealer, and avoid purchasing coverage you dont need.
- Understand what you may be giving up. Taking advantage of a 0% APR loan might sound like a no-brainer, but it may not always be your best option. In addition to 0% APR financing, dealers sometimes offer cash rebates that can shave hundreds or even thousand dollars off the purchase price. However, you often cant combine offers. Run the numbers to determine whether the special financing or a rebate makes more sense based on your finances.
How to Qualify for a 0% APR Car Loan
Qualification requirements vary by dealer, but generally, you need to have:
- Good credit: No-interest auto loans are typically reserved for borrowers with strong credit profiles.
- Adequate income: Even though you dont have to pay interest on your loan, you still need to demonstrate that you can afford to make the monthly payments.
- Low debt: Your debt-to-income ratio (DTI) is one of the factors lenders review to determine whether you can afford your payments each month. Reducing your DTI may improve your chances of qualifying.
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FAQ
What credit score is needed to get 0 financing on a car?
… is typically limited to “qualified buyers” or those with “tier one credit.” This means you’ll likely need to have a credit score higher than 700 or 720 …
What credit score do you need for 0% down?
To buy a house with no money down, you typically need a credit score of at least 620 for a USDA loan or a minimum credit score of 500, for some lenders, for VA loans.
How can I qualify for 0% APR?
Introductory no-interest credit cards typically require good credit (scores 670 to 739) or excellent credit (scores 740 and greater).
Is 0% APR on a car a good deal?
When is 0% financing a good deal? If you qualify and the numbers make sense, 0% financing can save you a significant amount in interest over time. But here’s the key: make sure those monthly payments fit comfortably in your budget. A no-interest loan doesn’t mean “free”—it just shifts where the cost shows up.
Is there a minimum credit score for a car loan?
While there’s no universal minimum credit score required for a car loan, your scores can significantly affect your ability to get approved for a loan and the loan terms.
What credit score do you need to buy a car?
The report also found that on average, the credit score for a used-car loan was 684, while the average score for a new-car loan was 756. What minimum credit score is needed to buy a car? There isn’t one specific score that’s required to buy a car because lenders have different standards.
Can you get a car loan with a 650 credit score?
Yes, it’s possible to get a car loan with a 650 credit score, though your rates might not be as good as those for an applicant with better credit. If you shop around and aren’t happy with the interest rates you’re quoted, you might consider working on your credit before taking out a loan. How does an auto loan impact my credit score?
Can you get a 0% APR car loan?
To qualify for a 0% APR car loan, you generally need excellent credit, a solid income and a low debt-to-income ratio. But even if you qualify, your vehicle options may be limited. It may sound too good to be true, but getting a car loan with a 0% annual percentage rate (APR) is possible.
What is a good FICO score for a car loan?
Many dealers use a FICO Auto Score instead of a traditional FICO Score or VantageScore when evaluating your car loan application. Your FICO Auto Score can range from 250 to 900, depending on your previous auto loans.
What if I qualify for 0 percent financing?
If you qualify for 0 percent financing, talk to your car dealer about your payment options. Some dealerships will agree to a longer loan term if you request it. It takes a full seven years for negative information to age off your credit report.