The truth about 0% financing offered at dealerships

A car loan with zero interest? Sounds like a dream.

But before you rush to the dealership, let’s pull back the curtain on those 0% financing deals and see what’s really going on.

What is 0% financing?

When a dealership offers zero-percent financing, it means they’re giving you a car loan without charging interest. Sounds generous, right?

Not quite. Dealers still make their money—just in a different way. These no-interest loans are usually used to:

• Push slow-selling models

• Clear out older inventory

• Boost sales during slow seasons (like economic downturns or pandemics)

The dealership profits off the sale of the car itself—not the financing. So while it might look like a win for you, it’s a smart move for them, too.

Can anyone qualify for 0% financing?

Spoiler alert: Not everyone.

0% financing is typically reserved for buyers with excellent credit. Dealerships use it as bait to get folks in the door, but only the most creditworthy borrowers walk away with the deal. If your credit isn’t top-tier, expect to be offered a different loan option—possibly with higher rates.

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.

When is 0% financing not a good deal?

Here’s where things get tricky. That shiny 0% offer might come with trade-offs:

• No price negotiation: Dealers are less likely to budge on the sticker price.

• No rebates or incentives: Many 0% deals disqualify you from manufacturer cash-back offers.

• Higher monthly payments: Shorter terms (like 36–48 months) mean steeper payments.

• Longer commitment: Some offers stretch to six years, which is a long time to pay off a depreciating asset.

Let’s say you’re eligible for a $2,500 rebate on a car—but only if you don’t take the 0% offer. That rebate could lower your overall cost more than skipping the interest.

Let's do the math.

Here’s a side-by-side breakdown:

*Includes a $2,500 rebate

In this case, the traditional loan is actually cheaper overall—despite the interest—thanks to the rebate.

Bottom line?

Zero-percent financing isn’t always the best deal. Before signing anything, run the numbers yourself. If the monthly payments are too high, or if you’re giving up valuable rebates, the deal might not be worth it.

And if you’re shopping for a new car, OnPath’s 90 days of no payments  on new vehicle loans can give you a head start—without the strings that often come with dealership offers.

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