Is 0% Financing the Best Deal?

The auto dealer’s 0% interest rate sounds very appealing to those looking for their next car. However, is 0% the best option for you? Sometimes the 0% interest rate is advertised as one of the best deals you can get when buying a new car, but are you saving money? Here are some crucial points to consider.

Limited Availability for Top Credit Scores
Keep in mind that 0% loans are generally available for those with exceptional credit scores. A previous report from the New York Times states that only about 10% of consumers qualify for 0% interest loans, which requires pristine credit. While this option may sound great, be prepared that you may not qualify even with a good credit score.

Before considering a 0% offer, we recommend getting pre-approved for a loan with Cy-Fair FCU. The pre-approval will ensure you have an affordable financing option just in case you do not qualify for the dealer's 0% offer, potentially protecting you from higher dealer financing costs.

Better Alternatives for Qualified Borrowers
Even if you do qualify for the 0% interest loan, there may still be an even better option. Consider the auto manufacturer’s bonus cash or rebate offer, along with using outside financing (such as from Cy-Fair FCU) to avoid built-in dealer financing fees or higher rates. Taking the rebate typically reduces the car’s overall price, and then when paired with a low-interest loan you may find greater savings than the 0% financing might offer. For example:

  • 0% financing: For a car priced at $25,000, with 0% interest, you would pay $25,000 over 36 or 60 months.

  • Rebate Option: If you choose a $3,000 bonus cash, you finance $22,000 over 60 months at a 3.00% interest rate. Your total repayment would be $23,720.13, resulting in a savings of $1,279 compared to the 0% offer.

Dealers may not always disclose the bonus cash or rebate options when offering 0% financing, so you will need to ask, and then be sure to crunch the numbers before making your decision.

Making an Informed Decision
To determine the best savings option, consult with Cy-Fair FCU consultant. By carefully evaluating your financing options, you can ensure that you make the most financially sound decision when purchasing your new vehicle.

Cy-Fair FCU