You’ve likely seen the flashy car commercials yelling about “0% APR FINANCING” … and why wouldn’t they be excited? When it comes to paying interest, you can’t get much better than zero, right?

In actuality, 0% financing isn’t as glamorous as it seems. While it works well for some, it may not be the best financial choice for others. Here are some things to consider before heading to the dealership to snag that TV ad:

  • Qualifying for the offer can be difficult. Because 0% is such a great deal, dealerships are understandably cautious to extend it because they want to minimize the risk that the loan will default as much as possible. 0% financing is reserved for those with the very best credit, and there is little transparency from automakers as to what the credit score requirements are to secure it.
  • You may not have control of the terms. 0% financing often comes with a set term (the length of time you have the loan for) that cannot be negotiated. This can work against you if the term is too short or too long. If it’s required that you take a shorter term on the vehicle, the monthly payments may be a stretch for your budget. If you have to take a longer-term payment like 72-months or 84-months, you may become upside-down on the car if it loses its value before its paid off. This may also mean you have a car loan longer than you would like – if you had been able to select a shorter term like 48 or 60-months, you might have been car payment free sooner.
  • You might end up overpaying. You may see 0% and think the best things in life are free, but your reality could be that nothing is free. In order to recoup the money lost through financing, dealerships may be less willing to negotiate with you on the price of your vehicle. You might have come out ahead had you financed less with a low interest rate. Or, if you’re offering a trade-in, you may be offered less for your vehicle in exchange for the financing deal.

0% financing can be great if you qualify, negotiate ahead of time, and come to the bargaining table with a substantial down payment. For many, however, it makes more sense to get pre-approved for your auto loan, secure a great rate, and go car shopping with the power of cash.

For a limited-time, we’re offering auto loan rates as low as 2.020% APR* in honor of our 40th anniversary. Contact us to learn more, or conveniently (and safely!) apply from the comfort of your home online.

*APR = Annual Percentage Rate. 2.020% APR for new/used/refinanced vehicles 2015 and newer. Credit Union reserves the right to discontinue, change and/or update the promotion without notice. Rates, terms and conditions subject to change and may vary based on qualifications, including creditworthiness. All loans subject to approval. Membership eligibility required. See credit union for details. Interest will continue to accrue during the deferred payment period. Deferred payment option available for loans closed in July or August 2020. Federally insured by NCUA.