Is a 0% Auto Loan Good for You?

Crazy question, right? It sounds great. But getting a zero percent loan can actually cost you more money compared to a low interest rate loan. If the dealership gives you the option of a 0% loan or a rebate of some amount, you may end up paying less for the vehicle by taking the rebate and financing through a low-rate loan.

First, Some Math
Some dealerships are offering rebates up to $12,000 off MSRP for select vehicles.1 That’s a lot of money you could save! Of course, a rebate of that amount is less common than a rebate of a few thousand dollars, so let’s use a more practical example:

You’re looking at a car for $24,000 and you can either take a 0% loan or receive a rebate of $5,000. If you take the 0%, you pay the $24,000 in the long run. If you take the $5,000 rebate and finance a loan for $19,000 at an interest rate of 2.69% APR* for 66-months, you will end up paying $1,461.42 in interest, or $20,461.42 total.

As you can see, in the long run, you saved a few thousand dollars by taking the rebate over the 0% loan. Of course, this won’t always be the case and the details of your circumstances will differ. The point here is to not jump in to a 0% interest loan without comparing your options.

To help you explore your options, feel free to use our “Compare Two Vehicle Loans” calculator or call one of our Member Service Representatives at 619-297-4835.

*APR = Annual Percentage Rate.
1According to the article Top Car, Truck, & SUV Rebates in July 2020 posted on CarsDirect.

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