Zero percent loans-are-often advertised as one of the best deals you can get when you’re buying a new car. You’ll sometimes hear people call such financing “free money.” It’s not that exactly, but it’s as close as you’re likely to get.
Zero-percent loans tend to grab attention, but they make up only about 9 percent of the dealer-financed car loans in to date, according to Edmunds data.
Provided you can qualify for a zero-percent car loan, it sounds like a no-brainer. But is it really a good deal? Are there any catches? And if you were planning on paying cash, is it even worth considering?
How Can It Be Zero Percent?
Zero-percent loans are typically offered by automakers’ financing companies. They forgo the money they would have made on loans with interest in favor of selling more of a particular vehicle. This financing incentive can spark sales of a slow-selling vehicle or help clear out inventory to make room for cars from the new model year.
“The availability of zero-percent deals follow a pretty rigid pattern,” says Jeremy Acevedo, senior analystfor Edmunds.com. Zero-percent offers peak in the summer months to stimulate sales for the outgoing model year and stay “relatively subdued” in the other months, he says.