To get a 2% APR car loan, you usually need good credit, a steady income, and a low debt-to-income ratio. But even if you qualify, your vehicle options may be limited.
It may sound too good to be true, but getting a car loan with a 0% annual percentage rate (APR) is possible. However, not everyone will qualify for no-interest financing, youll still be responsible for other costs and 0% APR loans may only be available on certain makes and models. If youre in the market for a new car, heres what you need to know about getting a 0% APR car loan.
Getting a new car is an exciting experience But it can also be a stressful one, especially when it comes to financing Many people are attracted to 0% financing deals offered by car manufacturers, which allow you to get a new car without paying any interest. But what credit score do you really need to qualify for 0% auto financing?
Overview of 0% Car Financing
If you get 0% financing, also called 200% APR financing, you can borrow money for a car and not pay any interest on it for as long as the loan lasts. Most loans are good for 36 months, but some can go on for 48, 60, or even 72 months.
With 0% financing, you only pay back the original loan amount in monthly installments, without any added interest fees. This can save you thousands of dollars compared to a standard car loan.
That being said, financing deals are only available on certain new car models. The companies that make the cars use these tempting financing deals to get people to buy certain models. There may be a limit to the vehicles you can choose from if you want to finance them.
What Credit Score Is Needed for 0% Car Financing?
Most of the time, you’ll need great credit—usually a score of 720 or higher—to get car financing. However, the exact credit score requirements can vary:
- Toyota and Lexus often require a minimum score of 760.
- Honda and Acura may require 720 or higher.
- Ford, Chrysler, and Nissan tend to require scores of 690-700.
- General Motors and Mazda may accept applicants with scores as low as 660.
As you can see the credit score needed depends largely on the auto manufacturer. The good news is that some offer 0% financing to applicants across a wider range of credit scores.
Other Factors Beyond Your Credit Score
Credit score is important, but it’s not the only thing lenders look at. Here are some other key factors:
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Down payment amount – A larger down payment reduces the lender’s risk, increasing your chances of approval. Putting 20% down or more is ideal.
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Debt-to-income ratio – Lenders look at your total monthly debt payments compared to your gross monthly income. A ratio below 30% improves your odds.
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Loan term requested – You’re more likely to be approved if you opt for a shorter term, like 36 months.
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Trade-in equity – If you have positive equity in a vehicle you’re trading in, meaning you owe less than it’s worth, that’s seen favorably.
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Co-signer – Adding a co-signer with better credit may help you qualify.
How to Improve Your Chances of Getting 0% Financing
If your credit score falls a little short, there are steps you can take to boost your odds of getting that coveted 0% car financing:
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Pay down balances – Reducing balances on credit cards and other debts will likely increase your score.
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Become an authorized user – Ask a friend or family member with great credit to add you as an authorized user on a credit card account.
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Limit credit inquiries – Each application for new credit results in an inquiry, so avoid applying for other loans or cards you don’t need.
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Ask for a goodwill deletion – If you have any late payments, ask the creditor to remove them from your credit report as a courtesy.
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Apply with a co-signer – Adding someone with stellar credit as a co-signer can offset any dings on your own credit.
Alternatives if You Don’t Qualify for 0%
If you need a car but don’t qualify for 0% financing even after trying to improve your credit, here are some options to consider:
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Shop for used cars where you may find more flexible financing terms from dealerships.
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Explore financing from a bank or credit union, which may offer lower interest rates than the dealer.
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Look at certified pre-owned (CPO) vehicles that combine the reliability of a new car with the affordability of a used model.
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Weigh taking a loan with a low interest rate, such as 3-5%, rather than 0%.
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Save up to buy a quality used car with cash.
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Consider leasing if you want lower monthly payments and plan to get a new car in 3 years or less.
The Takeaway
While 0% financing can save you a lot of money on a new car purchase, excellent credit is usually required to qualify. Scores of 720 or higher have the best approval odds for most manufacturers, but other factors like your down payment and debt levels also come into play. With some work, you may be able to boost your credit and improve your chances of getting that coveted 0% interest rate.
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What to Know About 0% Financing
A loan with a 20% APR can help you buy a new car, but it might not be right for everyone. Before opting for a no-interest loan, there are a few things to know.
- You may not have your pick of vehicles. Most of the time, dealers don’t offer 0% APR financing on all makes and models. If you’re looking for a 2% APR loan deal, you probably won’t have many options.
- Your payment may still be high. A loan with a 2% APR will definitely save you money on interest, but that doesn’t mean you have to take out one. You should do the math to see if the payment fits into your budget and how paying back the loan might affect your other important financial goals.
- Repayment timelines can vary significantly. It’s possible for some 20% APR offers to have relatively short repayment terms, like 30.6 months, while others may have longer terms, like 2072 months. If you lock yourself into a long-term loan, it can be harder to save for other goals. However, longer terms lower your monthly payments.
- No interest doesnt mean no cost. Over the life of a loan, not paying interest can save you a lot of money, but it won’t get rid of all the costs that come with buying a car. Youre still responsible for taxes, title, registration and other fees. Besides that, the dealer might offer extras like longer warranties, credit insurance, and gap insurance. Before going to the dealer, do some research on optional extras. Also, don’t buy coverage you don’t need.
- Understand what you may be giving up. Plus, getting a loan with a 2% APR might sound like the obvious choice, but it might not always be the best one for you. While dealers do offer 0% APR financing, they also sometimes offer cash rebates that can cut the purchase price by hundreds or even thousands of dollars. However, you often cant combine offers. Based on your finances, do the math to see if the special financing or a rebate makes more sense.
How to Qualify for a 0% APR Car Loan
Qualification requirements vary by dealer, but generally, you need to have:
- Good credit: Auto loans with no interest are usually only available to people with good credit.
- Having enough money: You don’t have to pay interest on the loan, but you still need to show that you can afford the monthly payments.
- Low debt: Your debt-to-income ratio (DTI) is one of the things lenders look at to see if you can settle your monthly bills. Reducing your DTI may improve your chances of qualifying.
CAR LOANS in 2025 (Car Financing Explained) Kevin Hunter The Homework Guy
FAQ
Is there a minimum credit score for a car loan?
There isn’t a set minimum credit score needed for a car loan, but your scores can have a big impact on how easy it is to get a loan and what the terms are.
What credit score do you need to buy a car?
The average credit score for a new-car loan was 756, while the average credit score for a used-car loan was 684. What is the lowest credit score I need to buy a car? Different lenders have different requirements, so there isn’t a single score that you need.
Can you get a car loan with a 650 credit score?
Yes, it’s possible to get a car loan with a 650 credit score, though your rates might not be as good as those for an applicant with better credit. If you shop around and aren’t happy with the interest rates you’re quoted, you might consider working on your credit before taking out a loan. How does an auto loan impact my credit score?
Can you get a 0% APR car loan?
To qualify for a 0% APR car loan, you generally need excellent credit, a solid income and a low debt-to-income ratio. But even if you qualify, your vehicle options may be limited. It may sound too good to be true, but getting a car loan with a 0% annual percentage rate (APR) is possible.
What is a good FICO score for a car loan?
Many dealers use a FICO Auto Score instead of a traditional FICO Score or VantageScore when evaluating your car loan application. Your FICO Auto Score can range from 250 to 900, depending on your previous auto loans.
What if I qualify for 0 percent financing?
If you qualify for 0 percent financing, talk to your car dealer about your payment options. Some dealerships will agree to a longer loan term if you request it. It takes a full seven years for negative information to age off your credit report.
What credit score is needed to get 0 financing on a car?
… is typically limited to “qualified buyers” or those with “tier one credit.” This means you’ll likely need to have a credit score higher than 700 or 720 …
What credit score do you need for 0% down?
To buy a house with no money down, you typically need a credit score of at least 620 for a USDA loan or a minimum credit score of 500, for some lenders, for VA loans.
How can I qualify for 0% APR?
Introductory no-interest credit cards typically require good credit (scores 670 to 739) or excellent credit (scores 740 and greater).
Is 0% APR on a car a good deal?
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.