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#JustAskJennifer – A 0% interest rate? What’s the catch?

Just Ask Jennifer


My friend recently got a 0% interest rate for her car loan at a dealership. This is crazy to me! Are there any downsides to this? How did she get this rate?


Thank you for taking the time to write in with such a great question! It certainly does not seem real that somebody could get a zero percent loan. While there is no true “downside”, there could be restrictions and there could actually be a benefit to paying a bit of interest.

Let’s start with how the dealers are even able to do this. You will find that this option is only available on new automobiles from the major brands like Ford or Toyota. That zero percent financing is available from the dealer’s captive finance company (Ex. Ford Motor Credit or Toyota Motor Credit). The manufacturer and the financial division are all under one corporate umbrella. The dealership gets incentives from the manufacturer to sell large volumes of automobiles. If they sell more volume by offering great financing, everybody wins.

The only potential downside for you, the buyer and borrower, is that there is often a restriction on the term, such as 48 or 60 months. In addition, this offer is generally only available to those with exceptional credit (750+). If you can afford the higher payment for the shorter term, you would be foolish to pass this up! But before you sign on the dotted line, see if there are any other incentives. For example, they will often offer a large rebate of $2500 or more. A rebate is a reduction in the amount financed. When we put pencil to paper, you may find that a reduction in the amount financed actually saves you more money overall than a zero percent rate.

When you are ready to buy, please reach out to myself or one of my wonderful lending experts to help you calculate what option is best for you.

Thank you again for just asking Jennifer!

Have your own question for Jennifer? Just use the hashtag #JustAskJennifer on social media, or submit a question here.


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