0% Car Finance: All You Need To Know

On the surface, 0% car finance seems like something of a no brainer. Spurred on by the difficulties brought on by the coronavirus crisis, more dealerships and financers are touting 0% finance deals.

Given that lower rates of interest on loans are always preferable, opting for a 0% deal seems like the way to go.

Nevertheless, it’s important to bear in mind that 0% finance deals aren’t always quite as generous as they appear to be. They can represent outstanding value for money in some instances, but it is important to read the small-print to know exactly what you are getting yourself into.

What Is 0% Car Finance?

As the name suggests, 0% car finance refers to a car finance deal where you don’t pay any interest whatsoever. You borrow a certain amount of money and you agree to a series of monthly repayments, which throughout the life of the loan are not subject to any interest.

The immediate benefit of 0% is (of course) the potential to save money on the life of your loan. Particularly if planning on repaying the balance over an extended period of time, lower interest rates equate to lower outgoings in general.

In addition, 0% also helps keep things simple for the borrower. The price you see is the price you pay, so you know exactly how much you are borrowing, how much you need to repay and when it needs to be paid back.

0% Car Finance: The Caveat

Wondering what the catch is with 0% finance? This is where carefully consulting the T&C’s of any 0% deal is essential, as the vast majority of car finance companies don’t work for free.

0% finance is always attractive, but there are potential disadvantages to take into account:

• You will usually need to pay a much bigger deposit to qualify for 0% car finance, which may or may not be within your means.
• Most 0% car finance deals are exclusive to shorter-term repayment agreements, over the course of just a couple of years at the most.
• Just because there is 0% interest payable doesn’t mean other costs don’t apply. For instance, 0% interest may mean hefty arrangement fees, admin fees and so on.
• Some car finance companies also scrutinise 0% applications more heavily, in terms of credit report checks and other verifications.

Is 0% Car Finance Worth Bothering With?

The short answer is yes, but it is vital to consider the finance package as a whole – not just in terms of the published interest rate. Working with an independent broker is advisable, who can help you compare the available options and find an unbeatable deal to suit your budget.

0% interest must be considered alongside overall borrowing costs, application criteria, deposit requirements and all other terms and conditions. Before approaching a lender directly, consult with an independent broker to determine whether or not 0% car finance is suitable for you.