Car loans are a major financial commitment, as they involve years of bill payments and interest costs. For this reason, getting a car loan with favourable terms and a low interest rate can make a huge difference on your wallet. This is where 0% financing can be very attractive, as it can eliminate interest expenses. By skipping interest, 0% financing can make buying a car more affordable. Let’s take a closer look at 0% financing in Canada and the potential conditions that may come with it.
Where Can I Find 0% Financing Offers On Cars In Canada?
Given the significant savings that come with zero interest on a car loan, you may want to know where to find such deals near you. While 0% financing offers on cars in Canada are not always available, when they are, you’ll be able to find them with any of the following sources:
- Car Dealerships: Many dealerships in Canada offer 0% financing deals. You may find these offers during promotional periods or for specific vehicle models. It’s recommended to check with several dealerships and compare offers to find the best deal.
- Manufacturers: Many vehicle manufacturers also offer 0% financing on car loans, especially as part of promotional offers or for certain models. Some of the top brands in Canada that offer 0% financing in Canada include Chevrolet, Ford, GMC, Buick, and Volkswagen.
- Loans Canada: Loans Canada partners with multiple lenders across Canada to provide financing options, which may include 0% financing for cars. The online platform makes it easy to find car loan deals near you based on your financial and credit profile. You can quickly compare offers and apply, making the loan application process quick, easy, and secure.
Latest 0% Financing Deals in Canada
| Brand | Offer Details | Vehicle |
| Ford | 0% for 24 months with $4375 down | 2025 Ford F-150 |
| Chevorlet | 0% for up to 60 months | 2024 MALIBU |
| GMC | 0% for 72 months | 2025 SIERRA 1500 PRO GRAPHITE |
Learn more: What Is A Good Interest Rate On Car Loan?
0% Financing Features
Key features of 0% financing for cars are as follows:
- No Interest: You won’t pay any interest on your car loan. This means your entire monthly payments will go towards the principal amount, saving you money on your loan.
- Shorter Loan Terms: Car loans with 0% financing rates typically come with shorter loan terms. While this typically means higher monthly payments, you’ll pay the loan off faster and be debt-free sooner.
- Limited Availability: 0% financing offers are not always available. Plus, they’re not usually offered by lenders and banks, and tend to be provided mainly by dealerships and manufacturers during promotional periods.
- Strict Eligibility Criteria: Qualification requirements for 0% financing are typically strict. More specifically, you’ll need good credit to qualify.
- Limited Incentives Or Rebates: A 0% financing offer may often result in limits in other promotions and incentives, such as trade-in bonuses or cash rebates. In this case, you may have to choose between one or the other.
Learn more: 0% Car Financing In Canada
0% Financing Vs Cash Rebates
As mentioned, 0% financing offers typically limit other incentives, including cash rebates. So, you may have to choose between the two. The question is, what exactly are cash rebates, and how do they differ or compare to 0% financing on car loans?
Cash rebates are incentives offered by dealerships or manufacturers to entice buyers to purchase a vehicle. On the other hand, 0% financing means there is no interest charged on the car loan, so monthly payments go strictly towards the principal.
Here are some key differences between cash rebates and 0% financing:
| Cash rebates | 0% Financing | |
| Savings | Money is given back to you immediately at the time of purchase. | Lowers your monthly payments since there’s no interest, so you’ll see some savings with each payment you make. |
| Qualifications | Typically easier to qualify for compared to 0% financing. | You’ll need to have strong credit, so not everyone may be eligible. |
| Interest | You’ll likely still be charged interest on your car loan when you’re offered a cash rebate. | There’s no interest on a 0% financing car loan, which means your monthly payments go entirely towards the principal. |
Learn more: What Is The Average Car Loan Interest Rate In Canada?
How To Choose Between Cash Rebates And 0% Financing
To show you how much you could potentially save with a cash rebate versus 0% financing, let’s illustrate using an example of a $25,000 car loan and 60-month loan term.
Now, let’s see how two different scenarios may determine whether a cash rebate or 0% financing may be best:
- Financing a $25,000 car with a 0% interest over 60 months OR
- Financing a $25,000 car with a 7% interest over 60 months, plus get a $2,500 cash rebate.
| Cash Rebate Option | 0% Financing Option | |
| Car Price | $25,000 | $25,000 |
| Cash Rebate | $2,500 | – |
| Interest Rate | 7% APR | 0% |
| Term | 60 | 60 |
| Car Loan Amount | $22,500 | $25,000 |
| Monthly Payment | $445.53 | $416.67 |
| Total Paid | $26,731.62 | $25,000 |
In this example, it’s better to finance at 0% than take the cash offer. However, if the cash offer was higher and/or the interest rate was lower, the numbers could shift and the cash rebate may be the better offer.
Be sure to crunch the numbers to see whether or not the cash rebate saves you more than the total interest you would pay compared to a 0% financing offer.
Ultimately, the best option for you depends on your financial situation and goals. If you have very good credit and prefer to make smaller monthly payments, then 0% financing may be right for you. On the other hand, if you’re looking for immediate savings or have bad credit, a cash rebate might be the better choice.
Benefits And Downsides Of 0% Financing
No-interest financing on car loans can certainly be a great way to save money in interest payments. However, there are some downsides to consider as well. Be sure to weigh the pros and cons of 0% financing before committing.
Pros Of 0% Financing
Benefits of 0% financing are as follows:
- Lower Overall Cost. Since you’re not paying any interest, the total loan cost will be significantly lower over the loan term, saving you plenty of money.
- Quicker Loan Repayment. Typically, 0% financing comes with shorter loan terms, allowing you to repay your car loan sooner and get you out of debt.
Cons Of 0% Financing
Potential downsides of 0% financing include the following:
- Limited Offers: 0% financing offers are not always available. And when they are, they may be limited to specific models.
- Eligibility Restrictions: You need to have good to excellent credit to qualify for 0% financing, leaving those with less-than-perfect credit out of luck.
- Conditions: There may be some conditions to meet to qualify for 0% financing, such as a minimum down payment amount or additional warranties.
- Potential Trade-Offs: Dealerships often don’t allow different offers to be combined. So, you might have to choose between 0% financing and other incentives, such as cash rebates.
- Inflated Car Prices: In some cases, dealerships may entice buyers with 0% financing but increase the car’s price to offset the lost opportunity to profit from interest.
Who Can Get 0% Financing?
As noted earlier, not everyone may qualify for 0% financing. There are certain eligibility criteria that must be met to get approved. Generally speaking, 0% financing is reserved for car buyers who meet the following criteria:
- Good Credit: You’ll need to have good to excellent credit to get approved for 0% financing on a car loan.
- Strong Income: Lenders want to make sure that you have a reliable and sufficient income to cover the monthly payments, even though payments may be lower thanks to zero interest.
- Low Debt-To-Income (DTI) Ratio: A low DTI ratio means your current debt level is manageable relative to your income. This is important when it comes to qualifying for a loan, including 0% financing.
| Can people with bad credit access 0% deals? Generally speaking, 0% financing deals are not accessible to those with bad credit, as these offers typically require excellent credit scores. |
| Caution: Be wary of 0% financing offers that have conditions like large down payment requirements. Make sure you’re comfortable with the upfront cost before agreeing to the loan arrangement. |
Alternatives To 0% Financing
If you’re struggling to qualify for 0% financing because of bad credit, there are alternative options to consider:
- Alternative Lenders: You may be more likely to qualify for a car loan from an alternative lender, as they are more likely to approve loans for those with bad credit and consider factors besides credit scores. However, you’ll likely pay a higher interest rate in exchange for this flexibility.
- Credit Unions: Many credit unions also offer loans to bad credit borrowers. Credit unions often have more flexible lending criteria compared to regular banks.
- Cash Rebates: Some dealerships offer cash rebates, which can be used as a down payment or to reduce the overall car loan amount. In turn, this can reduce your monthly payments and the total interest amount.
Bottom Line
A 0% financing offer can be a great way to save money in interest on a car loan. However, it’s important to consider the eligibility criteria and the potential conditions that come with such offers. Make sure to compare these 0% financing offers with other incentives, such as cash rebates, to determine which option can provide greater savings.
