Are zero percent car loans really interest free?

We’ve all heard the offer of zero percent car loans, but what’s the catch?

Are zero percent car loans really interest free?

Of all the many questions that we get from listeners and readers, one question keeps recurring – what’s the deal with zero percent car loan offers?

So, we thought we would try and answer the question and help everyone get a better understanding of how these finance packages work and what you should be wary of.

Remember the golden rule – if it looks too good to be true it probably is! That seems to be the case here.


A lot of the time the zero percent finance offer is being made on one particular model in a car manufacturer’s range, or even just a particular variant of a model.

Sometimes, the vehicle that is being offered to you with that zero percent/or super low interest rate carries a full regular full retail price.

However, the vehicle might normally be discounted because it’s an older model, or a model/variant that is about to be superseded.

So, for example, you might be paying $20,000 for a vehicle that you might have otherwise been able to pay only $18,000 for.

Shop Around

Don’t be afraid to look around and talk to other car dealerships who may have the same make/model available to you but with a lower starting price.

Do the sums and even with a higher interest rate, working off that lower financed amount, you may end up ahead over time.

What you are looking to establish is the total repayment figure for whatever finance options you are considering and tools like this car repayments calculator can help.

Also, we all like to haggle, though the zero percent finance offer might not give you room to negotiate a better deal or get extra any features added to your new set of wheels.

A lot of the time the window price is a ‘take it or leave it’ proposition with these finance offers.

Again, another dealership might be willing to talk a deal, especially if they want to clear space for an updated model.

How long is the finance period?

Often the zero percent finance offer is also for a shorter loan period than a regular loan.

We’ve heard of these finance offers being capped to 36 months, that might suit some car buyers, however others may need to, or would prefer to spread the loan repayments over a longer period e.g. five years.

This could also be a particularly relevant point for business owners and those car buyers who are able to claim vehicle expenses against their tax etc.

In summary, as with all things to do with cars and money, do your homework, don’t be afraid to ask questions, get expert advice and shop around before you sign on the dotted line.

About Joel Helmes 3051 Articles
Joel is the founder and CEO of Behind the Wheel. Joel has a background as a radio broadcaster with on-air roles at 4BC, 4KQ, 2KY, 2LT and 2UE amongst others, as well as a news editor and program director. Joel’s relationship with cars stems back to his early childhood learning to change oil and brakes with his father and uncle. This continued on into his driving years owning an assorted collection of cars.

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