The Truth About 0% Interest Financing and Deferred Payments

Anyone looking to buy a car during the pandemic could actually land themselves a really good deal. Many manufacturer’s financial institutions are currently offering deferred payments and 0% financing in order to provide some relief to prospective car buyers. However, we recommend always reading the fine print when it comes to any special offer.

Deferred Payments

There are plenty of offers currently on the table from almost every manufacturer you can think of. Fortunately, Car and Driver graciously listed all of them for easy access to the offer details. Upon looking at this list, we can see that a lot of manufacturers are offering deferred payments.

Some of the deferred payment options are up to 90 days, and some are even up to 180 days. To be clear, this means that the buyer will not have to make payment for the first 3 to 6 months with the purchase of a new car.

One thing to keep in mind is that those 3 to 6 months will then be put on the back end of the loan, so eventually, you’ll have to pay for them. On top of that, during the time of those deferred payments, the loan is still accruing interest.  

Just be wary, as you’re technically going to have to pay one way or another. If you can purchase a car from a manufacturer like Kia, who is offering both 0% and payment deferrals of up to 4 months, then that would be ideal.

Always keep in mind, though, these offers are typically on select vehicles.

Honda vehicles for sale at a dealership
Older Honda Accord models for sale | Justin Sullivan/Getty Images

0% Financing

As stated above, some of these offers are only certain models, so if you’re looking for 0% financing, then remember to inquire as to which models qualify.

You should also ensure that you yourself will qualify for 0% financing. For example, in Volkswagens’ special offer terms, the list in the fine print that the 0% is for “highly qualified customers who finance through Volkswagen Credit.”

By “highly qualified,” this typically means a 750 credit score and above. Auto loan interest rates are based on tiers and if your credit score falls within a certain tier range – tier 1 being 750 or higher and so on – then you’ll get the interest rate according to that.

Different lenders will have a different tier system. But, in general, the higher the tier, the lower the interest rate.

Buying a Pickup Truck
Buying a Pickup Truck | Getty

Not all credit approvals are equal

We wanted to note that credit scores and applying for credit has a lot of gray territory in the sense that finance and lease rates don’t depend just on your credit score alone.

When applying for financing, the lender will look at your credit score, credit history, your income, and your debt-to-income ratio.

Car loans can be denied even with a decent credit score if the lender sees your income and doesn’t think you’ll be able to make the payments due the withstanding debt that you already have on your report. However, in times like this, some lenders may be more lenient as well.

Smart shopping

If you’re planning on buying a car this month or next, we highly recommend doing your research as to not only which car will fit your needs and your budget, but also which financial offer could work best for you as well.

While the current offers might not be offered to everyone, they can still be advantageous for those who qualify, so be sure to check your FICO score beforehand and always read the fine print.