Can I Get Interest Free Car Finance?

Hey, this sounds like exactly what I need! 😁 Of course this would be great. If you are looking to buy a new car, you have probably analysed the market interest rates. Car dealers and marketers often advertise car finance plans with 0% interest. These deals are available for buyers but come with a catch. 🤔

Interest-free credit, also known as 0% annual percentage rate (APR), allows buyers to spread payments over a set period, but you will not be charged any interest or extra fees during this time. At the end of your lending agreement, you pay back the exact amount you borrowed.

This arrangement may sound too good to be true, but it is possible. These loans are only provided under special conditions and are available to borrowers with  excellent credit scores. If you are shopping for a new car, here’s how zero percent interest car finance works.

How Does 0% Car Finance Work?

Car dealers often offer interest-free credit for new cars. The manufacturers subsidise the cost of finance for buyers. This arrangement is rarely available for used vehicles. As long as your credit history is strong, you can apply for car finance with 0% interest. Manufacturers use this type of deal as an incentive for customers to persuade them to buy more expensive new cars.

How Can I Qualify For 0% Interest Car Finance?

Before you go for a 0% auto loan, you should fully understand what it takes to qualify for one and where you can find it.

Check Your Credit Score

The most critical requirement for getting zero percent interest in car finance in the UK is a good credit score. Before you shop for a new car, apply for your credit report to check where you stand. If you find any anomalies, you can file a report with credit reference bureaux to review any inaccurate data.

If you realise your credit score is not good enough, take some time to improve on it. You can do this by paying off any credit card balances, settling your bills, and only taking credit when you need it. If you have any late payments or default on previous loans, take some time to improve your score if you don't need the car right now.

Look For Manufacturers With 0% APR

Zero-interest loans are not offered by banks or credit unions. Manufacturers and car dealerships are the perfect spots to get this kind of deal. Once you identify the type of vehicle model you need, research the manufacturers providing 0% APR loans.

Most of them will provide no-interest loans on particular models and under specific conditions. This information is available on most manufacturer websites giving details on incentives and any current offers. These options are primarily available when a manufacturer wants to reduce their stock on a specific model.

Negotiate Price First

Once you identify the manufacturer or dealer you would like to approach, go for the best deal possible. It would be best to first negotiate the dealer's price before asking for a car finance deal with 0 percent interest. Having this in place enables you to get the best auto prices. It's worth also checking different dealerships for that make in towns or areas adjacent to where  you live - you can sometimes negotiate a better price!

Things To Consider With 0% APR

Interest-free car finance deals are very tempting. However, as a buyer, there might be a catch, so you need to understand the fine print before settling for this plan.

Extra Costs

Car dealers may try to make up for the costs in another way. Since you are saving on interest fees, they may add extra fees to the contract or sell the car at a very high price.

The dealers also may push for you to get more services from them, such as gap insurance. As a buyer, it's prudent to do your research on the market prices of the car you need to avoid spending more money than you should.

Catchy Offers

Dealerships heavily advertise on these 0% APR loans. These eye-catching offers are to encourage buyers to walk into their shop to check out the cars. This is the first step in securing a sale for the car dealers. Often marketed as limited, they create a sense of urgency for buyers. You should be careful not to miss out on the fine details, and don't be pressured into making a decision without due consideration.

Limited Flexibility

With 0% car finance, most lenders often factor in the interest costs in the car's total cost. This amount is spread through the monthly repayments. While the zero interest sounds generous, it’s not entirely true. Because of this, the seller might not be flexible in negotiating the price of the car.

High Payments

For brand new cars, the monthly repayment charges are often too high even without the interest fee. Before committing to this deal, make sure you can afford to sustain the repayments within the set time.

Long Repayment Terms

Because of the high monthly repayment, dealers encourage buyers to opt for more extended repayment periods. These can go up to 84 months.

Signing up for this long-term commitment level can be a burden for you later, especially if you have other financial plans, such as getting a mortgage. Therefore, if you can afford it, go for shorter repayment periods.

High Service Costs

When buying a new car, your dealer may insist that you service with them to reap the car warranty benefits. This means they can charge you high servicing costs because they have exclusivity. Pay attention to these types of details before deciding on car finance with 0 percent interest.

High-Cost Deposit 

Unlike typical car finance plans, the down payment for this kind of deal is usually high. For Hire Purchase, the initial deposit is usually 10%.

However, with no-interest loans, the lender might require you to make up to 40% of the deposit. This is why it's essential to read the fine print carefully before committing.


Getting car finance with 0 percent interest can be challenging, but it is possible. But an excellent credit score is a critical element that every lender will look at before advancing this type of loan.

However, even if you qualify for this finance plan, you should still research the different options available depending on the vehicle model you want to buy. And do read through the lending agreements well, to get the best deals. Good luck with your search!