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When it comes to zero-percent financing, is zero really your hero? While you may be eager to accept this popular offer from dealers, there are many factors to consider before driving off with a zero-percent auto loan.

What is zero-percent financing?

The financer is lending money to the buyer without charging any interest over the life of the loan. It’s common for dealerships to offer incentives like zero-percent financing or a rebate, especially for slower-selling models or to make room for newer models.

Which offer should I choose: zero percent or a rebate?

Combining a shorter term, like 36 months, a low interest rate, and a rebate can potentially fuel your savings more than a zero-percent offer.

For example, if you’re purchasing a $30,000 car, you know you’re guaranteed to pay $30,000 with zero-percent financing.

Now let’s say instead of no accrued interest, a $2,500 rebate is available for the car. Then, finance for 36 months with a low rate like 1.90%. The total interest you’ll pay over the life of the loan is approximately $900. With the rebate and low interest rate, your savings would be $1,600.* Check it out!

New Auto Loan: $30,000
Term 36-months 60-months
Sales Price $30,000 $30,000
Rebate $-2,500 $0.00
Net Price of Car $27,500 $30,000
Interest (%) 1.90% 0%
Interest ($) $900 $0
Loan Amount + Interest Repaid $28,400 $30,000
Savings $1,600 $0

*FAIRWINDS rate and savings shown is for illustrative purposes. Your actual savings will vary.

Before you head over to your nearest car dealership or check out their online inventory, get a precise picture of which option could save you the most money with our free Rate vs. Rebate calculator. Another recommendation? Make sure you’ve determined how much you want to contribute for a down payment and start building a rock-solid savings plan to decrease the amount you finance.