The trade-off most 0% deals hide
Car makers often let you choose between 0% financing and a cash rebate with a normal loan, but not both. The rebate lowers the price, so it can be worth more than the interest you save.
A worked example
A car costs $30,000. You can pick either deal for a 60-month loan.
| Option | Amount financed | Monthly payment | Total you pay |
|---|---|---|---|
| 0% financing | $30,000 | $500.00 | $30,000 |
| $3,000 rebate + 6% loan | $27,000 | $521.99 | $31,319 |
Here 0% wins by about $1,319. But the answer depends on the rate you can get. At about 4.23%, the two options cost the same. If your bank or credit union offers less than that, take the rebate and their loan.
“0% interest” with a fee is not 0%
In some markets, especially China, dealer and captive finance deals advertise 0% interest but charge a handling fee (手续费). The fee works exactly like interest paid up front.
Example: borrow ¥100,000 for 36 months at “0%” with an 8% handling fee (¥8,000). Your payments total ¥100,000, but you only had the use of ¥92,000. That is a real annualized rate of about 5.49%. Since August 2026, Chinese lenders must show this total annualized financing cost, so ask for it.
Other catches to check
- Short terms. 0% deals are often limited to 36 to 60 months, which means higher payments.
- Credit requirements. The best offers usually need top credit. Ask what rate you actually qualify for.
- Price negotiation. A dealer may be less flexible on price when you take the subsidized rate. Negotiate the price first, then talk financing.
- Add-ons. Warranties and protection packages added to a 0% loan are not free just because the rate is 0%.
How to compare
Get a pre-approved rate from a bank or credit union first. Then run both options through the car APR calculator in “Find my payment” mode and compare the total you pay. If a 0% deal includes a fee, enter it in the fees box and the calculator shows the true rate.
Try it yourself
Open the car APR calculator and enter your own loan. It works in 13 currencies and follows each country’s loan rules.