0 Percent Finance on Cars: Is It Really Free?
Car Owl
Published in English •
Summary
- 0% finance means no interest: You only pay the car's price.
- Usually needs good credit: Not everyone qualifies.
- Check the full deal: Some catch back value elsewhere.
Zero percent car finance sounds too good to be true. Is it? Here's what you need to know about 0% deals in the UK.
What Is 0% Car Finance?
With 0% finance, you borrow money to buy a car but pay no interest. The APR is 0%, meaning you pay back exactly what you borrow (plus any fees).
It's sometimes called:
- 0% APR
- Interest-free finance
- 0% PCP or HP
How It Works
Example of a 0% deal:
| Item | Amount |
|---|---|
| Car price | £20,000 |
| Deposit | £4,000 |
| Amount to finance | £16,000 |
| Term | 48 months |
| Monthly payment | £333.33 |
| Total paid | £20,000 |
| Interest paid | £0 |
Who Offers 0% Finance?
Zero percent deals are typically offered by:
- Manufacturers: On new cars to boost sales
- Dealers: On slow-selling stock
- Special promotions: Time-limited offers
They're rare on used cars because there's no manufacturer subsidy.
What's the Catch?
You Might Miss a Discount
Manufacturers often offer either:
- 0% finance, OR
- A cash discount (e.g., £2,000 off)
If you can get cheap finance elsewhere, the cash discount might save more overall.
Higher Deposit Required
0% deals often need larger deposits – sometimes 30-40% of the price.
Shorter Terms
Interest-free periods may be shorter (24-36 months), meaning higher monthly payments.
Limited Models
Often only available on specific models or trim levels.
Strict Credit Requirements
You usually need excellent credit to qualify.
Who Qualifies for 0% Finance?
To get the best 0% deals, you typically need:
- Excellent credit score (700+)
- Stable income
- Low debt-to-income ratio
- No recent missed payments
The headline rate is often only for the best applicants.
Comparing 0% vs Other Finance
Example Comparison
For a £20,000 car:
| Option | Monthly | Total Cost |
|---|---|---|
| 0% finance (no discount) | £333 | £20,000 |
| 5% APR + £2,000 discount | £345 | £19,560 |
In this example, taking the discount and paying interest is actually cheaper!
Tips for 0% Finance Deals
- Check if cash discount is better: Do the maths
- Read the small print: Check for fees or conditions
- Don't overstretch: Higher payments with shorter terms
- Check you qualify: Representative APR means not everyone gets it
- Compare total cost: Not just monthly payments
Questions to Ask the Dealer
- Is there a cash discount alternative?
- What deposit is required?
- What's the maximum term?
- Are there any fees?
- What credit score do I need?
- What happens if I'm rejected for 0%?
For more on car finance, see our guides to PCP finance, HP finance, and comparing finance options.
Read our other articles:
Instant Vehicle History Checker
Get a comprehensive 90+ point check and uncover the full story behind any vehicle.
Fast • Easy • Secure
Sell Your Car for Free
Get competitive offers from trusted UK buyers within hours. Your 7-day listing ensures maximum exposure and hassle-free selling with free home collection.