Does 0% Financing Exist in Canada? Learn How Canadian Car Buyers Can Take Advantage Of This Arrangement.

When looking into your finance options for buying a vehicle, you may encounter 0% financing offers at the local dealership. ... Read more

When looking into your finance options for buying a vehicle, you may encounter 0% financing offers at the local dealership. 0% financing on vehicle purchases is an enticing offer, but not all dealerships offer it. Is this really something offered to everyone? What does it even mean for there to be “0%” interest rates for a certain period of time? 0% financing means that for a specific period of the loan term, there will be 0% interest rates. This isn’t offered to everyone and is only available on certain vehicles; this guide will explain all you need to know about understanding 0% financing to figure out if it’s the best option for you.

What Does 0% Financing On Car Loans Mean?

Car loans in Canada typically have interest rates attached to the principal borrowing amount. Interest rates are determined by your credit score. The lowest interest rate is 0%, also known as “0% financing” since you won’t pay any interest on the loan. Most lenders don’t benefit from having 0% interest rates on their car loans. Dealerships and automakers offer 0% financing to gain a competitive edge by using the incentives as a way of pushing out older inventory in favour of newer models with no-interest payments.

To Take Advantage Of 0% Financing, You Need

Dealerships are more likely to offer 0% financing if the borrower already qualifies for a lower APR on a loan. This is because the dealerships want to offset their losses when they sell old inventory. Usually, there are strict requirements imposed by auto manufacturers to protect from high losses of profits under the 0% finance contract. There are a few requirements that must be met if you want to receive zero-interest financing offers.

Requirements for 0% Financing

  • High FICO score of 700 and higher.
  • Low debt-to-income ratio well below 40%.
  • Excellent credit history with no defaulted loans.
  • Payment history indicating on-time payments for several consecutive months.
  • Dealerships may also request that you provide pay stubs and bank statements showing your ability to repay the high monthly payments.

Does A Low Credit Score Mean I Can't Get 0% Financing?

It can be difficult to qualify for 0% financing when your credit score is below 700 especially if you have a history of late payments or defaults on loans. If you have a good credit history, dealerships may offer 0% financing; however, they take on a huge risk because they make no profit on the sale if you end up defaulting on your loan. With that said, it may be possible to qualify for 0% financing with a Fico score of <700. You’ll need to jump through some extra hoops by providing extra paperwork that proves to the dealership that you will be able to maintain the monthly repayment until the loan is paid in full. It is important to note that dealerships may require credit scores over 700 even if they accept your proof of ability to repay after reviewing it. as long as your FICO score is below 700 so long as your credit history is in good standing.

How To Qualify For 0% Car Loans In Canada With Bad Credit Or No Credit

  • Provide up to 2 years of bank statements of both chequing and savings accounts.
  • Provide up to 2 years’ worth of paystubs.
  • Provide 2 years’ worth of tax return documents.

Providing evidence of a stable income can help you qualify for low-interest car loans with a bad credit score.

The bank account statements show the following possible red flags; unstable income, insufficient funds, bounced checks, and payments to another account. Pay stubs from your employer show steady employment. Tax returns are a record of the past year’s entire sum of taxable income and show lenders if you will be able to afford the 0% loan without defaulting.

When It Comes To 0% Financing, There Are A Few Things To Keep In Mind.

Some dealerships that offer 0% financing may increase the price of a vehicle to maintain an existing profit margin. It is important to compare prices at your local dealerships and find out about current prices for vehicles within your city. If you are looking for a car loan with 0% interest, make sure that the dealership is not backing such offers without putting in a full credit history check. It is important to note as well how long the financing will be offered at 0%. In the fine print of the 0% financing policy, there may be an “introductory interest-free period” which only has 0% APR for a selected number of months under the APR term within the 0% financing policy. 0% car loan financing may include an introductory rate, which is not always a good deal. Some 0% financing policies have a listed introductory interest-free period with the APR term in the fine print. There may be 0% interest-free periods that expire after the first year of borrowing. Make sure to read the fine print and special terms of your deal before agreeing to receive a loan with no interest for any length of time.

See If You Qualify For 0% Financing Today!

We have lending partners all across Canada, no matter where you are. Even if you don’t qualify for an 0% APR on a new vehicle financing offer we have many options available to make it easier to finance your next car! We would love to work with you and get you into the vehicle of your choice.