0% financing means you borrow money for a car and pay no interest: every payment goes toward the price. In Canada these offers come from automakers' own finance companies on selected new vehicles, usually need strong credit (often 700 or higher), and often mean giving up a cash rebate, so the cheapest deal isn't always the one that says 0%.
Key takeaways
- 0% deals come from automakers on selected new models, not from banks or used car lots.
- Most programs look for a credit score around 700 or higher.
- You often give up a cash rebate, so compare the total cost, not just the rate.
- If you don't qualify, a pre-approval shows the real rate you can get.
What 0% financing actually is
A 0% APR car loan is a promotion. The automaker's finance arm (the "captive lender", such as the finance company that carries the brand's name) lends you the money and charges no interest. The automaker pays the lender to make up the difference, because it would rather move cars off the lot than cut the sticker price.
That's why you'll see 0 percent car finance offers on specific new models, often older model years or slower sellers, and almost never on used cars from a regular lot. Banks, credit unions and subprime lenders don't offer true 0% loans.
Who qualifies for 0% car deals
There's no single published cut-off, but zero interest car deals are aimed at the strongest borrowers. Lenders commonly look for:
- A credit score of about 700 or higher. Some programs want 720 to 740.
- No recent missed payments, collections, consumer proposal or bankruptcy.
- Steady, provable income and a manageable debt load.
- Sometimes a down payment, even when the ad shows $0 down.
Approval is up to the automaker's lender, and each brand sets its own rules. If you're rebuilding your credit, a 0% offer usually isn't realistic yet. A bad credit car loan paid on time for a year or two is how most people get there.
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The catch: the cash rebate you may give up
Many 0% offers can't be combined with the cash rebate on the same vehicle. You pick one: the 0% rate, or a lower price with a regular rate from another lender. The only fair comparison is the total you pay over the whole loan.
| Option | Amount financed | Rate | Monthly payment | Total paid |
|---|---|---|---|---|
| 0% financing, no rebate | $35,000 | 0% | $583.33 | $35,000 |
| $3,000 rebate + outside loan | $32,000 | 5.99% | $618.50 | $37,110 |
| $5,000 rebate + outside loan | $30,000 | 3.99% | $552.36 | $33,142 |
Before sales tax, fees and any trade-in. Examples only, not offers.
In the first comparison, 0% wins by about $2,100. In the second, the bigger rebate and a low outside rate win by about $1,900. Small rebates and higher outside rates favour 0%; big rebates and low outside rates favour the rebate.
Try the car payment calculatorCompare a 0% offer with a rebate using your own price, rate and term.Other things to check before you sign
- Term length. Many 0% offers run 36 to 60 months, so the payment can be higher than a longer loan at a low rate. Some brands now offer 0% for 72 months or longer on selected models.
- Which trims qualify. The offer may apply only to higher trims, not the base model you priced.
- Add-ons. Extended warranties, protection packages and gap insurance are optional. Ask for them to be listed separately with their prices.
- The purchase price. Agree on the vehicle's price first, then discuss how you'll pay. Financing shouldn't change the price.
- Negative equity. Rolling an old loan into a 0% deal adds to what you borrow. A long 0% term can still leave you owing more than the car is worth for years.
- The paperwork. Canadian lenders must show you the APR and total cost of borrowing before you sign. Make sure the contract matches the advertised offer.
0% financing on used cars
True 0% offers on used cars are rare. Some certified pre-owned programs from automakers offer low promotional rates, but most used car loans are priced on your credit, the vehicle's age and its kilometres. See car loan interest rates in Canada for what's typical.
If you don't qualify for 0%
Most Canadians don't finance at 0%, and that's fine. What matters is a payment you can afford and a rate that matches your credit today:
- Get pre-approved before you shop so you know your real rate. Car loan pre-approval doesn't need a SIN to start.
- Pick a reliable vehicle priced well within your budget.
- Put money down if you can, even $500 to $1,000.
- Add a co-signer with strong credit to lower your rate.
- Pay on time for 12 to 24 months, then find out how you can lower your interest rate.
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Frequently asked questions
Is 0% financing on a car really free?+
What credit score do I need for 0% financing in Canada?+
Can I get 0% financing on a used car?+
Is 0% financing for 72 months available?+
Is it better to take 0% financing or the cash rebate?+
Sources
This guide is general information, not financial or legal advice. Rates and offers change; examples are estimates only and are not loan offers. ShopRides is a financing referral service and is not a lender.