Zero Percent Car Financing Isn’t A Thing Anymore

If you wanted a zero percent financing deal on your next car purchase, you are shit out of luck. After a never-before-seen increase in free-money deals during the pandemic, zero percent financing is pretty much gone from the market, according to Automotive News.

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The share of all loans financed at zero percent hit a new low in the third quarter of this year at just 1.1 percent. That’s down considerably from their peak in the second quarter of 2020 — the height of the Covid pandemic — at 24.2 percent. That number is sort of an outlier, but the average quarterly rate of zero percent financing for the three years before the pandemic was 7.1 percent. So, to have zero percent financing rates at just 1.1 percent now is equally unprecedented.

There’s a reason we’re seeing such a wide variance in these sorts of deals, Automotive News says:

“As the Federal Reserve has increased the bank policy rate, we’ve seen 0 percent financing taper off,” Ivan Drury, Edmunds’ director of insights, told Automotive News.

The pandemic and fears of a recession led automakers to push to clear out inventory, but now “there is so much demand in the market for cars at the same time that borrowing money has gotten so expensive” for automakers and finance companies, he said. “It’s just not worthwhile.”

Earlier in 2023, the Federal Reserve raised the rate to the highest it has been in 16 years, a move that drove up the cost of borrowing money. At the same time, captive finance providers again dominate the market share of total financing, according to data from Experian.

The rate of 0 percent financing “this quarter is appalling compared to every time period we are looking at in the past,” Drury said. And the decline in offerings comes as “consumers now more than ever would appreciate this kind of offer,” he said.

Zero percent financing has even declined in vehicle segments that usually have a large share of those sorts of deals, like large SUVs and pickup trucks. Back in September of 2022, 15 percent of all sales of those types of vehicles had zero percent rates. Now, it’s just one percent for large SUVs and five percent for large pickups.

Even for the tiny sliver of zero percent financing deals left, there are extremely strict eligibility requirements and short terms that have kept most customers away. Now, the average term length for zero percent financing across the first three quarters of 2023 was 42.8 months, according to AutoNews.

All of these miserable factors combined mean monthly payments that come from average financing today can end up being hundreds of dollars more than the payments of someone who took advantage of a zero percent deal when they were everywhere, even if it’s a very similar vehicle.