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Question By
zipathome

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what credit score is needed to get 0% auto financing
I'm trying to decide whether to pay cash or finance a new car purchase in a few months. I have good credit so I shouldn't have any trouble getting financing, but I would only want to use a loan if I could get 0% interest for three years or thereabout. I am hoping to get an idea ahead of time. Thanks in advance for your help!

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Do not assume 0% is always good.

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First to answer your question, look, listen and read the ad's for a zero interest loan. "VERY WELL qualified purchaser". Meaning in at least the 700's probably 750 or above.

Now, do not always assume that zero percent interest is the way to go. Although vehicles are not this cheap anymore, lets pick a $15,000 vehicle.

The dealership offers a $2000 rebate OR zero percent interest on a three year loan. Take the rebate....... pay the interest, use the rebate.

$15,000 / 36 months = $417 per month. Total = $15,000 paid.

vs

$15,000 - 2,000 = $13,000 financed @ 4.5% = $387 per month = $13,922 paid. (still 36 months).

You saved over a thousand dollars by paying the interest plus your monthly payment is about $30 per month cheaper. Crunch the numbers, what sounds good is not always good. The dealership lost $2,000 but the finance company made $922. They will like you even more and increase your credit score.

Again, these are fictional numbers. Crunch your numbers, interest, and time of the loan plus rebate.

Reply by
Slugger29

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Valuable information. Thanks for the info and the breakdown of everything; VERY Helpful advice.

Reply by
poet1951

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Wow, Personally, I appreciate knowing this strategy in car buying.  Will remember this when my credit score improves and I'm shopping again in the future. 

Reply by
cemoore1225

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Your numbers are wrong in the second example.  You forget the interest is an ANNUAL percentage and your loan is a 3 year loan, therefore you need to compound the interest amount by 3 for the length of the loan.  In other words....$13000 financed @4.5% is $585 per year, multiply that by 3 years and the total interest is $1755 making the monthly payment $409.86.  Therefore this method only saves about $6.81 per month or $245.16 for the full loan term of 36 months.

Reply by
poizoniva

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I am no math wiz, but in your equation above total for 0% is $15,000, where as financing is the $13,922 + $2,000 that was up down so total is actually $15,922.  No matter what you finance you will always pay more with increased interest.

The amount that you put down actually decreases your monthly payments, but not significantly, usually month dollars to $20 max really, unless you jump from 2k down to 5k down.  Best thing to do is if you have to finance is to make a spilt monthly payment just like with a house loan, it cuts the interest monthly.

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Reply by
scarhill

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The dealership cannot offer a rebate.  The rebate comes from the manufacturer.  When you take a rebate the dealership loses nothing as the manufactuer covers the rebate.  The dealership can offer a discount but not a rebate.

Typically, the offer is zero percent financing or the rebate.  Often, they even out over the life of the loan.  That means the interest saved using the zero percent versus the going rate is often about the same as the rebate.  The manufacturers know math.

Your example is skewed.  These days the rate offered by the captive financing, manufacturer's finance arm, is much lower than 4.5 percent when offered in conjunction with a rebate.  Typically the rate is around 2 percent.  For folks with great credit.

Using your $15,000 number, which is usually too low for a car which would have a $2,000 rebate, the total interest paid on a 36 month loan at 2 percent would be $480.  At 36 months the total interest would be $780.  Therefore, using the $15,000 in your example the best choice would be to take the $2,000.  As you noted.

A better price for a $2,000 rebate is more like $25,000.  For a 36 month loan at 2 percnt the total interest paid would be about $776, at 60 months to total interest would be $1,280.  Still better to take the rebate.

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Reply by
scarhill

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And Cemoore is wrong.  You do not pay the same amount of interest every year on a car loan.  Every month the loan balance drops due to your car payment.  Interest is comuted monthly on the loan balance.  The loan balance is the amount of the loan reduced by the amount of the loan paid. The monthly payment includes a payment of the loan as well as interest.  Each month the loan balance decreases and the amount of interest paid decreases as well.

On a car loan the interest is not compounded.  The interest is paid each month.  No compounding.

Using his example, $13,000 over 36 months at 4.5. percent, the monthly payment is about $387.  The total interest paid over the full 36 months is about $932, not $1,755.

Reply by
RBit

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No, his calculations are correct. Total paid $13922. The reason is that the principal decreases monthly, so with each payment less interest is charged. Interest is not calculated up front in a lump sum as you did. It is typically compounded monthly even though they call it APR. [For more info, Google "Effective Annual Rate"] CK has an Amortization Calculator you can use to test out paying $15000 @0% for 36 months vs. $13000 @4.5% for 36 months. 

The Amort. Calculator also is a useful tool to show you how powerful making a downpayment is, especially on longer loans. 

Reply by
CardCurious

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GREAT  INFO ! I Am Thrilled there are Well Informed People on this Site who Are Very Willing to Share THIER Knowledge! ...Thank You ! It's Such  a Blessing ! To See...

Reply by
878991

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This was very informative and valuable! Will take it into consideration on my next vehicle purchase. Thanks!

Reply by
Jenny54720

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I know this post is 2 years old, but I have to correct cemoore1225's incorrect math.  That is NOT how you calculate interest.  You are reducing your outstanding principal each month you make a payment, thereby reducing the amount for which interest is charged each month.  You do not pay interest on principal that you have already paid down over the course of a loan. The math of the orignal poster is correct and your monthly payment would be $387.

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I don't know what is required for 0%, I always assumed you needed perfect credit.

I never looked into low finance offerswhen my credit was perfect. I always had alot of equity in my trades and the rebates in lu of 0% made more sense to me. Domestic pickup rebates can be $4000-$9000.

My credit recently took a large hit down to 680. So when i was shopping for a new truck, I checked with aaa, to see what i would qualify for before going to the dealer.AAA aproved me for 2.49% for 4 years.

After settling on a price at the dealer, They included a $500 rebate to use chrysler capital.When they came back with 4.99% this seamed fair with the rebate. I did the math and decided aaa was the better option. When I told them this they weren't happy, but came back and matched the 2.49% and a total of $7,000 in rebates including $500 for taking the %2.49 ( I also got $3,500 off the sticker price as well).

My point is I never thought i would qualify for this rate but prequalifying before i went in gave me the confidence to push the dealer and get a great deal.

Reply by
mflannery

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*lieu

Reply by
ryan1462

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when you check into what you were "pre-qualified" for, did they hit your credit score with a hard inquiry?

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Reply by
kjarrett1991

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Wow I have AAA Towing service I need to check it out thanks

Reply by
878991

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This was valuable infomation. I hear a lot about pre-qualifying for a loan prior to going to the dealer and have yet to use this method! I will be using it in the near future for best results now. Thanks! 

Reply by
dollartroubles

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I check with my bank or loan company before I buy a car EACH and EVERY time. I have used that strategy more than once to buy my car. Works every time. Car company and finance company both want your business. Just have to be prepared to throw a rate back at them to match.

Reply by
McMelty59

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Enter Your Reply Thank you for the info! Wow! That just gave me confidence!

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so you know

Helpful to 51 out of 52 people

I worked dealerships for 25 years and most are scumbags their strategy is to get you excited about the vehicle then wear you down with all the negotiations and NEVER LET THEM KNOW YOUR A PAYMENT BUYER then they can do just about anything they want behind the scenes and you will be sure to pay at least $50 more on the payments.

Okay now that you are tired and hungry they finally send you into the lion's den called finance department were they will use every term to baffle you into thinking they are your friend and working hard for you to get you the very best deal possible but trust me when I say they are the worst con artist in the company. Their whole job is to get every single penny they can squeeze out of you!!!!!

This includes getting the zero percent, just because you get that they will try to add in all kinds of other services like remote entry, security system and my favorite the paint or desert protection package.

Do not be afraid to walk away at anytime also do not give up your keys to your trade in until the deal is done and your happy. They will come up with excuses to keep you there like holding your trade hostage so they can reason with you.

Good luck

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Reply by
teflon662

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great post Jimbo, I am planing on purchasing a luxury vehicle and after all the research everything points towards geting a loan from a bank and not the dealer. ie getting the money for the car from the bank and paying the car cash at the dealer and then paying off the loan payments with the bank. would you say thats a better idea? 

cheers

Reply by
878991

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Very helpful and glad to hear from someone with such experience in the industry!

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720 or better

Helpful to 229 out of 245 people

I've been involved with auto finance for years and it depends on the manufacturer and, to a lesser degree, the dealership.  I have never seen anyting below 720 receive 0% financing but most call for 740+.  Hope this helps

Reply by
878991

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Very helpful! Convinces me to wait until credit score reaches that point before attempting to finance for the 0% financing or rebates that most dealers offer now. 

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Finance Dept. in Dealerships

Helpful to 103 out of 109 people

FYI.   Car dealerships make a lot of money on the finance end of car deals.  

They submit your information to the lenders.  They get the approval back from the finance company/lender with your interest rate also.  Unfortunately, many times that is not the interest rate you actually pay.    The finance department then, can and will, add a point or two to make money for their department.  You will never know the difference.  

Reply by
RESANDLIN

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When a dealership fianances your car your they get 2% of the fianance rate. you are better off finding your loan for the car by yourself.Enter Your Reply

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Reply by
johnmeyers74

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They will try, but that is why you need to goin prepared by being prequalified at a bank or credit union. Last vehicle I bought we went in knowing we has a 3% rate at the credit union. The dealership finance girl said "Great news! We can get you a 6% rate!", I said no thank you we are already qualified for 3%. She was quite miffed that I knew what rates were and kept pressing for us to take her offer, recalculating and gradually lowering the rate until it was within a quarter percent. I didn't budge on the rate and said I'd come back with a check.

The department manager even got in on it at the end and tried to push for us to pay the slightly higher rate. When I brought up that they were going to profit from the rate, he acted almost offended and declared they wouldn't make much. I then told him I don't care if he isn't going to make much from the financing, it's going to cost me more every month and I don't see a reason to pay it when I have cheaper financing already lined up. An extra $10 doesn't seem much, but over 60 months it adds up to $600!

Bad rates and high pressure tactics. And these people wonder why buyers are apprehensive and later talk bad about used car salespeople!

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car loan

Helpful to 38 out of 42 people

First of all, get away from a bank. Join a credit union, loans are less, interest on credit cards and car loans are much less.  You do have to have a good credit score, but you and always open a saving account.  After a year of so open a checking account.  All your "bank" issues will go away.

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**** good question

Helpful to 168 out of 213 people

We are in the market for an auto and are looking at the Toyota 0% financing for 36 months.  Just curious who has qualiifed for this and what your score was?

Zip I did ask my dealer how to qualify and here is what they replied.

-   Length of time at Residence (1-2 years is good)

-   Length of time at Employer (1 year plus is good)

-   Tradein equity if applicable. (too much negative equity may not carry on the new vehicle)

-   Credit score above average. (please use our credit estimator if you don't want to pull credit, it only asks questions to get an idea, it doesn not collect your SS#.. here is the link: http://fowlertoyotatulsa.com/Credit-Estimator/

-   Car credit payment history. (late payments or repos)

-   Monthly debt to income ratios (percentage of outgoing debt pay plus new loan should not be an overwhelming percentage of income)

-   Percentage of income dedicated to new loan.

Hope this helps.  Anyone else with credit score info that can help would be greatly apprecaited!!

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Reply by
Floridabiker777

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I can say that it's what's in your credit file that also counts.  Being responsible to handle credit will count more than you think.  You can have a 700 score and still get 0% financing. They want to see that you can handle credit wisely.  When I started using this site I had a mtg & a used car payment with 1 Cap One card.  It's been 3 yrs and I now have a new car lease (with the payments I wanted), a motorcycle loan, and yes, 18 cc's!!!  Never, ever pay anything late, and alway keep utilization at no more than 30% or pay in full every month.  You can learn a lot on here and how they want you to handle your credit.

Reply by
1939Nash

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I applied and received 0% credit with a score of 767. If more people would do this, we can determine what is the LOWEST score to achieve 0%.  Come on and help out

Reply by
878991

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Very helpful and informative information here! Thanks!

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Reply by
Vlanson

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I’d like to share my story too. Just a few weeks ago i was homeless, i was jilted by my online lover. and he had robbed me of everything i had. By the time i realized i was being played, my credit score was already 458 , i had an eviction on my report and a large debt on my credit. I was on my way to the little corner behind the store where i normally sleep when i saw a fellow homeless person who i met some days ago and he was looking so changed and successful. I immediately began to beg him to tell me how he made it so fast and because i had told him my story when we previously met, he understood my problem and gave me the contact of the hacker that helped him. i contacted the programmer (ex FICO and Experian agent) and he fixed my credit, raised my credit score and cleared all negative listings on my credit in less than 9 days. I would have kept quiet about this, but i won't be able to forgive myself for not helping people who are in terrible conditions like i was. "gmorrison741 @ g m a i l . c o m" is the programmer's email address. I wish you good-luck. Y’all can thank me later. 

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credit score for Toyota zero percent

Helpful to 152 out of 203 people

Anything above 650 credit score will land  you zero percent financing. If you dont get it, the finance manager is bull****ting you

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Reply by
icuhowie

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Don't think so,  LOL

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Juliettecep94

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good thing. thanks for the advice ;)

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malsings07

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Some years ago when I first bought my home my car went out and I went in search for a another car (used) and went to a Nissan dealer based on their radio advertisement so I saw a used Altima I was interested in , they went in the back came out and told me I had bad credit and that my payment would be around $480.00 I must have looked like boo boo the fool they warned me that I wouldn't get a better deal than that because of my credit I said no thanks went to another dealer and got into a car for $279.00 a month for 3 years. So, shop around my score was in the 700's

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Reply by
bbryson21

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Yeah, "right".........I would have to disagree with that statement.

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Reply by
Vlanson

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I’d like to share my story too. Just a few weeks ago i was homeless, i was jilted by my online lover. and he had robbed me of everything i had. By the time i realized i was being played, my credit score was already 458 , i had an eviction on my report and a large debt on my credit. I was on my way to the little corner behind the store where i normally sleep when i saw a fellow homeless person who i met some days ago and he was looking so changed and successful. I immediately began to beg him to tell me how he made it so fast and because i had told him my story when we previously met, he understood my problem and gave me the contact of the hacker that helped him. i contacted the programmer (ex FICO and Experian agent) and he fixed my credit, raised my credit score and cleared all negative listings on my credit in less than 9 days. I would have kept quiet about this, but i won't be able to forgive myself for not helping people who are in terrible conditions like i was. "gmorrison741 @ g m a i l . c o m" is the programmer's email address. I wish you good-luck. Y’all can thank me later. 

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answer to your question

Helpful to 94 out of 118 people

To be honest with you , there is no tried and true response. I worked at one of the big three finance companies and I saw contracts where two people with the exact same credit score where given entirely different rates.  If you are able to pay cash for your vehicle , then you are  in a better position to determine the price you are going to pay.  If you don't have to use a dealer's financing options, then you are in charge of the deal. Don't accept the price they are giving you, there i the sticker price and then there is the dealer price and trust me, you can get closer to the dealer price if you can pay cash for your vehicle out right. hope this helps.

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Reply by
scarhill

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Actually paying cash for a vehicle often results in a higher price.  The reason being dealers view a cash buyer as one who will not offer addtional profit in the back end, the F&I office.  Deales will often sell at a lower price if they believe they will make profit through financing or from those various products they sell in the F&I office.

Even if a buyer is paying cash, there is no need to disclose this when negotiating the price.  It is usually better to have the dealer believe the buyer will finance. 

Reply by
gracie1981

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I agree with scarhill's comment completely. There are always spiffs from the Finance Manager's office so it's never in a buyer's best interest to pay cash or even let on that they can. Also, putting tons on your down payment isn't always the smartest way to go. Put down enough to get super low interest even if you could pay for it all that day; they will make you a better deal -- and then when your first or second payment comes due just plunk down the payoff amount then. You get a responsible loan on your account, the salesperson works harder to get you a good price because he's going to get a finance commission bonus, and you all win. (I processed sales contracts for a Cadillac dealership for many years and have seen a lot.)

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Of course the credit has be to high,

but try to negotiate the price on the vehicle as well,assuming your credit is great,you can get a low interest plus rebates plus negotiations. Remember now,rebates are offered from the manufactuer to the dealer,dealer loses nothing on rebates. The price is still negotiable,plus rebates. In the end whats going to save the most money is having a lower price and paying more than minimum per month assuming the interest is at a low rate. Don't forget taxes are thrown into financing,as other fees. 

The other math was too basic. 

Heres what the 0 percent would look like vs the 2000 rebate inculding taxes and 250 in fees of registration etc. 

0 percent- Vehicle price 15,000

tax@6.25 percent

250 in fees,

0 down

monthly payment- 449.65 for 36 months

Tax-937.50

Amount financed- 16,187.50

interest-0

total 16,187.5

Now with say a 4.5 rate and rebate,which is still dependable on credit

Monthly payment 418.32

Tax 812.50

amount financed 14,062.5

Total interest 997.02

Total payments 15,059.52

Now It shows the savings. But you can negotiate that rebate with interest price as well,plus go to local credit unions and pre qualify for say maybe a 1.99 or 2.5 rate. Remember now,those 0 percent offerings are through the actual manufacturers bank. 

So lets say you go get a 2.5 at a bank,and get 500 bucks off the price,2000 rebates

Same term and fees and tax,

Monthly payment-390.53

Tax-781.25

Amount financed 13,531.25

Total interest-527.83

Total payments 14,059.08

Now for fun,lets say you get a 3.5 at 72 months from another bank,2000 grand in rebates,and a mere 500 off asking price(this is very possible)

Monthly payment-208.63

Tax-781.25

 Amount financed-13,531.25

total interest-1490.11

Total-15,021.36

Say you get that term,but you pay a month what you would with the 0 percent at 36 months which is an extra 241.02 extra  a month

total interest would be 651.68(rest pf payment applied to principal)

total payments-14,182.93

Total interest savings-838.43

Pay off earlier by 40 months

I would choose the very last option,just due to not that much more in interest,having a lower payment,and being able to pay extra whenever you want.

If you can afford the very first option,then surely the last would make sense. 

Negotiate,shop around for rates,and if you have money down,thats even less interest. 

Im wondering how your situation sorted out. 

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