When it comes to auto loans, a 0% interest rate is a head-turner, but it’s not always the best deal.

Car dealerships generally advertise 0% offers in the summer when they’re looking to make room in the showroom for newer models. The offers come from the financing arms of the large auto manufacturers, which unlike traditional lenders, profit directly off the sale of the car and don’t necessarily need the interest revenue.

But like any great deal—there’s a catch. According to The New York Times, only about 10% of consumers actually qualify for 0% interest loans, which require pristine credit—usually a FICO score of 720 or higher. Those loans typically are reserved for a limited number of models and are not available if you’re shopping for a used car—which cost less than newer models.

In addition, taking the 0% offer may mean giving up the rebates that are available with the new car. So, although you would save in your interest rate, you could be letting go of thousands of dollars in rebates. It’s important to do the math and see which option will get you the best deal.

These 0% loans often are paired with shorter-term loans, which cost you less overall but mean a higher monthly payment. So, before you head to the dealership chasing a 0% loan, keep these points in mind:

  • Look at all available deals. Check for other offers, such as cash back. If you can get a rebate—which lowers the overall price of the car—paired with a low-interest loan, it may save you more than the 0% financing. Be sure to crunch the numbers with an online calculator.
  • Negotiate the price. Before you get to the interest rate, finalize a sale price and stick to it. Don’t feel pressured to accept expensive add-ons. Once the sale price is established, then talk about financing; and
  • Get preapproved for a loan at your credit union. Heading to the dealership with a firm offer in hand will give you a point of comparison and puts you in a stronger negotiating position. Credit unions, as not-for-profit financial cooperatives, offer competitive rates.

If you’d like to learn more about auto lending, or any other financial topic, we have a robust Financial Wellness Program available. You can learn more about credit, lending, savings, budgeting, and much more. Best of all, these playlists are fast, informative, and completely free to everyone.