Credit Building > How do 0% car finance deals work?

How do 0% car finance deals work?

Wollit Team2 minute read · Updated 30th June 2024

0% car finance deals in the UK work by allowing you to purchase a car without paying any interest on the loan.

These deals are essentially interest-free loans where you only pay back the amount borrowed and spread the payments over an agreed period, usually 24 months.

This doesn’t necessarily mean they’re a great deal or everyone is eligible for them.

Where can I find the best 0% car finance deals?

To find the best 0% car finance deals available, start by checking websites like:

These have listings of current 0% finance deals on various car models. They include the deposit required, the length of the agreement, and other details. They might also offer an eligibility checker to determine whether your credit score is good enough.

What are the pros and cons of 0% car finance deals?

The main advantage of 0% car finance deals is the cost saved, as you’ll save on interest payments and pay back only the principal amount borrowed. Depending on the finance plan type, you can buy the car outright, return it, or use it as part exchange for another vehicle at the end of the agreement.

However, 0% car finance deals come with quite a few disadvantages as well:

They’re hard to find and are not as common as they used to be.
You’ll be limited in the choice of cars available.
They often require a high deposit, usually around 10% to 50% of the car’s value.
You’ll also need to have a good credit score and undergo a credit history check. The lender wants to make sure that you can meet the monthly payments before committing to any 0% finance agreement.

What are the differences between 0% car finance deals and other financing options?

The differences between 0% car finance deals and other options mainly come down to interest rates and terms:

0% car finance deals do not involve interest charges, meaning you only repay what you borrowed. Other financing options for cars, like Hire Purchase (HP) or Personal Contract Purchase (PCP), usually include interest charges which make them more expensive.
0% finance deals might also require a higher deposit and have shorter repayment periods, potentially leading to higher monthly payments than other finance options.
With 0% finance deals, what happens at the end of the agreement depends on the finance plan. You usually can choose between buying the car outright, returning it, or using it as part of an exchange for another car. In contrast, other financing options like HP involve taking ownership of the car only after the final payment.
Finally, qualifying for a 0% finance deal often requires a good credit score. If you don’t have an excellent credit history, you might have to look into other financing options or even take out a personal loan to pay for your car.

The best thing to do if you want access to the best 0% interest car finance deals is to improve your credit score. There are several tools you can use for this, and one such tool is Wollit.

Wollit is an app that reports your monthly subscription as loan repayment to credit reference agencies, helping you build your credit history and potentially improving your credit score.

On top of this, Wollit can also report your monthly rent payment to Experian, adding another line in your credit report that shows lenders you’re responsible and pay your bills on time.