Just how good does your credit have to be to qualify for 0% financing on a car loan?

August 17, 2007 5:03 AM

Just how good does your credit have to be to qualify for 0% financing on a car loan?

Ford is offering 0% 60 month financing for buyers who qualify. I have a fairly good credit score, but I'm curious if they have a set score that you have to meet to be approved? Does anyone happen to know?

posted by saucy to Work & Money (9 answers total)

0% financing isn't purely a credit decision. They lose money on it, since they can't borrow money for free. That makes it more like a promo. Think of it like just another rebate or discount, but worked into the loan rather than the price of the car.

So, they'll give you 0% if they can keep the price of the car sufficiently high that they'll still make their profit overall. If you haggle the price of the car down too close to their margin, a score of 800 won't get you 0%.
posted by smackfu at 5:34 AM on August 17, 2007 [4 favorites]

Seconding that. Ford offered the same deal back in 2002 (and kicked in a 5 year/100,000 mile powertrain warranty on top of it), and despite my very good credit score then, they wouldn't give me 0% unless I put $1500 down first. They claimed it was due to my lack of credit history to that point (that was my first ever new car purchase which makes their point somewhat of a legitmate one), but still it seemed a little underhanded at the time.

They also bent over backwards to try to get me to take advantage of their "$2,000 cash back offer" or whatever it was, in lieu of the 0% financing. I declined, several times (they were relentless), and their argument was in fact what you stated - it was no guarantee that I would qualify for the 0% financing, so why not take the cash in hand now? I didn't, and five years later I'm glad.
posted by Rewind at 6:17 AM on August 17, 2007

I don't know, but I got 0% from Toyota with no hassle 4 years ago; my credit score is around 700. So there's one data point for ya. :)
posted by iguanapolitico at 7:24 AM on August 17, 2007

smackfu has it. The loan guy for my credit union (who goes to my church) told the exact same thing.
posted by 4ster at 7:29 AM on August 17, 2007

And should hasten to add, he told me that in a conversation where he directed me to another credit union because they offered a better APR. A good guy.
posted by 4ster at 7:30 AM on August 17, 2007

Athough the 0% situation is a little different, (as described by smackfu, above), the cutoff for the best rate is usually 720. My sister-in-law is a finance manager at a car dealership, she confirmed this, and it was our experience when we bought our new car.
posted by peep at 8:34 AM on August 17, 2007

Keep in mind that Fair Isaac uses a slightly different scoring model for auto loans than for consumer loans, so getting your "FICO score" from a Web site may not tell you your score as a car dealer would see it. Last time I financed a car, my "auto FICO" score was 50 points higher than the score I thought I had.
posted by kindall at 12:39 PM on August 17, 2007

They also bent over backwards to try to get me to take advantage of their "$2,000 cash back offer" or whatever it was, in lieu of the 0% financing.

I could be wrong, but the dealer was probably pushing the cash because it was a manufacturer's incentive, and thus not out of the dealer's pocket, whereas they derive some revenue from your financing. You should run all the numbers in any case:

When we bought our car a few years ago, we'd gotten pre-approved at 4% from our credit union. Doing the math on the 0% APR vs. the cash back revealed the difference between 0% and 4% over 5 years was less than the cash back amount, so we happily took the money and ran (and used the 4% pre-approval to negotiate a 3.75% rate from the dealer). They even added a "customer loyalty" rebate even though we were trading in a different make of car, also (I assume) because it wasn't coming out of their pocket.

(As I write this, I remember they even gave us gap insurance for free - either my charisma is overwhelming, or they had some sort of crazy quota/reward system happening behind the scenes - I'll choose to believe it was my dashing good looks...)
posted by jalexei at 1:56 PM on August 17, 2007

jalexei's got the basic idea that the financial relationship between the OEMs (Ford, Chrysler, etc.) and the dealers is _incredibly_ complex. There are so many layers and layers of promotional fees, givebacks, etc. between them that it's very hard to for anyone who's not working in their accounting departments to understand exactly what's going on, but it all plays into the final offer the dealer's willing to give you.

It's very common for the OEMs to launch a "Tier 1", or national promotion where they offer something like "0%/0 down" to a very, very tightly defined credit group. The tiny group who qualify have to get financing through the OEM credit arms, of course, but it's basically a promotional message to get the bigger, less qualified pool of people come in and take advantage of a less impressive offer. At the same time, in the background, the OEMs need to offer the dealers several different compensations to make up for any kind of loss they have to take.

The smart dealers work that system like you wouldn't believe. As much as they try to screw _you_ over, they're working just as hard to wring every dollar out of the OEM incentives. The final deal you get is almost guaranteed to be tweaked in a way that gets the dealership the most money possible back from the OEM, even if some parts end up basically being a wash for you.
posted by LairBob at 5:37 PM on August 17, 2007