Zero Percent Auto Financing Loans Continue to Decline in Q3 2023

The percentage of auto loans financed at zero percent fell to just 1.1% in Q3 2023, down significantly from a high of 24.2% during that pandemic. According to Edmunds, for the three years before the pandemic, the average quarterly share of 0% loans was 7.1%. Driven by the surge in demand for vehicles, combined with higher interest rates, it has become less appealing for lenders to offer lower rates, with captive lenders regaining market share in the total financing market. Of the remaining 0% deals available, stringent eligibility requirements and shorter terms have excluded many potential borrowers. During the first three quarters of 2023, the average term for zero percent loans was 42.8 months.

Whether the drop-off in these loans will have a meaningful effect on sales has yet to be seen. Chris Scott, the New Car Sales Manager at Kokomo Auto World in Indiana, for example, downplayed the potential impact, stating “I believe 0 percent financing is just a way to try to capture business… But I don’t necessarily know if [the lack of] it stops anybody from buying a car.”