0 interest car deals in Canada are subvented financing offers: the vehicle manufacturer pays a finance company to lend you money below its own cost, in order to move specific new models. Subvention means the automaker sends the lender the difference between the promotional rate you see and the preferred rate that lender actually requires, a structure the Financial Consumer Agency of Canada described plainly in its Auto Finance: Market Trends review (FCAC, March 2016). Because that subsidy comes out of a marketing budget, manufacturers almost always make you choose: take the 0% rate, or take the cash rebate on the same vehicle. You do not get both. I'm Tim Phillips, and across 15-plus years in Ontario's car business, most of it in the F&I office, the 0% offer was the easiest sale on the floor and the one buyers checked least. Ontario Car Financing wrote this page to give you the one calculation that settles it. Before you compare offers, know what a normal rate looks like for your file in Rates and Costs, and put both versions of the deal through the payment calculator so you are comparing totals rather than payments.
A cash rebate, sometimes called cash back, delivered incentive, or customer cash, is a manufacturer discount applied to the price of the vehicle when you do not take the promotional finance rate. Give up a $4,000 rebate to get 0% financing and you have paid $4,000 for that interest-free loan. That forfeited rebate is the real cost of borrowing.
What is 0% financing and who pays for it?
Nobody lends at zero out of goodwill. In a subvented program the manufacturer is buying down the rate, and it is doing so for inventory reasons: slow-selling trims, outgoing model years, a segment losing share. That is why 0% offers arrive with conditions attached, and why the conditions are the part worth reading. Typical restrictions include a specific model and trim list, a shorter term than you would normally choose, and a requirement that the vehicle be new and in stock rather than factory-ordered.
The term restriction is the one that surprises people. Subvented zero-percent money is expensive for the manufacturer, so it is often offered at 36 or 48 months while the market-rate alternative runs 60, 72, or 84. A shorter term at 0% can mean a higher monthly payment than a longer term at 6 percent, which is exactly the comparison a payment-focused buyer gets wrong. The payment is the distraction; the total cost is the truth.
One more structural note worth knowing: FCAC observed that subvention financing does not typically involve the dealer reserve, the commission a lender pays a dealer for arranging a loan. So on a 0% deal the dealership is generally not earning on the money. That matters, because it explains where the desk will try to make the deal work instead: the trade-in number, the price, and the add-ons in the finance office.
0% financing vs the cash rebate: why you rarely get both
Think of the manufacturer's incentive as a fixed pot of money on a given vehicle. It can spend that pot buying down your interest rate, or it can hand it to you as a price reduction. Both cost the manufacturer roughly the same and both are worth roughly the same to a buyer, which is why the offer is structured as a choice rather than a stack. Your job is to work out which form of the same incentive is worth more to you, and that depends on one thing: the rate you can get on the post-rebate price somewhere else.
That is the move most buyers never make. Taking the rebate does not mean paying cash. It means taking the discount, then financing the smaller amount through a bank, a credit union, or even the same dealership at an ordinary market rate. If your own rate is low enough, you end up with a smaller loan, a lower payment, and a lower total than the 0% buyer standing next to you.
The worked comparison: when the rebate beats 0%
Here is the arithmetic on an illustrative deal. These numbers are an example, not an offer, and they exclude HST and licensing. Assume a new vehicle priced at $40,000, a 60-month term, and a manufacturer offering either 0% financing or a $4,000 cash rebate.
| Route | Amount financed | Rate (illustrative) | Monthly payment | Total paid |
|---|---|---|---|---|
| 0% financing, rebate forfeited | $40,000 | 0% | $666.67 | $40,000 |
| Take the $4,000 rebate, finance elsewhere | $36,000 | 3.0% | $646.87 | $38,812 |
| Take the $4,000 rebate, finance elsewhere | $36,000 | 7.5% | $721.37 | $43,282 |
Read the middle row twice. At 3 percent, the rebate buyer pays about $1,188 less in total and has the lower monthly payment, despite paying interest while the 0% buyer pays none. The 0% buyer paid $4,000 for the privilege of a zero on the contract; the rebate buyer paid roughly $2,812 in interest instead and pocketed the difference.
The bottom row is the other side of the same coin. At 7.5 percent, financing the post-rebate price costs about $3,282 more than the 0% route, so 0% is clearly the better deal. Same vehicle, same rebate, opposite answer, decided entirely by the rate you can get.
The break-even on this illustration lands near 4.2 percent APR. Below that rate, take the rebate. Above it, take the 0%. You can compute your own break-even in one pass: find the rate at which the post-rebate loan's total payments equal the pre-rebate price, which is what the payment calculator is for. And note the break-even moves with the size of the rebate relative to the price and with the term, so it is worth doing on your actual numbers rather than borrowing mine. The mechanics of turning any rate into a total sit in The Real Math.
One accuracy caveat that changes real dollars: how the rebate is applied affects tax. A rebate that comes off the selling price on the bill of sale reduces the amount HST is calculated on. Cash paid back to you after the sale generally does not. Ask which one you are being offered, and confirm it on the bill of sale before you sign.
Tim's take: in the finance office, 0% closed itself. People would say the word "zero" back to me like it settled the conversation, and in six years at that desk I can count on one hand the buyers who asked what the cash-purchase price of the same car was. That question is the whole game. The manufacturer already told you what the interest was worth, because it put a dollar figure on the alternative and printed it in the same ad. Here's the lever they don't tell you about: the rebate is negotiable ground too, and on a slow unit you are sometimes offered both a rate program and a price concession if you make the desk compete for the deal.
What "0% on approved credit" actually screens for
On approved credit, usually shortened to OAC, means the advertised rate is the best available offer rather than the offer everyone receives. Subvented 0% programs are top-tier prime products. Lenders generally treat prime as roughly a 670 credit score and up, with some pricing their best tiers well above that, and manufacturer programs typically sit at the strong end of prime. There is no single published cutoff, it varies by manufacturer, model, and program, and it moves with lender appetite.
Credit tier is not the only screen. In practice a 0% approval also tests for a clean recent payment history, provable and stable income, a manageable debt-service load, and a loan-to-value that fits the program, which is where a trade-in with negative equity often breaks the deal. Rolling an unpaid balance from your last car into a subvented loan frequently pushes the amount financed past what the program allows, and the file quietly moves to a standard rate. If that is your situation, read Negative Equity on a Car Loan in Ontario before you shop, because the rollover is usually the reason the advertised rate evaporates at the desk.
Fleece alert: the bait-and-switch to a "0%-like" payment. The pattern I saw most often was a buyer who came in for an advertised 0% offer, did not qualify or wanted an ineligible trim, and left in a longer-term loan at a normal rate with a payment engineered to match what the 0% payment would have been. Nothing illegal happened. The payment was the same and the total cost was thousands higher. Your counter-move is to check the term and the total of all payments on the contract, not the payment amount. If the term moved, the deal moved.
What Ontario law requires a 0% ad to disclose
Zero-percent advertising is specifically regulated in Ontario, and the rules are more demanding than most buyers realize. Under O. Reg. 17/05 made under the Consumer Protection Act, 2002, an advertisement offering fixed credit that discloses an interest rate or a payment amount must also disclose the annual percentage rate, the length of the term, and, for a specifically identified vehicle, the cash price and the cost of borrowing (s. 61(2)). Critically, s. 61(3) states that those requirements apply even if the advertised interest rate or payment amount is zero. The APR must be shown as prominently as the most prominent rate or payment figure in the ad (s. 61(4)).
There is a further provision aimed squarely at deferred-interest structures. Section 61(8) requires that an advertisement stating or implying that no interest is payable must disclose whether the agreement is unconditionally interest-free for that period, or whether interest accrues and will only be forgiven if conditions are met, and in the second case it must state the conditions and what the APR would have been if those conditions were not satisfied. If an offer is "0% for 12 months" rather than 0% for the term, that is the section that entitles you to see what happens in month 13.
Your rights: the regulator already agrees the rebate is a cost of borrowing. In its dealer bulletin on credit and lease contract disclosure obligations, OMVIC instructed that the APR and cost of borrowing must be calculated on the cash price of the vehicle, so any cost a financing customer pays that a cash customer would not must be factored into the APR. Its listed examples include "rebates which are only available to cash paying customers." In other words, Ontario's dealer regulator has already taken the position that a discount you forfeit by financing is part of what the financing costs you. That is the same logic this page's arithmetic runs on, and it is worth quoting if a salesperson tells you the rebate and the rate are unrelated. Confirm current requirements as the CPA 2023 transition phases in through 2026.
What if your credit is not top tier?
Then 0% is not your decision to make, and it is better to know that before you spend a Saturday at a dealership. Subvented rates do not reach near-prime or subprime files. What does still apply to you is the more valuable half of this page: the cash rebate is often available regardless of how you finance, so a bruised-credit buyer can take the discount and finance the smaller amount. Ask explicitly whether the rebate is conditional on the finance program, because sometimes it is and sometimes it is not.
The rest of the levers are ordinary ones. Ontario tier ranges are wide, roughly 5 to 9 percent prime, 9 to 15 percent near-prime, and 11 to 30 percent or more subprime as aggregate estimates, all bounded by the federal criminal interest cap of 35 percent APR in force since January 1, 2025. On a subprime file, one point of rate over a long term is worth far more than any rebate, so shopping the loan is the move that pays. Start with Bad Credit Car Loans in Ontario. And for context on how much car is being financed these days, AutoTrader put the average new vehicle price at $63,439 at year-end 2025, which is the number that makes all of this worth an afternoon of arithmetic.
Bottom line from this side of the desk: 0% financing is a genuine offer, not a trick, and it is frequently the wrong one to take. The only question that decides it is what the same car costs if you take the rebate and finance somewhere else. Ask for the cash price, ask for the rebate amount, then compare totals rather than payments. No judgment, just the path.
Frequently asked questions
Is 0% financing actually a good deal?
Sometimes, and the deciding factor is the cash rebate you give up to get it. Work out the break-even rate: if you can finance the post-rebate price below that rate, the rebate wins; above it, 0% wins. On an illustrative $40,000 vehicle with a $4,000 rebate over 60 months, the break-even lands near 4.2 percent APR. Run your own numbers before you choose.
Why can't I get 0% financing and the cash rebate at the same time?
Because the manufacturer funds both out of the same incentive budget. In subvented financing, the automaker pays the finance company the difference between the promotional rate you see and the rate that lender actually needs, as FCAC described in its 2016 market review. The cash rebate is the alternative way of spending that same money, handed to you instead of the lender. You are choosing which form the incentive takes.
What credit score do you need for 0% financing in Canada?
There is no single published cutoff, and it varies by manufacturer, model, and program. In practice 0% is a top-tier prime product: lenders generally treat prime as roughly 670 and up, and many subvented programs sit well above that. The phrase on approved credit means the advertised rate is the best available offer, not the offer everyone receives.
Does 0% financing exist on used cars?
Very rarely. Subvention is a manufacturer marketing program paid for out of the incentive budget for its own new inventory, so 0% is normally tied to specific new models and trims, occasionally to certified pre-owned programs. A 0% offer on an ordinary used vehicle is unusual enough that you should read where the cost has been moved to, most often the vehicle price.
What does 0% APR on approved credit mean in an ad?
It means the rate is subject to lender approval and is available only to buyers who meet the program's credit tier, on eligible models and terms. Ontario's advertising rules still apply at zero: under O. Reg. 17/05 s. 61(3), the disclosure requirements apply even where the advertised interest rate or payment is zero, and s. 61(8) requires ads implying no interest to state whether the deal is unconditionally interest-free or whether interest accrues and is only forgiven if conditions are met.