0% APR Car Finance in the UK

The real story behind 0% APR car finance

0% APR car finance is a headline offer that promises interest-free monthly payments over a fixed term. It is available in the UK on selected models and usually for a limited time. The appeal is obvious: you spread the cost without paying interest, preserving cash for other priorities. Yet the mechanics, eligibility and small print matter just as much as the rate.

Today, multiple manufacturers and retailers run periodic 0% promotions. Škoda has offered 0% APR on a range of models, allowing buyers to pay over time without interest when terms are met (source: Škoda). Toyota has promoted 0% APR representative on specific models such as the C-HR Hybrid over short terms via PCP, alongside brand savings on electrified cars when financed through Toyota PCP (source: Toyota UK). Vauxhall has advertised zero percent deals that typically require a minimum deposit to qualify (source: Vauxhall). Volvo UK has highlighted selected models with 0% APR options and additional cash incentives on models like the XC40 during promotional windows (source: Volvo UK). Roundups frequently showcase 0% offers on models including the Volvo EX30, BYD Dolphin and Ford Mustang Mach-E when campaigns are live (source: carwow). Dealers also explain that 0% finance simply spreads payments like other plans, only without interest if you follow the rules (source: Evans Halshaw).

The format is usually PCP or HP. With PCP, you pay lower monthly instalments and decide at term end whether to pay the optional final payment, return the car, or part-exchange. HP divides the total amount into fixed payments so you own the car at the end once the final instalment clears. The 0% rate applies to the credit cost, but not always to fees or add-ons. Stocks, trims and terms are often limited, and approval still depends on credit checks and affordability.

If you are weighing up a new EV, a hybrid crossover or a family hatchback, 0% APR can be a cost-efficient route - provided the deposit, term length and optional extras suit your budget. Understanding the headline versus the total cost of ownership is critical. Factor in insurance, maintenance, tyres, home charging for EVs, and any excess mileage charges if you choose PCP.

Understanding APR is not just about percentages - it is about what you will pay in real pounds across the term.

In the following guide, we unpack the jargon, compare options, outline the costs and risks, and show you how to check eligibility before you apply. As a UK-based retail finance broker, Kandoo helps you compare options from multiple lenders and dealer partners so you can select a deal that fits, not just a rate that looks good.

Who should consider 0% finance?

If you have strong credit, a stable income and the flexibility to pay a sizeable deposit, 0% APR can keep borrowing costs to a minimum while preserving savings. It suits buyers who plan to change cars every few years and prefer predictable payments, especially on PCP where mileage and condition are monitored. It can also work for cash-rich buyers who would rather keep funds liquid for investments or emergencies while their car payments remain interest-free.

For those eyeing new cars that qualify for manufacturer-backed campaigns - for example, selected Škoda models, Toyota PCP offers over shorter terms, or a Volvo promotion - 0% APR can be appealing. However, if you want very low deposits, used cars, longer terms, or you have a thinner credit file, a different finance type or a standard APR with incentives might yield a better overall outcome.

Speak the language: key terms explained

• APR: The annual percentage rate of charge for credit. At 0%, the lender is not charging interest, though fees or optional products may still apply.

• PCP (Personal Contract Purchase): Lower monthly payments with an optional final payment. You can return, pay to own, or part-exchange at term end.

• HP (Hire Purchase): Fixed monthly payments that lead to ownership once the last instalment is paid. No large final payment.

• Deposit: Upfront contribution, often 10%-30%. Some 0% deals require a higher minimum deposit.

• Term: The length of the agreement, commonly 24-48 months. Many 0% campaigns are shorter, such as 24 months.

• Optional final payment: The balloon amount on PCP. Paying it transfers ownership; not paying means returning the car subject to condition and mileage.

• Mileage allowance: Annual cap on PCP. Exceeding it incurs pence-per-mile charges.

• Representative example: A standardised illustration of costs for typical customers. Always check total amount payable and fees.

Your interest-free choices, compared

1. PCP at 0% APR

   • Typical use: New cars on brand campaigns. Examples have included Toyota C-HR Hybrid over 24 months and models highlighted by carwow like EX30 and Mach-E when offers run.

   • Why pick it: Lower monthly payments, flexibility at the end.

   • Watch-outs: Mileage limits, condition charges, optional final payment due if you want to own.

2. HP at 0% APR

   • Typical use: Selected models with shorter terms. Can suit buyers who value straightforward ownership.

   • Why pick it: No balloon payment, own the car when done.

   • Watch-outs: Higher monthly payments than PCP, deposit often required.

3. Manufacturer 0% loans with incentives

   • Typical use: Limited-time campaigns from brands like Škoda, Vauxhall and Volvo. May include deposit contributions or model-specific savings.

   • Why pick it: Interest-free plus brand savings where available.

   • Watch-outs: Stock-limited, trims restricted, minimum deposit rules.

4. Dealer 0% promotions

   • Typical use: Retailer-led events on specific cars or plate-change periods. Evans Halshaw explains payments are spread like standard finance but interest-free within terms.

   • Why pick it: Local availability and potential add-ons.

   • Watch-outs: Tight eligibility, short windows, admin fees may apply.

5. Standard APR with bigger discounts

   • Typical use: When 0% is unavailable or restrictive. Dealers sometimes offset interest with larger cash discounts.

   • Why pick it: Broader choice of cars and terms.

   • Watch-outs: You pay interest - compare total payable carefully.

What it really costs: pounds, trade-offs and risk

Can you qualify?

Eligibility for 0% APR is tighter than for standard finance because the lender or manufacturer is subsidising the interest. Expect a full credit check and affordability assessment. Strong credit history, stable employment and a clear electoral roll presence are typical success markers. A higher deposit can improve acceptance chances and may be mandatory on some campaigns, such as Vauxhall offers that specify a minimum contribution. Some 0% plans are shorter term - for example, Toyota’s 24-month PCP promotions on certain models - which means monthly payments are higher, so the affordability test must still pass even without interest.

Lenders also look at the car itself. Offers can be limited to selected new models, body styles or trims, and may exclude factory orders if stock is tight. Mileage allowances and usage profile matter for PCP. If you are newly self-employed, on a temporary contract, or have recent credit issues, you might find more consistent approval odds with a standard APR product or a slightly longer term rather than insisting on 0%.

From search to keys: the simple sequence

1. Check credit file and set a realistic budget.

2. Shortlist models with active 0% campaigns.

3. Decide PCP flexibility or HP straight ownership.

4. Confirm deposit size and preferred term length.

5. Get a broker-led soft check for eligibility.

6. Review the representative example and total payable.

7. Sign, collect the car and keep to mileage limits.

Advantages and trade-offs at a glance

Read this before you press go

0% APR is not always the cheapest overall once you include deposit size, term length and any extras. Compare like for like: same car, same term, same deposit. If a standard APR deal comes with a larger discount or a longer term that better fits your monthly budget, the total cost may be comparable or even lower. For PCP, be honest about your mileage and keep the car in good condition to avoid end charges. Finally, check whether incentives require you to finance through the manufacturer’s captive lender and what happens if you settle early.

If 0% is not available

1. Low APR with bigger cash discounts - sometimes cheaper overall than a short 0% term.

2. Longer-term PCP or HP - lower monthly payments with a modest rate.

3. Leasing (PCH) - fixed rentals without ownership, often competitive on EVs.

4. Nearly new or approved used finance - wider choice and lower prices.

5. Paying cash partly - combine a larger deposit with a shorter, low-rate plan.

Answers to common questions

Q: Are 0% APR deals real, or is the discount hidden? A: They are genuine but subsidised. Some campaigns reduce flexibility versus cash discounts. Compare total payable and the car price across offers.

Q: Which brands have active 0% promotions? A: Availability changes. Recent UK examples include selected Škoda models, Toyota PCP terms on specific hybrids, Vauxhall zero percent with minimum deposits, and Volvo promotions on select models. Check current stock.

Q: Is PCP or HP better at 0%? A: PCP keeps payments lower and offers options at the end. HP is simpler and leads directly to ownership. Choose based on mileage, cash flow and long-term plans.

Q: Do I need a big deposit? A: Often yes. Many 0% deals require a meaningful upfront contribution to reduce risk. The higher the deposit, the lower the monthly payment.

Q: What about fees and add-ons? A: 0% usually covers interest only. Admin fees, optional products, servicing packs and paint protection can add cost. Scrutinise the representative example.

Q: Can I settle early? A: Usually, but terms vary. Some incentives may be conditional on keeping the agreement for a minimum period. Ask for an early settlement figure.

Make your move with confidence

Start by clarifying budget, deposit and term, then compare live 0% campaigns across brands and retailers. As a UK retail finance broker, Kandoo can help you check eligibility with soft searches, weigh PCP against HP, and calculate real-world costs including fees and mileage. When the numbers stack up, apply and keep paperwork tidy for a smooth handover.

Important information

This article is for information only. Finance is subject to status, terms and conditions, and availability. Kandoo is a broker, not a lender. Offers, APRs and incentives change frequently - always confirm details with the provider and read the agreement before signing.