0% finance on electric cars: what's the catch?
Carmakers are offering 0% finance to sell electric cars. Here’s what to check beyond the headline rate, from deposits and balloon payments to the cash price.
Carmakers are offering 0% finance on electric cars to hit government targets. Here's why the deals exist, what to check beyond the headline rate, and how to tell whether you're really getting a bargain.
0% finance sounds like free money. Sometimes it nearly is. But the rate is only one part of a finance deal, and the parts nobody advertises can cost you more than the interest you're saving.
In this guide
- Why 0% deals on electric cars are everywhere
- What to check beyond the 0% rate
- 0% on a new EV vs a nearly new or used one
- Questions to ask before you sign
- Dealer finance vs a broker
- FAQs
Quick answer
- There isn't always a catch, but there's usually a trade-off.
- A 0% deal may come with a bigger deposit, a shorter term, higher monthly payments, a large final balloon payment, strict mileage limits or a higher price than you'd pay in cash.
- Compare the total amount payable, not just the APR, and check what the same car would cost on a different deal or bought nearly new.
Why 0% deals on electric cars are everywhere
Electric cars made up a record 32% of new car registrations in October 2026, according to the SMMT. But that growth has come at a cost for carmakers.
Under the government's Zero Emission Vehicle (ZEV) Mandate, manufacturers must make sure a set share of the new cars they sell are zero emission. The target for 2026 is 33%, but the SMMT expects electric cars to finish the year at 27.2%. Next year the target rises to 38%, and the SMMT expects sales to reach only around 32%.
To close the gap, the SMMT says carmakers have spent billions on discounts, low and 0% finance, deposit contributions and even subsidised charging. That's on top of the government's Electric Car Grant, which takes money off the price of eligible new electric cars.
You can see it in the deals on offer. When Parkers rounded up current 0% finance deals, most of them were on electric cars.
For buyers, that pressure is good news. Carmakers want to sell electric cars, and cheap finance is one of the most effective ways to do it. With the target going up in 2027, these deals are unlikely to disappear soon. But it pays to understand how a 0% deal is put together before you sign.
What to check beyond the 0% rate
A 0% APR means you pay no interest on the money you borrow. It doesn't tell you how much you're borrowing, how quickly you have to pay it back or what you'll owe at the end. These are the details that make the difference.
The deposit
Many 0% offers need a bigger deposit than a standard deal, sometimes 20% or more of the car's price. If a deal includes a deposit contribution from the manufacturer, check whether it depends on you putting down a minimum amount yourself.
The term length
0% deals are often limited to shorter terms, such as two or three years. With nothing added for interest, a shorter term can still mean higher monthly payments than a longer deal at a low rate. Make sure the monthly cost fits your budget, not just the rate.
The balloon payment on PCP
Many 0% deals are PCP (personal contract purchase). Your monthly payments cover only part of the car's value, leaving a large optional final payment, often called a balloon or GFV (guaranteed future value), if you want to keep the car.
At the end, you can pay the balloon, hand the car back or part-exchange it. If the car is worth more than the balloon, the difference can go towards your next car. If used electric car values fall, that equity shrinks.
Mileage limits
PCP deals set an annual mileage limit. Go over it and you'll pay a charge for every extra mile if you hand the car back. Be realistic about how far you drive, and check the charge per mile before you agree.
Finance price vs cash price
This is the one people miss. Sometimes a 0% deal is only available on the full list price, while cash buyers or people using other finance can negotiate a discount. If the 0% deal means paying more for the car, you may still be paying for the finance, just not as interest.
Ask the dealer for the cash price and the 0% price side by side.
Parkers also notes that 0% deals can rarely be combined with other dealer or manufacturer discounts. So a discount you could negotiate as a cash buyer may not be available alongside the 0% offer.
Fees and extras
Look for arrangement fees, option-to-purchase fees and any add-ons bundled into the deal, such as paint protection or service plans. Add them up as part of the total cost.
The total amount payable
Your finance quote should show the total amount payable, including the deposit. It's the simplest way to compare two deals fairly, whatever their APR.
0% on a new EV vs a nearly new or used one
A 0% deal on a new car isn't automatically cheaper than buying used. For most new cars, the biggest cost of ownership is depreciation, the value the car loses over time, and it hits hardest in the first few years.
Used electric cars have become much better value after several years of falling prices. The average used EV was advertised at £25,263 in October 2026, according to Autotrader, and prices have started rising again as demand picks up. A two or three-year-old EV can still come with years of battery warranty left, and used car finance lets you spread the cost in the same way as on a new one.
When you compare, put both options on the same footing:
- What's the total amount payable on each deal?
- What will the monthly payment be over the same term?
- How much of the car will you own at the end?
- How do insurance and running costs compare?
For some drivers, a 0% deal on a new EV will come out on top. For others, a nearly new car on a standard finance deal will cost less overall. The only way to know is to compare the full picture.
Not sure which works out cheaper? At carloans 365, we start with the car you want to drive, then help you find finance that fits around it. Your adviser can help you weigh up a used EV against what you've been offered elsewhere. Check your eligibility in around 60 seconds with no impact on your credit score.
Questions to ask before you sign a 0% deal
- What's the cash price, and is it lower than the 0% price?
- How much deposit do I need to put down myself?
- Is the deal PCP or hire purchase? With hire purchase, you own the car once you've made the final payment. With PCP, you'll face a balloon payment if you want to keep it.
- How big is the balloon payment?
- What's the annual mileage limit, and how much is each extra mile?
- Are there any fees? Ask about arrangement and option-to-purchase fees.
- What's the total amount payable?
- When does the offer end? Don't let a deadline rush you into a deal you haven't compared.
- What happens if I want to end the agreement early?
- Is this the only finance option? Ask whether the dealer can show you other deals, and remember you're free to arrange finance elsewhere.
Dealer finance vs a broker
Manufacturer 0% deals are arranged through the dealer and are tied to specific new models. They can be excellent value, but they only cover the cars the manufacturer wants to sell, and Parkers says 0% APR usually needs a good to excellent credit score.
A finance broker works differently. Instead of offering one lender's deal on one car, a broker works with a panel of lenders to find finance that suits your circumstances. That can help if you want a used car, if you'd like to compare a dealer's offer with alternatives, or if your credit history means you might not qualify for manufacturer offers.
At carloans 365, you'll have your own adviser from first chat to driving away. We'll start by working out what's affordable for you, then help you find a reliable used car from a trusted dealer within that budget. We arrange both hire purchase and PCP, and if your credit file has had a few bumps, we'll still want to hear the rest of your story.
No jargon. No pressure. You can check your eligibility in around 60 seconds. It's a soft search, so it won't affect your credit score.
