Is it easy to finance a car with no down payment in the Philippines?

Buying a car is a big financial decision for any individual, as it involves a substantial chunk of money. Most buyers do not have such a large sum of money lying around and during such times, car financing offers the opportunity to get your dream car without much trouble. While we have discussed car financing in detail in our previous blog, which you can check out here, there is one more popular financing option available that we’d like to discuss. Called a no or zero down payment car loan, this financial tool is offered by various financial institutions and car dealers in the Philippines.

As can be guessed by the name, this particular car loan format requires no down payment from the buyer, which in the case of a regular car loan is around 20% of the car’s value. Thus attracting many car buyers with its flexibility and ease of buying a car. However, it is not all a bed of roses, this one comes with its own set of challenges and drawbacks.

In this article, we’ll be shedding light on Zero Down Payment car loans advantages, potential drawbacks, requirements, and much more. All this will enable you to decide whether this particular financial tool will suit your financial health or not, because like every other loan option, this one too has long-term financial implications.

So, without wasting much time, let’s dive into the concept of Zero Down Payment Car Loan in the Philippines.

Understanding Zero Down Payment Car Financing

What is zero down payment car financing? It is a car financing tool that enables prospective car buyers to purchase the selected vehicle without making any upfront payment (which in the case of a traditional car loan constitutes a percentage of the car’s total cost).

 

Key pointers -

• This financial tool finances the entire car’s cost.
• The tool results in higher monthly payments, which means a higher overall cost of the loan.
• This option appeals to Filipino car buyers with near to no substantial savings.
• This tool is opted for by those with a steady income, which will support the upcoming monthly payments.

Zero Down Payment Car Financing - Pros & Cons

Zero down payment car financing in the Philippines comes with several benefits and disadvantages. The table below discusses the same in detail -

Pros	Cons
Upfront car ownership: Buyers can get home the car without the need to save or worry about a down payment, which otherwise constitutes around 20% of the vehicle’s cost.	Higher monthly payment: This tool is accompanied by a higher interest rate and therefore a higher overall interest payment.
Untouched savings: Since no cash goes towards buying the car, buyers can retain the savings.	Strict approval process: The creditworthiness of the borrower is assessed more rigorously here. One needs to have a good credit score and a stable income.
Financial freedom: Buyers are at ease to use the money as they please, like investment, home improvement, or education.	High overall loan cost: Since the initial payment was zero and the interest rate is high, your overall loan cost gets pretty high compared to regular car loans.
Convenience: For qualified applicants, zero down payment loan is a boon as the application & approval process is quite fast.	Limited availability: Like low down payments, cars with zero down payment are usually part of an exclusive deal or limited-period promo.

Zero Down Payment vs Regular car financing

It is important for prospective car buyers to clearly understand the difference between a regular car loan and a zero cash out or down payment car loan. Only after knowing the potential financing alternatives can one make a wise decision that best suits his/her situation.

The table below compares the two types of car financing options under different parameters, thus helping you further understand the choices.

Parameters	Zero Down Payment	Regular Car Loan
Monthly payment amount	The monthly payments are fixed; the amount financed equals the car’s net selling price.	The monthly payment is fixed for the entire duration of the car loan; so there is no annual increase.
Loan term	It depends on the bank or financial institution. Typically it is between 12 to 60 months.	It depends on the bank or financial institution. Typically it is between 12 to 60 months.
Initial cash out	Zero cash is required for the down payment.	Before the loan can be availed, the borrower needs to make their payment.
Motor insurance	Before the loan gets approved, the borrower needs to pay for insurance. As for the premium for succeeding years, you need to pay for that lump sum annually.	Before the loan gets approved, the borrower needs to pay for insurance. As for the premium for succeeding years, you need to pay for that lump sum annually.
Key benefit	No upfront cash payment. Cash remains intact in your account and can be used as per your will.	It allows you to budget your monthly. expenses beforehand. Thus enabling you to keep a fixed amount aside each month, until the loan term ends.
A vehicle that can be purchased	New vehicle (passenger vehicle only)	New or used passenger vehicles, can also be used to buy big bikes or trucks.

Zero Down Payment: Who can apply

Different finance providers and banks have different eligibility criteria when it comes to zero down payment car loans. However, the most commonly seen are mentioned below -

• He/she should be a Filipino citizen or a dual citizen.
• Applicants should be at least 21 years old when applying for the loan.
• Applicants should be at most 65 years old upon maturity of the loan.
• If employed, the applicant requires a minimum employment tenure and a minimum gross monthly income (both vary with the insurer).
• If self-employed, the applicant must run a profitable business.

Zero Down Payment: How to apply

Like several other things, the application process for a zero down payment car loan also varies with the lender. Here’s a general outline of the procedure, which by the way, can be both through online and offline means. Let us discuss both one by one -

Offline -

• Go to the desired bank branch or dealership.
• Ask for the application form for a zero downpayment car loan and duly fill it out.
• Submit the required documents.
• Next, your application will be reviewed and processed.
• If approved, you’ll be notified and will be asked to visit the lender/dealership personally for further formalities.
• The deal is done with the signing of the loan contract.

Also Read: All you need to know about car loan agreement

Online -

• If the lender has an online connectivity option, then the borrower can make use of it and apply for a zero down payment car loan from the comfort of their home.
• Open the lender’s official website and look for a zero down payment loan option.
• Apply for it and fill out the application form.
• Upload the required documents.
• Next, your application and documents will be thoroughly reviewed and processed.
• If approved, chances are you’ll be asked to visit the branch/office personally.
• To seal the deal, you’ll have to sign the loan contract.

Zero Down Payment: It is best suited for?

It is a fact that a zero down payment car loan is not everyone’s cup of tea, it works best under certain circumstances, including -

• You want to buy a car urgently
  In case you need a vehicle on asap and don't have the time and/or ability to save up for a down payment, zero down payment financing is your best option.
• You are not in a position to disturb your savings
  If you are not in a position to disturb your savings due to some prior commitment or expected future expense, this option will allow you to keep the funds intact.
• You are pretty confident about your repayment ability
  You are in a position to consider these car financing options, if you have a steady income, which allows you to handle high monthly payments.s

Zero Down Payment Car Financing in the Philippines

When it comes to zero-down payment financing, several lenders in the Philippines offer this type of financing. Some of the most notable ones are -

• Bank of the Philippine Islands (BPI) with its Zero Cash Out scheme
• First Automotive Electric Vehicles (FAEV) offering Zero Downpayment. Zero Emission scheme
• Toyota Financial Services with its Pay Light Program
• Zero down payment promos by the car dealerships

Things to consider

When applying for a zero down payment car loan, an applicant must consider a few things for his/her benefit. The list includes -

• Assessing the budget thoroughly to see if it can accommodate the added burden of monthly payments.
• Make sure to compare interest rates from different lenders, to secure the best deal.
• Note all loan terms including processing fees, hidden charges, etc.
• Have a look at your credit score, if low, work on improving it, as a high score will get you better loan terms.
• Make sure to consider alternative financing options as well, opt for the one that gives you better loan terms and interest rate.

Bottom line

Buying a car with zero down payment is possible in the Philippines, thus freeing buyers from the burden of arranging money equivalent to almost 20% of the car’s value. However, like every coin has two faces, this medium of car financing enjoys its own set of pros and cons. On one hand, while it offers the benefit of convenience by canceling out the large upfront cost, buyers must prepare themselves to pay higher monthly payments and a strict approval process. However, before calling the final shots, it is important to do thorough research, compare options, and check your financial readiness for the upcoming long-term financial commitment.

Also Read: Lease vs. Buy: Which car financing option fits your budget?