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Zero Down-Payment Auto loans: Advantages, Disadvantages, and Who Should Use It

Submitted by admin on November 15th, 2025

Purchasing a vehicle is at the same time one of the largest investments that many Indians make, particularly those who are new to the market. Unlike in the previous case whereby someone is expected to make a down payment of between 10 and 25 percent of the value of the car, a new trend is on the rise, that is, zero down-payment car loans. These loans will enable you to drive home a new car without paying anything at the onset. This can be very tempting to people who wish to immediately have ownership even without having to reach into their savings. However, as with any financial product, it also has its benefits, risks and what types of users should have it.

What Is a Zero Down-Payment Car Loan?

The car loan with a zero down-payment funds 100 percent of the on-road price of the car, which includes:

• Ex-showroom amount
• RTO registration charges
• Insurance
• FastTag
• Handling and processing charges.

On other occasions, accessories or extended warranties can also be covered by lenders. Such a loan is sold by a few banks, NBFCs, and even more by digital-first auto lenders who apply more sophisticated risk assessment tools to examine the profile of borrowers more precisely.

Advantages of Zero Down-Payment Car Loans

No Upfront Financial Burden

The most significant plus is the fact that it is possible to buy a car without an initial cash investment. This will assist the consumer who does not wish to disrupt his/her savings, emergency fund, or investment.

Best Suited to being a first time car buyer.

Zero down-payment offered by a company is very convenient to new buyers who do not have the ability to accumulate large savings. It allows them to venture into the market at early stage without having to amass funds.

Quick Approvals through Digital Verification.

Numerous lenders that provide this product rely on digital KYC, AI-based underwriting and instant credit checks. This increases the rate of approval and less paper work, which means that a borrower can drive his new car as fast as possible.

Assistance in Case of Emergency or Emergency Needs.

In case one requires a vehicle urgently be it to work, relocate or even family obligations, zero down-payment loans will enable a person to purchase a vehicle without delay.

Other Pressors Can be funded using cash.

Rather than borrowers spending [?]1-[?]3 lakh as an initial cost, they could spend that money on home expense, education, travelling or other obligations.

Disadvantages of the Zero Down-Payment Car Loans

Increased EMI, Total Interest Cost.

EMIs go high since the loan value is higher. Moreover, the interest charged to borrowers is higher, within the loan tenure than loan borrowing with a down payment.

Tougher Eligibility Requirement.

Lenders assume more risk hence they prefer:

• High credit scores (750+)
• Stable income
• Low existing debt
• Strong banking history
• Not everyone will qualify.
• Limited Car Choices

Other lenders are limiting zero down-payment loans on a model-by-model basis, typically those models that are low priced or high selling and where the risk is less.

Additional Add-on Charges

In other cases, lenders impose processing fees, insurance requirements or are bundling products which adds to the cost.

Increased Risk of Negative Equity.

Carmen value depreciates rapidly. Under full financed loan, the loan value can be retained above the car resale value during the first few years.