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Edmunds: Record Percentage Of March Sales Were Financed At Zero Percent
by
Edward Niedermeyer
(IC: employee)
Published: April 20th, 2010
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Ever since a debt crisis toppled the already-precarious auto sector into undeniable crisis there’s been a running debate about when US car sales would “return to normal.” By now though, even the most ardent bulls seem to have accepted that 2007’s 16m number will be out of reach for at least several more years. So, how will we know when we’ve hit the new normal? According to Edmunds, at least one statistic roared back to 2006 levels last month: the percentage of sales financed at zero percent.
In March, more than 22 percent of financed new cars were purchased with zero-percent finance deals. Last March the total was just 13 percent. The prior high was 21 percent in July 2006.
Edward Niedermeyer
More by Edward Niedermeyer
Published April 20th, 2010 6:18 PM
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So, which gimmick works best - last Summer's $4C or this Spring's 0% financing?
0% only works for people who keep the car for the full term, since you usually have to give up a huge rebate as a result. I guess that that would work for most conservative Toyota owners, who probably won't buy another car for 15 years. This high a percentage of 0% financing tells me that people with good credit are still buying cars, not so much for everyone else.
Anybody factor in what happens if, after the "proper" interval, you are still making zero-percent payments but the car's value as determined by your insurance is less than what you owe and the vehicle is stolen or totaled by a wreck, whatever and the amount paid by your insurance is less than what you still owe on the vehicle?
I wonder what the real cost to manufacturers is. For example, on a typical $30,000 car financed at 4.5% for 5 years the cost of financing would be $3,557. Do the manufacturers shoulder this full amount? Do they finance this or pay an up front fee? If they finance it, do they do it at a fixed rate, or variable (greater risk?) What is the true cost per vehicle?