Edmunds: Record Percentage Of March Sales Were Financed At Zero Percent

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.


Toyota was the king of zero, as 71 percent of its March sales were zero-percent deals, according to Edmund’s numbers (bye-bye armor-plated resale values). Mazda and Mercury followed at 58 and 32 percent each. Though Toyota clearly had its finger on the scale, aggressively pushing finance deals to make up for volume lost during its recall scandal, it’s not a fantastic sign for the industry at large that zero-percent financing deals were at 2006 levels, and yet failed to make sales numbers look anything like March 2006. Credit may be loosening, but it doesn’t appear that there are millions of units of pent-up demand just waiting for the right credit deal. It’s looking like it might be time to rethink “normal” again.

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  • OldandSlow OldandSlow on Apr 20, 2010

    So, which gimmick works best - last Summer's $4C or this Spring's 0% financing?

  • Dwford Dwford on Apr 20, 2010

    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.

  • Obbop Obbop on Apr 20, 2010

    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?

    • NulloModo NulloModo on Apr 20, 2010

      I imagine the same thing that happens if your vehicle is stolen/totaled and you are in a traditional loan with interest - the balance becomes due (as you no longer have the collateral for the loan) and you are SOL. That's why there is such a thing as gap insurance, and why it is a good idea if you are getting into a loan upside down, and especially so if you are going to be upside down for a while, that way if something like that happens, it's a wash, and you walk away. With no money down, the time to gain equity in a vehicle isn't appreciably longer in a 0% loan than it is with an interest loan where you took the rebates at the start. Yes, you are in a slightly better position at month 1 had you taken the rebates, from a purely loan to value point of view, but your early payments are heavily weighted towards interest and not principle, while as with the 0% loan your payments are 100% principle, so you catch up with equity much quicker. In my above Fusion example, taking the 0% instead of the rebates means that after 5 payments, you have more than made up for the initial rebate, and after another two or three (guessing, don't feel like making out an entire amortization table to find the exact spot) you're actually closer to equity than the person who is paying interest.

  • Disaster Disaster on Apr 21, 2010

    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?

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