Not Everyone Drove Away With a Low-interest Loan in March
We told you yesterday how zero-interest financing exploded in popularity in the final two weeks of March, as governments everywhere belatedly clamped down and automakers had to pull out all the stops to lure frightened buyers out of their homes. Despite many would-be buyers not taking the bait, for some, zero-percent/84-month loans proved as irresistible as topless pics of a young starlet on the beach.
At the same time, drivers who stood no chance of netting that coveted no-interest loan were also headed to dealers.
Data provided by J.D. Power reveals that, as stay-at-home orders proliferated across the country, the buyer most likely to do just that happened to be the biggest cash cow in the industry: the cash-flush, high-credit-score 56-plus-year-old.
A reliable patron of the local dealership, the members of this cohort (who represent 38 percent of all new vehicle sales) dwindled in attendance by 67 percent in the week ending March 29th. That’s going off of sales reported from that week. All other age demographics fell, but not by as much. Sales to 18-35-year-olds fell 54 percent, while Gen-Xers stayed away to the tune of 58 percent.
Month-to-date, sales attributable to the three age demographics declined 29, 32, and 36 percent. Not surprisingly, buyers with a credit score topping 720 were more likely to stay home. Sales attributable to the 720-plus crowd (which encompasses about 65 percent of new vehicle buyers) fell 65 percent versus 52 percent for the under-720 cohort last week.
Younger people, and those with poorer credit scores, are more likely to find themselves at a point in their life where they suddenly need a car, virus be damned. Stretching the cost of a new vehicle over the longest time frame possible is appealing to those of lesser (or uncertain) means, and last month brought no shortage of uncertainty to the table. Is it any surprise that the average loan term surpassed 70 months in March?
New vehicle loan terms pass the 70 month mark for the first time ever in March. 70.6 mos was the average. 35.3% of buyers who financed a new vehicle last month had a loan term between 73-84 months! More here: https://t.co/72xU4URkHr
— Jessica Caldwell (@jessrcaldwell) April 1, 2020
“Vehicle purchases made in March — particularly the second half — were likely need-based,” said Jessica Caldwell, executive director of insights at Edmunds. “These shoppers might not have necessarily qualified for zero percent finance offers but still needed a car in spite of everything else going on in the world.”
While zero-percent financing ballooned in late March, the opposite end of the ladder also gained members. Loans with APRs of 10 percent or more rose from 10.7 percent of new vehicle buyers in February to 12.8 percent last month, Edmunds said.
[Image: welcomia/shutterstock]
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I would be so bummed if I bought a car in early March to have the bottom fall out 2 weeks later with all sorts of discounts and special financing.
You couldn't pay me to drive a car with a hostile, malevolent facial expression. I expect pushback toward this comment by the hostile, malevolent community, about which nothing would be more obvious.