By on April 2, 2020

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?

“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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25 Comments on “Not Everyone Drove Away With a Low-interest Loan in March...”


  • avatar
    ToolGuy

    If a purchase rebate which applies to a cash purchase does not apply to a “zero-interest” financing deal, it is a not a zero-interest financing offer.

    Classic shell game.

    • 0 avatar
      HotPotato

      How so? If I have a 25% friends-and-family discount at my store, my parents don’t get 50% off because there are two of them.

      I mean, obviously I’d prefer double-dipping, but I recognize it’s probably not a reasonable expectation.

      • 0 avatar
        Garrett

        If you get a 0% loan, the interest you are saving is capitalized into the transaction price of the vehicle – you just don’t see it.

        Basically, if you look at most rebates that are not allowed to be combined with 0% financing, you get an idea as to what the manufacturer is paying to essentially buy down your rate.

        Put another way, true 0% financing doesn’t exist. You either pay a market rate, or are paying more for the financed vehicle.

    • 0 avatar
      jalop1991

      You mean…you mean…math is real? There ain’t no such thing as a free lunch???????

      The world moves forward thanks to stupid people. I just wonder how high the prices must go before even the stupid people resist.

      • 0 avatar
        don1967

        The easiest decision I ever made was to finance a new truck @ 0%, instead of cashing in $40k worth of investments.

        Total cost was $1,200 in forfeited cash incentives… a small fraction of the compound growth on $40k.

        Finance deals are only “stupid” if the math doesn’t add up, or if they become an excuse to drive more car than one can afford.

        • 0 avatar
          jalop1991

          “Finance deals are only “stupid” if the math doesn’t add up, or if they become an excuse to drive more car than one can afford.”

          Agreed.

          Except you and I (I do exactly what you do) are one in a million. The rest of it is people stepping up to the Platinum Edition, because why not, now I can “afford” it (aka, monthly payment)

  • avatar
    vvk

    For cash-strapped people stuck home now is the perfect time to do all that deferred maintenance to avoid needing a new car.

    When will you get another few weeks of downtime to take that engine out???

  • avatar
    Lie2me

    “… automakers had to pull out all the stops to lure frightened buyers out of their homes.”

    Yep, those 0% finance rates are simply to die for :(

  • avatar
    SCE to AUX

    “the cash-flush, high-credit-score 56-plus-year-old.”

    That’s me exactly. And I have replacement shocks and struts sitting in my garage that I intend to install on my 09 minivan this weekend.

    My next car purchase was tentatively set for this summer, and that could be something used.

    While I’m always window shopping, I have no taste for a $40k loan.

    • 0 avatar
      jalop1991

      “And I have replacement shocks and struts sitting in my garage that I intend to install on my 09 minivan this weekend.”

      Oooo, look at Richie Rich with his ’09 minivan.

      I’ll get back into my 07 minivan and drive home now, thank you very much.

  • avatar
    SCE to AUX

    BTW, getting low-credit people to ‘participate in the economy’ is the same trap that triggered the 2008-09 housing/auto crisis.

    Those 84-month loans will leave most buyers upside-down on their trades after 3-5 years.

    I do hope the banks are taking the long view this time, but they could be ‘encouraged’ not to by the government.

    • 0 avatar
      Lie2me

      Lol, your optimism is nice, but you know the government is just going to bail them out again

      • 0 avatar
        Erikstrawn

        More importantly, THEY know the government is just going to bail them out again.

      • 0 avatar
        SCE to AUX

        I’m not optimistic. What I meant was this: the banks should be denying loans for people with bad credit. By doing so, they would protect themselves and the buyers who can’t afford the loan.

        Agreed on the eventual bailout… after the CV crisis passes, everyone will hand their hand out. The $2T measure just passed is only the beginning.

    • 0 avatar
      jalop1991

      “Those 84-month loans will leave most buyers upside-down on their trades after 3-5 years.”

      No, because they’re buying Nissan Versa cars and Kia Forte cars for 84 months at 0%.

      They’ll be upside down for…84 months.

  • avatar
    thegamper

    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.

    • 0 avatar
      S197GT

      or, worse, you bought a car in march and then lost your job.

    • 0 avatar
      theflyersfan

      I was almost that guy. After me telling the last area Honda dealer where they could shove their CTR sideways due to all of the games they were playing, the MX-5 hunt began. Found a really nice Club RF and the dealer was in a mood to negotiate. I was still working on the price and financing a small part of the car when the rumbles started about everyone working from home, hours could be cut, etc. Quickly determined that this would be the wrong time, with so much uncertainty in the air.
      I’m fortunate to work at a company that handles medical billing, medical claims, and works with both insurance companies and hospitals. On the IT side, there should be plenty of work, even working mostly from home. But it’s scary not knowing how long this might drag out and what might happen to our jobs and hours. And I am not alone in thinking this is just the wrong time to sink tens of thousands of dollars into a car, especially driving so little right now.
      I’m getting calls, e-mails, and texts from both Mazda dealers saying that the interest rates have gone even lower and the deals might be better. It’s very tempting, and the younger foolish me would have done it, but the more financially responsible me says ride it out…we’ll see who wins.
      Besides, I’m sure the MX-5 will be waiting for me when things get back to normal.

  • avatar
    Polka King

    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.

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