Not Everyone Drove Away With a Low-interest Loan in March

Steph Willems
by Steph Willems

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]

Steph Willems
Steph Willems

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  • Thegamper Thegamper on Apr 02, 2020

    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.

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    • Theflyersfan Theflyersfan on Apr 02, 2020

      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.

  • Polka King Polka King on Apr 06, 2020

    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.

  • MaintenanceCosts It's not a Benz or a Jag / it's a 5-0 with a rag /And I don't wanna brag / but I could never be stag
  • 3-On-The-Tree Son has a 2016 Mustang GT 5.0 and I have a 2009 C6 Corvette LS3 6spd. And on paper they are pretty close.
  • 3-On-The-Tree Same as the Land Cruiser, emissions. I have a 1985 FJ60 Land Cruiser and it’s a beast off-roading.
  • CanadaCraig I would like for this anniversary special to be a bare-bones Plain-Jane model offered in Dynasty Green and Vintage Burgundy.
  • ToolGuy Ford is good at drifting all right... 😉
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