By on May 19, 2020

As you read last week, the U.S. auto industry continues its climb out of the coronavirus ditch, with foreign automakers pushing back at a briefly dominant Detroit in a bid to restore sales sanity.

The domestic three managed to unload an awful lot of big-margin trucks during the lockdown, propelling scared customers into dealers with zero-interest financing on long-term loans. Detroit’s rivals have now fully caught on, fighting back with their own offers. For Lexus, the new proposal to buyers doesn’t even end at the new-car lot.

As reported by CarsDirect, Lexus got a jump on Memorial Day weekend sales by introducing its new lower rates a week early. Actually, forget “lower” — on Friday, the brand dropped its APR to zero on 60-month loans until the end of the month. This applies to every model in the Lexus lineup, and the same goes for unsold 2019 vehicles.

If five-year terms leaves you feeling antsy, moving to a 72-month loan will still net you savings compared to Lexus’ previous offer. The brand now pegs its best six-year loans at 0.9 percent APR in the Northeast and 1.9 percent elsewhere, versus 3.9 percent nationwide a year ago. Pulling out its calculator, CarsDirect notes that the most-reduced rate would save a buyer 66 bucks a month on a $50k vehicle.

Eager to make any sale it can, Lexus also pushed the rate on its 36-month certified pre-owned loans to zero — apparently, for the first time in the brand’s history.

On the new-car lot, Lexus’ across-the-board rate slash could make some of its models more attractive to shoppers than a Toyota-badged model. Take the popular Lexus RX and Toyota Highlander as an example, where a no-interest, 60-month loan on the RX would set a buyer back more than $100 less than the no-deal-here Highlander, despite their similar MSRPs.

Across the industry, rates are falling like annual volume projections among premium automakers, with notable inclusions being BMW and Infiniti. Data from J.D. Power shows the premium market occupying nearly the same slice of the retail mix as before the pandemic hit. The week ending May 10th saw premium sales amount to 12 percent of the U.S. sales tally.

[Image: Lexus]

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9 Comments on “Slashed Rates Factor High in Premium Push...”

  • avatar

    I still don’t think it is going to be a full recovery or anything but the 0% for 60/72/84 months offers are going to put butts in the seats.

    And that is totally, 100% fine as long as these buyers have the liquidity to back it up.

    • 0 avatar

      Liquidity after two months without a job is going to be the killer. Then there’s the possibility the job may no longer exist once the states currently locked down open up again. That’s going to put a big crimp in the 0% interest rate – how many potential buyers will be able to qualify? With used car prices in free-fall, it might be cheaper to buy used.

  • avatar

    Yeah, we are going to see a lot of upside-down loans in a few years. Ram 1500s with 0% on an 84 month loan? What’s going to happen when the owners lose their job in the fall, after the 90 day no payment promotion expire. I was looking long and hard at a Dodge Durango RT and with the 0% for 84 months the monthly payment would be the same as a 8 month old, slightly used Durango. The biggest difference is, the slightly used Durango with 14,000 miles is $30,000 while the brand new one is 46,000.( No rebates apply if the 0% is taken).
    A lot of people have rushed into these deals but unless they are all government workers with ironclad job security, I think we will see tons of repos in our very new future.

    • 0 avatar

      It’s like any other type of loan – in the end, lenders don’t have a crystal ball to predict whether the borrower’s going to be employed in a year. When a bank made a loan to a well-qualified factory worker six months ago, who saw THIS coming? No one. This is literally unprecedented – the best analogue I can come up with is “natural disaster that affects the entire country simultaneously.” That’s never happened before…ever.

      I suspect these lenders are going to bend over backwards, twice, to make sure these loans don’t default. Personally, if I were the lender, I’d rather do stuff like suspended/partial payments than spend money to go get the car back, and then take a huge loss on it in a depressed used market.

  • avatar

    I am waiting for decontenting and cheapening of sold vehicles

    • 0 avatar
      el scotto

      @slavuta What used to be options are now standard or as I had to explain one time: it costs more NOT to get AC on an F-150 than does to get it. Less inventory control, same QC procedures if they all have the same thing. Used to be luxury cars had all the gee-whiz stuff. The Koreans ended that. A Mazda 6 probably has almost as many options as a Mercedes S Klasse.

  • avatar

    This will simply pull ahead purchases/leases. I think we learned in 2008-2009 that once you get the public hooked on 0% and piles of cash on the hood, its tough to ween them off. Its almost like the environment leading up to the bankruptcy of GM and Chrysler. Excess capacity, destruction of demand, incentives killing profitability. It may be a tough pill to swallow, but with inventories at close to all time lows for a lot of models, keeping transaction prices high and controlling production would have been a better solution. But once one kid jumps off a bridge, the rest follow.

    This is bound to net subprime and lower credit tier buyers. Fantastic terms are generally available several times throughout the year for tier one buyers.

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