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If you're in the market for a new ride and you've been waiting for the current wave of incentives to peak, you might want to head down to your dealer now. According to a study from Edmunds, more auto shoppers scored 0% financing last month than at any time in recent memory, and we're not so sure that things will stay at that high-water mark for long.
Over 22% of new vehicles purchased in March 2010 came with 0% financing. That edges out the previous high of 21% recorded in July 2006, and it's nearly double last March's figure of 13%.
Toyota's March sales event clearly helped drive that figure skyward: of all Toyota vehicles sold last month, a whopping 71% were matched with 0% financing. (For the curious, Toyota's previous high was 39%, set last August.) With seven customers out of ten scoring no-interest loans on extremely popular rides like the 2010 Camry, Corolla, and Rav4, it's no wonder that Toyota sales have remained strong, despite the automaker's ongoing recall fiasco.
The only other brand to cross the 50% line was Mazda, which offered zero-interest deals to 58% of its customers. Mercury clocked in third at 32%.
The increase in interest incentives on automobiles is mostly due to loosening credit restrictions in the U.S. As the economy continues to recover from recession, lenders are easing back toward pre-crisis policies.
The trend also owes some debt (no pun intended) to pent-up consumer demand and stabilizing personal income levels. Consumers have pulled back on spending for the past couple of years, but as we've seen in recent months, they've begun returning to showrooms. By offering heavy incentives, automakers like Toyota are simply making hay while the sun shines.
Whether such incentives will stick around is another matter altogether. Banks and government regulators are still a little gun-shy from the freewheeling credit market that contributed to the recession, so we'd be a bit surprised to see these figures go much higher. Furthermore, once financing arms start to sense that customers can make due with low-APR instead of 0% -- especially during high-demand times like spring and early summer, the incentive pendulum is likely to start swinging in the other direction. After all, usury has its benefits.
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SANTA MONICA, Calif. — April 20, 2010 — A record number of new vehicles were purchased with zero-percent financing in March, according to Edmunds.com, the premier online resource for automotive information.
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.
Remarkably, 71 percent of new Toyotas financed in March had a zero-percent APR — nearly twice the previous Toyota record of 39 percent in August 2009.
The two brands with the next highest percentages of such deals were Mazda at 58 percent of all financed transactions and Mercury at 32 percent.
"Credit must be starting to loosen if almost a quarter of all transactions financed in March were approved for zero-percent financing," said Jessica Caldwell, Senior Analyst for Edmunds.com. "Certainly it seems as if Toyota Motor Credit and other 'captive' finance companies may have lowered standards to help improve sales."
"Many car shoppers don't realize that they have to qualify for special financing deals," noted Edmunds.com Senior Consumer Advice Editor Philip Reed, who wrote many of Edmunds.com's Auto Finance Tips at http://www.edmunds.com/advice/finance/articles/index.html. "Shoppers should always check their credit score and secure financing from a bank or credit union before setting foot in the dealership so that they have a back-up plan if they get declined when seeking the special deals."
The industry's only comprehensive list of zero-percent finance auto offerings and other regional and national incentives and rebates can be found at http://www.edmunds.com/incentives/RebateController?step=0.
In part because of low-interest financing deals on new cars, more than 100 new vehicles currently cost less than their one-year old used counterparts. See the complete list at http://www.edmunds.com/industry-car-news/new-vs-used-car-buying.html.