Toledoan John Ross has carefully navigated all avenues for helping his 22-year-old daughter, Olivia, get another car for when she moves to Los Angeles for a job with a non-profit youth agency.
General Motors Corp.'s offer of zero percent five-year financing, no money down, and no payments for three months on most vehicles clearly was the best route for the Rosses, especially because they have a relative employed by GM, qualifying them for a family discount.
GM's quality improvements were another determining factor, Mr. Ross said last week while the duo considered a Pontiac Grand Am at Sylvania Township's Brown Pontiac.
“It's tough to beat,” he said. “It's amazing ... to get into a new car for the same price we'd have to pay for a car that's a couple of years old.”
Various zero percent financing deals have sporadically accelerated showroom traffic nationwide since last fall, when GM broke out the attention-grabbing approach in the aftermath of the Sept. 11 terrorist attacks. After disappointing sales last month, GM unveiled its latest offer - dubbed “zero, zero, zero” - and other automakers improved their deals too.
But some experts and dealers said automakers' latest zero percent efforts aren't resulting in as much business as even a couple of months ago. Still, money-saving deals of some type are likely to be around into next year because interest rates are low and automakers are battling for market share, the experts said.
Some buyers aren't as keyed up because they figure, after a year of seeing them, that the deals will continue to be available, experts and dealers said. Others bought cars sooner than they normally would have to take advantage of offers this summer, they said.
Findlay's Treadway Chrysler Dodge Jeep had its best month ever after zero percent financing was introduced last fall. August was this year's best month because of no-interest financing and September was pretty good, but October sales aren't on the same levels despite the current zero percent offers, said Nelson Treadway, one of the dealership's owners.
“There're still some people expressing interest in it, but it seems like this month it's not driving it in,” Mr. Treadway said last week. “It may come back here - the month's not over yet.”
But, said Robb Brown, executive vice president of Brown Motor Sales Co. in Sylvania Township, no-interest financing and other incentives certainly have propped up sales.
“I don't think this year would have been as good a year if we wouldn't have come out with these programs,” he said.
George Czepiec, of Maumee, who drives a 1994 Jeep Grand Cherokee, was mulling over his options Thursday night for buying a 2002 Ford Explorer SportTrac at Mathews Ford Oregon, Inc., in suburban Toledo. He said he was leaning toward getting $2,000 cash back instead of a financing deal, but wanted to continue thinking about it.
“I probably could have gone another year, but I figure let's see what they got and take advantage of it if I can,” he said after negotiating a price with a salesman. “Any way you look at it, no matter how good the deal is, you're spending a lot on a new vehicle.”
No-interest incentives have saved buyers $2,000 to $3,000 on a $24,000 car, said David Littmann, chief economist for Comerica Bank in Detroit.
“It's been the major incentive of all times for consumers,” he said. “There's no end to the variation on the theme.”
Low prime rates mean automakers don't have to pay as much for the money they borrow, either, said Art Spinella, general manager of CNW Marketing/Research in Bandon, Ore.
As GM and others offer zero percent financing, they are paying around 3 percent to 3.5 percent, Mr. Spinella said. But when 2.9 percent financing was the lowest, they were paying around 7 percent, he said.
“They're not in any hurry to get rid of zero percent financing as long as it generates floor traffic.”
Mr. Littmann predicted automakers will employ no-interest financing or other alternatives valued at $1,700 to $3,000 a vehicle - such as improved warranties or low-interest loans combined with cash - through next year.
If interest rates rise next year as expected, automakers may back away from zero percent financing and emphasize cash-back offers, said Paul Taylor, chief economist for the National Automobile Dealers Association in McLean, Va.
Automakers could go back to stressing lease offers after the beginning of the year, said Tom Walter, sales manager at Mathews Ford.
Zero percent financing last week brought customers out to Mathews Ford to take a look, and some said they may buy a Ford or other brand depending on the deal they can get. Others said they were considering vehicles on which zero percent wasn't offered.
At Dave White Chevrolet in Sylvania, Aaron Crawford was buying a 2003 Chevrolet Malibu under the “zero, zero, zero” plan and getting rid of his first vehicle, a 1994 Chevrolet Blazer he bought little more than a year ago. The Toledoan considered a Dodge Stratus and a Chrysler Sebring but couldn't get as good incentives, he said.
“It's cheaper for me to buy the new car,” Mr. Crawford said. “I figure more things are going to go wrong with [the Blazer] any time.”
Ms. Ross, who helped buy the 1990 Saturn she has driven for five years, said that as soon as she is able, she will take over payments on whatever new car she and her father decide to get. Having monthly payments that are $100 or so less than normal will help, said Ms. Ross, who also spent some time last week looking at a Chevrolet Malibu at Dave White and has considered other cars.
“I don't feel I'm asking too much because the payments are reasonable,” she said.
Realistically, though, just 9 percent of buyers end up using no-interest offers, according to CNW Marketing/Research. About 45 percent of buyers don't want financing because they pay cash, lease, or get vehicles for business fleets, according to the firm.
Barely half of those who apply for zero percent financing qualify, and of those who do qualify, only a third accept, according to CNW Marketing/Research. The rest decide against the no-interest financing deals because they would rather get the cash rebate or the loan period is too short and the payments are too high, Mr. Spinella said.
For example, DaimlerChrysler AG is offering zero percent financing on the Toledo-made 2003 Jeep Liberty, but it's for a 36-month term. Toyota Motor Corp. is doing the same with most 2002 and 2003 Toyota Camrys.
Bill Floro, of Genoa, who was looking at Ford Thunderbirds at Mathews Ford for his wife, Terry, said he suspects there's a catch to most zero percent financing offers. The Floros pay cash anyhow, but the no-interest offers make customers take a look, he said.
“It's really an interesting ploy, and I'm sure they're getting just gobs of people coming in,” he said. “It's definitely appealing.”
Of the major brands, Honda hasn't been a zero percent financing player, although it has offered other deals in the last year. Resale values are higher on Hondas and some other foreign makes, which is why they haven't needed to be as aggressive, said Comerica's Mr. Littmann.
For GM, which is on a quest to recapture market share, zero percent financing keeps factories operating and the automaker profitable, said spokesman Dan Hubbert.
GM had predicted its annual earnings would be $3.25 a share at the beginning of the year, but now the company expects $6.75 a share, Mr. Hubbert said. Plus, sales through September are up about 2 percent, he noted. “We hope we're getting some people into our showrooms who haven't been in our showrooms for a while,” Mr. Hubbert said.