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Car shoppers finding fewer 0% finance deals

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  • Aug.06,2018

Zero-percent finance deals are becoming harder for car shoppers to find, according to new analysis from Edmunds.


With interest rates on the rise and automakers turning to cash incentives, zero-percent finance deals dropped to their lowest level since July 2005 last month, Edmunds said. Promotional offers of 0% annual percentage rates (APRs) accounted for 6.92% of all new-vehicle sales in July, down from 11.34% in the same month last year.



The decline in 0% offers bucks the seasonal trend, as automakers typical dangle no-interest loans in the summer to boost sales of outgoing model-year vehicles.


“This appears to mark the end of a fairly long-lived tradition for the industry,” Jeremy Acevedo, Edmunds’ manager of industry analysis, said in a news release. “While inventory isn’t at the alarming level it was at this stage last year, how automakers navigate their model-year selldown will be critical through the rest of the year as the market contracts and prices continue to rise.”


Edmunds added that July’s scarcity of zero-percent finance offers helped keep interest rates near record highs. The average rate for a new vehicle was 5.74%, sharply higher than a year-ago average of 4.77%. That’s the largest year-over-year increase through the first seven months of 2018, Edmunds said.


The Federal Reserve has gradually hiked short-term interest rates to counter rising inflation, a move that increases borrowing costs for consumers. Sticker prices have also climbed amid declining market share for passenger cars. Strong sales of sport-utility vehicles and pickup trucks have driven average prices higher.


In order to keep monthly payments in check, car buyers have put more money down and taken out longer-term loans. The average down payment in July was $3,970, up from $3,621 in the year-ago month. Average loan terms fell slightly to 68.75 months from 69.45 months. Five years ago, the average loan was 65.58 months.


Most major automakers reported a decline in July sales. Ford said its monthly sales were down 3.1%, while Honda logged an 8.2% drop. Fiat Chrysler’s sales rose 6% on strong results for Jeep and Ram. The month followed a blockbuster June for auto sales and included one less selling day compared to July 2017.