SANTA MONICA, Calif. — Zero percent finance deals were more elusive than expected for car shoppers in August, with he percentage of sales with zero percent finance deals having been cut in half in the last two years — dropping from 14.6% of transactions in August of 2016 to only 7.4% last month, according to Edmunds
Last year, only 10.4% of August auto sales had zero percent financing. Analysts note that these numbers are particularly uncharacteristic for this time of year, given that zero percent finance deals typically peak in August and September.
“August truly represents the month that we would have expected to see a turnaround in this trend if one was imminent," said Jeremy Acevedo, Edmunds' manager of industry analysis. "Moving forward, shoppers will likely need to do a bit more digging to find other ways to save on a new vehicle, because it looks like zero percent finance deals are going the way of the dodo."
Edmunds analysts note that higher interest rates continued to contribute toward the scarcity of zero percent finance deals in August. The annual percentage rate (APR) on new financed vehicles averaged 5.8% in August 2018 compared to 4.9% in August 2017 and 3.9% in August 2013. Inventory levels have also fallen to a level not seen since 2016, which Edmunds experts say is creating less of a need for automakers and dealers to pile on costlier incentives.
“Automakers have done a decent job this year at aligning inventory with demand, so there's no need for dealers to have a fire sale,” Acevedo said. “Manufacturers seem to be more comfortable with a longer sell-down period that leverages targeted incentives, instead of an aggressive ‘everything must go now’ mentality.”
Edmunds analysts noted that most automakers have pulled away from zero percent finance deals this year, with automakers such as Nissan and Toyota experiencing the sharpest decline. For Nissan, zero percent finance deals accounted for 13% of sales in August 2017. These deals only accounted for 4.8 percent of sales a year later. For Toyota, in August 2017, zero percent finance deals accounted for 21% of sales. In August 2018, these deals only accounted for 4.6% of sales.
“In a somewhat self-fulfilling manner, because fewer automakers are participating in these programs, there is less impetus for other automakers to participate to be competitive,” said Acevedo. “Sometimes incentives are a bit of a follow-the-leader game.”
Originally posted on F&I and Showroom