Chicago Automobile Trade Association

0% interest deals reach record high in April

May 15, 2020
Those "well-qualified buyers" certainly appeared to take advantage of the generous financing terms captives offered in April based on the information shared by Edmunds this month.
 
Edmunds reported that zero-percent finance deals surged to a record level in April as automakers "pulled out all the stops" to encourage new-vehicle purchases during the coronavirus crisis.
Meanwhile, Edmunds noticed that the average rate for used-vehicle financing actually edged a tick higher year-over-year.
 
According to an Edmunds news release, zero-percent finance deals accounted for 25.8% of financed new-vehicle purchases in April, compared to 4.7% in March and 3.6% in February. This is the highest level of zero-percent finance deals that Edmunds has on record dating back to 2004.
 
Edmunds analysts pointed to the abundance of zero-percent finance deals as the driving force behind a significant drop in interest rates. The annual percentage rate on new financed vehicles averaged 4.3% in April, compared to 5.8% in March and 6.3% a year ago. This marks the lowest average APR since August 2015.
 
"It’s a buyer's market," said Jessica Caldwell, Edmunds’ executive director of insights. "And while there aren't a lot of buyers right now, those in a position to purchase a new vehicle are taking advantage of the most generous financing programs we've seen this century."
 
Edmunds experts warn that some consumers might be making riskier purchasing decisions due to the greater availability of zero-percent, 84-month term contracts.
 
According to Edmunds data, the average term length hit a record high of 73 months in April, and 81% of vehicle buyers who financed their vehicle agreed to a loan term between 67 and 84 months.
 
Edmunds data also reveals that consumers are stretching their budgets for more expensive vehicle purchases — the average amount financed for a new vehicle climbed to a record high of $37,681 in April, while the average down payment dropped to $3,159 in April, a 21% decline compared to March and the lowest on record since July 2011.
 
"For the fiscally responsible buyer, this is a great deal, but for others, this could spell trouble," Caldwell said. "Although longer loan terms help make financing larger purchases more palatable, consumers who opt into these deals put themselves at higher risk for negative equity further down the road."
 
Similar new-model pricing trends arrived from ALG and Kelley Blue Book, too.
 
 

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