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Low Captive Interest Rates Drive May Sales, Reports J.D. Power & Associates

June 18, 2008

WESTLAKE VILLAGE, Calif. -- The sharp increase in gas prices encouraged the spike in small sedan sales in May, but the exceptional results were helped by captive finance sources’ aggressive marketing, according to J.D. Power & Associates.

A report from the marketing information firm showed that compact sedans accounted for more than 20 percent of new-vehicle sales in May, up more than four percentage points from a year ago.

Captive interest rates in May both industry-wide and in the small sedan market dropped almost two points from a year ago to under 4.43 percent for a 60-month loan. In contrast, the average rate for a similar loan through non-captives declined about one and one-quarter points and ended up 7.22 percent.

More importantly, though, three key small sedans had annual percentage rates of less than 4 percent in May. One of these was the redesigned 2009 Corolla with a rate of just 3.11 percent, down more than 50 percent from a year ago.

The Corolla’s exceptionally low APR and resulting competitive monthly payment softened the $2,000 year-over-year price increase and drove a 6 percent sales improvement to more than 46,000 units.

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