U.S. sales of new cars and trucks are running at a torrid pace this month as zero-interest loan deals from major automakers offset lower consumer confidence since the Sept. 11 attacks, industry sources said on Oct. 9, according to a Reuters story by Justin Hyde.
General Motors Corp. , Ford Motor Co., and the Chrysler division of DaimlerChrysler AG all announced no-interest loan deals for new vehicles in late September as a way to boost business in the wake of the attacks in New York and Washington. Some foreign automakers, including Suzuki and Toyota, have since followed suit.
Robert Maguire, the GM dealer from Bordentown, N.J., who heads the National Automobile Dealers Association (NADA), said he was told by GM officials that industry sales in October are running at a seasonally adjusted annual rate of about 18 million vehicles - the highest such rate seen all year.
George Pipas, industry sales analyst for Ford, also said sales of cars and light trucks were running at their strongest pace so far this year, and could easily hit an 18 million rate this month if no further economic shocks hit the country.
New vehicle sales add up to more than 20 percent of all U.S. retail sales, and automakers have cast the programs as patriotic attempts to keep their sector of the economy healthy.
Most of the deals offer zero interest on three-year loans, with reduced rates of interest charged on longer term loans. The average U.S new-car loan runs just under five years, according to industry experts.
September auto sales were off 9 percent at a seasonal rate of 15.9 million vehicles, as industry analysts forecast sales would plunge further in coming months as consumer confidence plummeted and unemployment grew. The more optimistic predictions had seen a recovery sometime in the second half of next year, while some forecasts had called for a sales dropoff all the way through 2003.
Maguire said while his own business was off sharply, "I find the further west you travel, the better business conditions are." But he also warned that the cheap loan programs were costly. Incentives on new vehicles averaged $2,062 in September, according to industry analysts, and that figure only included part of the cost of no-interest or reduced-interest loans.
Ford struck a similar note last week when it warned that the loan programs would raise its marketing costs as a percent of revenue to about 17 percent.
