General Motors Corp. and Ford Motor Co. on Oct. 1 extended their offer of interest-free financing to include most of their 2002 and 2003 models amid signs of a sharp slowdown in U.S. vehicle sales, according to a Reuters report.

GM said it will offer interest-free loans of up to five years on most new 2003 passenger cars and minivans. GM had previously limited the zero percent offer on its new 2003 models to three-year loans, which are unpopular with most buyers because of the high monthly payments. GM's interest-free loans of up to five years on most of its 2002 models expired on Sept. 30.

GM also offered, as an alternative to the interest-free loans, cash incentives of as much as $3,000 on most 2002 models and up to $2,000 on most 2003 models.

GM's new incentives, which expire at the end of October, follow a precipitous 13 percent drop in its U.S. vehicle sales for September, when it tried to pull back on incentives, only to see customers flock to competitors, according to Reuters.

Ford Motor Co. had already announced incentives on its 2003 models, offering interest-free loans of up to three years on many of its cars, minivans, SUVs and pickups. A Ford spokeswoman told Reuters that the No. 2 automaker would study GM's incentives and adjust its own offering if necessary.

Ford's U.S. vehicle sales in September, excluding its import brands Jaguar, Land Rover and Volvo, rose 1.6 percent, falling well short of the double-digit gains that many analysts had predicted.

Ford already had offered zero percent financing on many of its 2003 model cars and on most of its 2002 model vehicle lineup. But it had until now refrained from offering interest-free deals on its bread-and-butter late-model trucks and SUVs.

According to Reuters, the interest-free financing deals have eroded razor-thin profit margins at Ford and other automakers and there have been growing concerns about how long Detroit can keep its incentives spending going.

Speaking to the New York Times, Morgan Stanley analyst Stephen Girsky said he was concerned that Detroit was reaching a wall in an incentive war that had led to big sales but slim profits.

"We had a reasonable slowdown from prior months," Girsky said in a New York Times interview. "Some of it may have been inventory related. Some of it may be consumers getting tired or bored with zero percent financing, or both."

"What's interesting to me, and what's worrisome, is if you've got zero percent for 60 months in October, the beginning of the new model year, what are you going to have in April?" he asked, according to the Times.