Americans bought new vehicles at a record pace in October, as zero percent interest financing lured customers back into showrooms, despite the Sept. 11 terrorist attacks and the end of the longest economic expansion in U.S. history.

U.S sales of cars and light trucks rose 24.4 percent over October 2000 and hit a seasonally adjusted annual rate of 21.3 million, beating the previous all-time record of 21.2 million set in Sept. 1986.

A record 1.73 million new cars and light trucks were sold in October, spurred more by what dealers call the feel-good psychology of

no-interest loans than the free-money loans themselves. Dealers say just 20 percent to 25 percent of customers get zero percent loans on 2002 models. They typically are limited to 36 months, so payments are too high for most buyers nearly $700 a month on a $25,000 loan.

General Motors Corp. said its October U.S. sales increased 31 percent over the same month last year to a total of 546,093 vehicles, not counting foreign brands and heavy trucks.

GM started the curerent industry price war by offering zero percent and low-interest loan deals in a bid to bolster consumer confidence after the suicide terrorist plane hijackings that killed nearly 5,000 people in New York, Washington and Pennsylvania.

No. 2 automaker Ford Motor Co. said October sales, excluding its foreign brands, rose 36 percent to 400,893 vehicles, with its F-Series pickup truck setting an all-time record with 102,424 units sold.

A much smaller increase was reported by the Chrysler side of DaimlerChrysler AG, which said U.S. vehicle sales rose 5 percent. Chrysler's financing offers were much more limited than those of GM or Ford.

Most foreign automakers also reported a healthy increase in sales, even though many did not offer zero percent financing to the same extent as Detroit's Big Three. Honda Motor Co. Ltd., which reported a 19 percent October sales gain, had no interest-free loan offers. Toyota Motor Corp. sales were up 27.5 percent, even though it offered the low and zero rates on only a few models.

Korean auto manufacturer Hyundai Motor Co. reported an 88 percent increase in October sales. Hyundai subsidiary Kia Motors Corp. said sales rose 72 percent.

The boom in auto sales, which account for about 22 percent of all U.S. retail sales, occurred despite consumer spending falling at its fastest pace in more than 14 years in September, according to a Nov. 1 report from the U.S. Commerce Department.

It sales spike paradoxically comes at a time when a recession has been all but officially declared in the United States, with the government reporting on Oct. 31 that the economy shrank last summer for the first time since 1993.

Zero percent interest financing, which industry analysts say is the only thing propping auto sales up, is cutting into profitability at the leading automakers at a time when some, like Ford, are already reporting huge losses. Ford says it lost an average of just over $1,000 on every vehicle it sold in the United States in the third quarter.

Paul Ballew, GM's director of industry analysis, played down the costs of the zero percent finance program his company has dubbed "Keep America Rolling," saying the program "is not breaking the bank."

GM, Ford and Chrysler have all said their loan offers will end in mid-November, after originally being scheduled to end Oct. 31. But according to Ballew, an extension of the offers has not been ruled out.

Industry experts have expressed concerns about what they refer to as "payback" for the current rash of loan deals, in the sense that they pulled sales into October that might otherwise have been made in November, December or later.

Ballew said he expects sales to fall from more than 21 million vehicles in October to fewer than 15 million in December, which would represent the weakest levels of the year.

Other executives and analysts also expect a sharp drop in sales after the interest-free loan programs end, mostly between Nov. 18 and 20. "One restraining factor will be relatively low dealer inventories, after the torrid sales pace in October," said Paul Taylor, chief economist for the National Automobile Dealers Association (NADA). "Many dealers report having

only half or even one-third the light vehicles in inventory that they had in October of last year."

Taylor predicts that 2001 sales of light vehicles will reach at least 16.8 million, if the current pace of elevated sales continues through November and no major disruptions to economic life occur in the U.S. That level of sales would be the third best in history, behind the records of 1999 and 2000.