Detroit automakers say the no-interest loans they've been offering since the Sept. 11 attacks have brought a lot more people into showrooms, although not many are taking the incentive, according to an Oct. 9 story by David Kiley in USA Today.

"The number of people opting for zero percent is a lot less than you would think," Paul Ballew of General Motors Corp. told Kiley.

"It's been more of a psychological boost that has created traffic," agreed Ford Motor Co.'s George Pipas.

"Business has been way up since the deal was announced," Pat Sabino, general manager of Norris Chevrolet in Westfield, N.J., told Kiley. "The zero-percent advertising is getting them in the door, and then it's up to our salespeople to put them together with the deal that makes sense for them."

Whatever the result, the no-interest financing has been successful enough for Detroit's automakers to inspire similar offers by some of their Asian competitors, including Toyota and Mitsubishi.

For a 2002 model, the no-interest loan is limited to 3 years, usually meaning a big monthly payment.

Casey Johnson, owner of a Lincoln-Mercury dealership in Fort Dodge, Iowa, told USA Today that 25 percent of his buyers have opted for the 3-year, no-interest loan. Fifty percent took 4-year loans and the rest opted for 5-year loans.

"Buyers of luxury vehicles can afford a bigger monthly payment and like the idea of owning it outright in just 3 years and saving the interest," Johnson said.

Johnson says the offer is bringing in a lot of buyers to trade cars sooner than they otherwise would have.

The zero percent interest offers are particularly attractive on vehicles that have not carried other incentives. A 2002 Chevy TrailBlazer LS 4WD, for example, costs $27,530. Add 5 percent sales tax, and it's up to $28,907. A 3-year, zero-percent loan after a 5 percent down payment -- $1,377 -- costs $772 a month. But a buyer saves $3,230 in interest over the typical General Motors Acceptance Corp. (GMAC) rate of 6.9 percent.

No-interest loans for up to 5 years on 2001 car models -- but not trucks -- are proving to be a real windfall for buyers.

"It's been working great to clear out the 2001 vehicles," said Sabino, who adds that most of his customers like 5-year loans.

And the savings in interest on a 5-year loan can be great. A rate of 8 percent -- about what a bank charges -- on a $20,000 loan would cost $4,527 over 5 years. Even a subsidized 5.9 percent loan from Ford Motor Credit would cost $3,354.

Ford officials have said because of the zero percent financing deals, marketing costs for the third quarter would be about 16 percent of revenue, up from 14.5 percent in the previous quarter and 11.1 percent in the third quarter of 2000. While Ford didn't disclose a specific dollar figure, some analysts estimate it could cost Ford as much as $300 million in additional marketing costs for the current quarter, according to the Wall Street Journal.

Automakers are exempting some particularly popular models from the no-interest loan offer, because they are reluctant to discount their newest and best-selling products at a time when they are scratching for every nickel of profit.

Chrysler decided not to offer free financing on its hot-selling PT Cruiser, Jeep Liberty SUV and new Ram pickup. Ford left out its Focus and ZX2 small cars and its new, limited-supply Thunderbird. Mitsubishi has exempted the new Lancer from zero percent financing.

Toyota is offering no-interest, 3-year loans on only a few models -- Corolla small car, 4Runner sport-utility vehicle and Tundra pickup.

"Corolla and 4Runner are at the end of their lifecycles, with redesigned models coming next year," said John Hanson, Toyota spokesman. "And with Tundra, we have to be competitive with GM, Ford and Chrysler."

A side effect of the no-interest financing deals is that car buyers may find their trade-ins are worth less than they thought. A glut is currently driving down used-car prices.

For buyers not taking no-interest loans, automakers' rates still look better than those of most banks. Some automakers are offering 4-year loans at 2.9 percent interest, and 5-year loans as low as 4.9 percent.

A 4-year loan at 2.9 percent interest would drop the payment on the Chevy TrailBlazer to $612. A 60-month loan at 4.9 percent would bring it down to $521.

The average rate for a 4-year bank loan is 7.67 percent, down from 8.17 percent in July, according to Bankrate.com.

Auto loan rates don't fall as fast as the Federal Reserve's rate that banks charge each other for overnight loans. The Fed's Alan Greenspan has cut that rate a full point since Sept. 11 and nine times this year to spur the economy.