DETROIT — Getting someone to buy a new car during the coronavirus-induced recession increasingly involves a pitch from a car company on how to skip making a couple of payments.
Fiat Chrysler launched financing incentives in May that now offer no payments for 120 days — or up to four months — on most 2019 and 2020 model year Chrysler, Dodge, Jeep Ram and Fiat vehicles. The initial rollout in April during the coronavirus pandemic was for 90 days of deferred payments but that’s now gone up by a month.
Fiat Chrysler is also offering 0% for 72 months on select makes and models.
Ford Motor is running TV ads that proclaim “six months, no payments” on many new car and truck purchases.
Eligible new car customers who finance through Ford Credit can tap into what Ford calls its “Built to Lend a Hand Program.” Ford will pay for three months and customers can defer for up to three months for a total of up to six months. The program is for those buying new 2019 and 2020 model year vehicles, excluding 2020 F-Series Super Duty trucks.
General Motors says its incentives vary by vehicle line and model year. A 0% offer for 84 months is available in some cases to “very well qualified borrowers.” GM also offers a payment deferral option on some vehicles for up to 120 days.
Automakers know that financial incentives must rev up consumer confidence and outrun the nagging feeling in the customer’s mind that somehow something else could go wrong here.
“We are all in the same position of not wanting to overextend ourselves with the uncertainty of potential furloughs, layoffs and other employment cutbacks,” wrote Brad Korner, general manager of Cox Automotive Rates & Incentives.
So suddenly a new car payment can be more affordable each month if you’re looking at a 0% rate and a loan term that goes out up to seven years. And some of those offers for qualified buyers may even go across their entire fleets, he said.
The payment deferral plans of 90 days, and now 120 days, give car shoppers more reassurance that they can handle things if the economy doesn’t recover quickly.
Car sales tanked in April. Consumers pulled back dramatically on borrowing by late March as factories, restaurants, stores and others temporarily shuttered operations and laid off workers during the initial fight against the coronavirus.
Auto loan inquiries, for example, fell by 52% between the first week and the last week of March, according to a report issued by the Consumer Financial Protection Bureau on May 1.
Borrowers, of course, need to remember that auto lenders tend to tighten up their lending standards in tough economic times. Consumers with credit scores of 660 and lower often face a harder time getting a loan and pay much higher rates.
Even so, we’re talking about more 0% deals in April than ever recorded by Edmunds.com, which has data back to 2004.
The 0% finance deals accounted for 25.8% of financed purchases in April, compared to 4.7% in March and 3.6% in February, according to Edmunds.
Car loan rates overall came down, too. The annual percentage rate on new financed vehicles averaged 4.3% in April, compared to 5.8% in March and 6.3% a year ago. This marks the lowest average APR since August 2015, according to Edmunds.
It’s a buyer’s market at a time when many people simply don’t want to go shopping.