Car shoppers who have debated whether to take a cash rebate or a low-interest rate have a new incentive to ponder–zero interest.
Chrysler joined General Motors and Ford last week in offering interest-free loans to try to jump-start auto sales, which fell more than 20 percent after the Sept. 11 terrorist attacks.
As good as that offer sounds, there are catches. First, the zero-interest applies mainly to 2001 cars on loans of 36 to 60 months. On 2001 trucks and all 2002 models, zero interest applies only to 36-month loans.
Other rates are as follows: 0.9 percent for 48 months on 2001 trucks and 2002 cars; 2.9 percent for 48 months on 2002 trucks; 2.9 percent for 60 months on 2001 trucks and 2002 cars; and 4.9 percent for 60 months on 2002 trucks.
The zero- and low-interest loans also are in lieu of rebates, some of which are substantial, so consumers don’t get both. GM has a $2,000 rebate on the 2002 Buick Park Avenue Ultra and cash back offers of $2,000 to $3,500 on several 2001 models that expire Monday. Ford has rebates of $2,000 on the 2001 Explorer, Expedition and Windstar and $2,500 on the Crown Victoria, all expiring Oct. 8.
Nevertheless, the loan programs, which end Oct. 31, offer substantial savings from bank rates that range from about 6.5 to 9 percent and can save more than most rebates.
For example, Bank One’s rate for 48 months is 6.9 percent. On a $20,000 loan (about the national average for new-vehicle financing), that works out to a $478 monthly payment and total interest of about $2,944 in the life of the loan.
By comparison, the automakers’ 0.9 percent offer for 48 months results in a $424 monthly payment and $352 in interest, a savings of $2,592.
On a 60-month term, a bank loan at 7.65 percent results in a monthly payment of $402 and total interest of $4,120. A 2.9 percent loan from a car company would be $358 a month and $1,480 interest, and a 4.9 percent loan for 60 months would be $376 and total interest of $2,560.
Chrysler was the last of the Big 3 to join the program, and its announcement came just a few weeks after it cut prices more than $2,000 on some 2002 models to avoid rebates and other incentives.
“We have to keep our dealers competitive in the marketplace,” spokesman Marc Henretta said. “We hope it will instill a little more confidence in consumers.”
None of the three top imports–Toyota, Honda and Nissan–have matched the offers. But, some import dealers are advertising reduced interest rates.
