For makers, 0 is huge number

Showing interest
Zero percent financing has delivered a bonanza of new customer contracts to the financing arms of General Motors, Ford Motor Co. and DaimlerChrysler. In October:


  • General Motors Acceptance Corp. said it wrote 135 percent more contracts than it did a year earlier.

  • Excluding leases, Ford Credit was up 200 percent.

  • Also excluding leases, DaimlerChrysler Services said it was up 100 percent.

  • DETROIT - Zero percent financing is delivering a bonanza in new customer contracts to the financing arms of General Motors, Ford Motor Co. and DaimlerChrysler.

    The huge increase in retail business at the three credit companies is another unexpectedly strong result of a financing program that has lifted industry sales above expectations.

  • In October, General Motors Acceptance Corp. recorded 327,000 new-vehicle financing and lease contracts, compared with 139,000 in October 2000.

  • Ford Credit notched about 300,000 new-vehicle financing contracts, excluding leases, in October, compared with just over 100,000 in the same month a year ago.

  • DaimlerChrysler Services last month doubled its new-vehicle financing business, excluding leases, compared with September 2001. No unit volume is available.

    "October was far and away an all-time record for us'' said Greg Smith, president of Ford Financial. "And the risk level of that business was much better than in prior months and the prior year. Zero percent attracted customers that were low risk. It would appear to have converted a lot of cash customers into interest-rate customers.''

    Last week, GM and Ford Motor extended the zero percent deals into January, and Toyota said it was considering an extension.

    GM introduced the program as a sales stimulus in the wake of the Sept. 11 terrorist attacks.

    Lower residuals

    Marketing divisions at the auto companies, not the credit units, subsidize the 0 percent deals.

    Credit companies welcome the new contracts as assets on the books. Moreover, the new business creates a pool of vehicle owners that company marketers will try to convert into loyal, long-standing customers.

    Those benefits are offset by the negative impact of 0 percent deals on used-vehicle values industrywide. Used-vehicle inventories have grown as buyers opt for new-vehicle deals. Lower residual values are a liability to the credit arms as vehicles are returned at lease expiration.

    "The picture looks brighter today on used-vehicle prices than it did a few weeks ago,'' Smith said.

    "It is a little early to call. But as we sit here today, we are working through the excess supply of auction units and dealer inventory. We are starting to see some signs of the firming up of auction and used-vehicle prices.''

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