Cut-rate financing struck a chord with consumers in early July as more buyers chose loans instead of leases, according to J.D Power and Associates data.
Almost 63 percent of new-vehicle transactions in the first 16 days of July involved a loan, an increase from 57 percent in June and 55 percent in May.
The research was compiled by the Power Information Network, a division of J.D. Power and Associates. It does not include fleet sales.
Spurring the uptick in the financing, Power says, was General Motors' 72-hour sale that offered 0 percent financing during the July 4 holiday. Loans financed about 78 percent of GM's retail sales in early July.
Loans were cheaper this month than earlier in the summer, the Power Information Network says. More than 39 percent of loans had an annual percentage rate of less than 5 percent, compared with 27 percent in June and 18 percent in July.
The average finance term inched up to 65 months in July, compared with 64 months for the rest of 2006.
With loans becoming more prevalent, consumers turned away slightly from other forms of payment. In early July, 16 percent of vehicle transactions were leases, down from 19 percent in June. Customers paying cash slid to 22 percent this month from 25 percent in June.
Rebates also fell. They were a factor in 42 percent of transactions through the first nine days of July, down from 49 percent in June. The Power Information Network notes that automakers were offering lower rebates. The average cash rebate declined to $2,097 in July from $2,335 in June.
"New-vehicle retail sales were very strong during the first week of July, propped up to some degree by incentives," said Bob Schnorbus, chief economist of global forecasting at J.D. Power. "However, sales dropped off sharply in the second and third weeks. How the month will end depends on how high and how well-accepted the end-of-month incentive programs will be."
You may e-mail Greg Migliore at [email protected]