No-interest financing deals are drying up across the industry as automakers cut back on the once-common tactic.
That means consumers who once relied on these deals will have to get creative.
Last month, 0 percent financing dipped to its lowest level for any July since 2005, coming in at 6.9 percent of sales, according to Edmunds. The share was even lower in June, at 5.6 percent, nearly half the level reported a year earlier.
The decline in no-interest offers is happening as rising interest rates make them a tougher proposition for automakers and their captive lenders.
"When APRs were really low, this was a deal manufacturers could extend to shoppers fairly cheap, but now it's more expensive for them to do so," Jeremy Acevedo, Edmunds' manager of industry analysis, told Automotive News. "If you look at just the average APRs for them going up, it's more expensive for the captive branch of the automakers to subsidize those."
The average annual percentage rate for new vehicles in July rose to 5.7 percent from 4.8 percent last year, Edmunds said.
Automakers historically have used 0 percent financing to help sell down outgoing models during the model-year changeover, Acevedo said, helping to keep older product from languishing on dealer lots during the summer.
"We're kind of sunsetting a bit of an automotive tradition here, and automakers are really seeing this as less of an imperative to sell their model-year vehicles," he said.
The rise in interest rates means consumers increasingly are priced out of lease and loan terms they could have easily afforded a few years ago. According to Edmunds, buyers who financed new vehicles paid an average of $5,477 in interest in the second quarter of 2018, an increase of 21 percent — or $943 — from a year ago.
But consumers have some options — refinancing vehicles could help them manage monthly payments, said Brian Landau, senior vice president and automotive business leader at TransUnion.
"Savvy consumers can use auto refinance to get a lower rate after the original purchase, especially as OEMs pull back on 0 percent financing, as we've seen this past month," Landau said.
TransUnion examined 1.5 million auto loans refinanced between January 2013 and December 2014 and evaluated their performance over the following 24 months. The bureau found that consumers could save approximately $50 on their monthly payment through refinancing. The average refinancing consumer achieved an APR reduction of 2.4 percent.
Relatively few automakers are hanging on to 0 percent deals, but Cadillac, Mazda and Subaru are among those still using the tactic.
Mazda is offering 0 percent for 60 months on the 2018 CX-9, CX-5, Mazda3 and Mazda6 models and the 2019 CX-3 through Sept. 4. Cadillac is offering the same deal on most of its vehicles.
Jeff Walters, senior vice president of sales for Subaru of America Inc., wrote in an email to Automotive News that the 2018 Legacy, Outback, Impreza and Forester all have 0 percent financing deals as the brand moves to clear out those model-year vehicles.
"We strive to provide consistent programs for our customers and retailers and as a result have chosen to continue these programs despite the higher rates in recent months," Walters said.
A Subaru spokeswoman said the brand has historically focused more on low-rate programs instead of dealer or customer cash incentives common with other brands.
Subaru has not always been as flexible in its financing, Acevedo said. Continuing the discounted deals could mean the automaker is feeling the pressure to maintain its impressive sales — nine straight years of records in the U.S.
"A lot of times, the extension of these deals, there's a little bit of an indication they're really striving to be competitive," Acevedo said. "It's a decent way to drive market share."