Zero percent financing deals, once a staple at many car dealerships and a favorite of new car buyers hoping to save some cash, are becoming scarcer. This is according to research from Edmunds that examined data representing the last two years.
In fact, the percentage of sales with zero percent financing has been halved in the last two years — falling from 14.6 percent of transactions in August of 2016 to only 7.4 percent in August of this year. The drop continues a trend that started last year, when only 10.4 percent of August auto sales had zero percent financing. According to some analysts, this trend is atypical for this time of year, as zero percent finance deals typically peak in August and September.
“August truly represents the month that we would have expected to see a turnaround in this trend if one was imminent,” said Jeremy Acevedo, manager of industry analysis at Edmunds. “Moving forward, shoppers will likely need to do a bit more digging to find other ways to save on a new vehicle because it looks like zero percent finance deals are going the way of the dodo.”
According to Edmunds, higher interest rates on auto loans are one important reason car makers and dealerships are less inclined to offer zero percent financing to vehicle shoppers. The annual percentage rate for a new vehicle purchase averaged 5.81 percent in August, up from 4.85 percent the previous year and 3.92 percent in August of 2013. In used vehicle transactions, the average APR increased from 7.67 percent in of August 2013 and 7.54 percent in of August 2017 to 8.33 percent in of August. In addition, inventory levels are at a record low not seen since 2016, which Edmunds experts say is creating less of a need for automakers and dealers to use more expensive incentives such as interest-free financing as bait.
The two automakers most likely to be offering zero percent finance deals today are Nissan and Toyota. A total of 4.8 percent of Nissan’s sales in August were made with zero percent financing, dropping from 13 percent the year before. While 21 percent of Toyota’s sales in August 2017 included zero percent financing, the share was down to 4.6 percent a year later.