Do 0% APR Loans Still WOW Car Shoppers?
KEYINSIGHTSREPORT
New Vehicle Loans
Do 0% APR Loans Still WOW Car Shoppers?
What is 0% APR?
Zero percent APR is an interest-free loan subsidized by automakers. It is typically extended to buyers with excellent credit as a purchase incentive. About ten percent of buyers who financed a new vehicle through a dealer or manufacturer program in 2014 received a 0% APR loan.
0% APR Saves $3,554 Over an Average Loan
Total Cost of Interest When
The Average New
Financing $28k Over 67 Months
$8.7k
Vehicle Loan...
$7.7k $6.8k
Amount: $28,000 APR: 4.31%
Term: 67 Months
$5.9k $5.0k $4.1k $3.3k
$2.4k
Interest Paid: $3,554
$1.6k
$$00 $0.8k
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% APR
Do 0% APR Offers Bring Out the Buyers?
For automakers 0% APR offers have been an effective method for increasing market share, but the boost is generally short lived. Once shoppers are accustomed to zero percent offers, it loses its appeal to drive shoppers into dealerships.
New Vehicle Loans at 0%
0% APR offered as part of the Employee Pricing Plus Incentive Program (Domestic Automakers)
0% APR offered by Toyota following major recall campaign
25% 20%
15%
10%
5%
0%
Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14
KEYINSIGHTSREPORT
New Vehicle Loans
Do 0% APR Loans Still WOW Car Shoppers?
How Have Interest Rates Changed?
20%
On average, today's car 18%
buyers pay a much
lower interest rate on
16%
their car loan than they
14%
did a decade ago.
12%
% of Loans
Because credit is
10%
cheaper and more
widely available, zero
8%
percent financing isn't as 6%
attractive as it once
4%
was...
2%
New Car Loan Distribution
2014
2004
0%
Loan Offers vs. Lease Deals
APR Range
Leasing is a growing trend among buyers. However, shoppers that elect to finance are fundamentally different from shoppers that lease. Zero percent APR offers appeal to buy-and-hold shoppers committed to long-term ownership. For many shoppers, though, leasing brings an economical, non-committal and nohassle approach to vehicle ownership. Leasing has surged in recent years, and that momentum will likely hold strong despite cheaper car loans.
30% 27%
New Vehicle Sales that
25%
are Leased 20%
16%
Percent of 15%
11%
13% 14% Loans at 0% 10%
8%
8% 8%
9% 9% 10% 9%
5%
4%
0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Where are the 0% APR Deals ?
Vans
19%
Non Lux Cars 11%
Non Lux SUV 10%
Truck 4% Lux 3%
0% APR Loans by Vehicle Type in 2014
e.g. 19% of financed van purchases carried a 0% APR
KY 16.7% AK 1.6%
WI 16.0% HI 4.5% States w/
Most and
IL 14.2% LA 5.1% Least
Loans at
NE 13.9% GA 5.3% 0% APR
in 2014
IA 13.7% FL 5.3%
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