Zero Percent Finance Deals Evaporate in August, According to Edmunds

SANTA MONICA, Calif., Sept. 4, 2018 /PRNewswire/ -- Zero percent finance deals were more elusive than expected for car shoppers in August, according to the experts at Edmunds. The percentage of sales with zero percent finance deals has been cut in half in the last two years — dropping from 14.6 percent of transactions in August of 2016 to only 7.4 percent this August. This continues a trend that started last year, when only 10.4 percent of August auto sales had zero percent financing. Analysts note that these numbers are particularly uncharacteristic for this time of year, given that 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, Edmunds' manager of industry analysis. "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."

Edmunds analysts note that higher interest rates continued to contribute toward the scarcity of zero percent finance deals in August. The annual percentage rate (APR) on new financed vehicles averaged 5.8 percent in August 2018 compared to 4.9 percent in August 2017 and 3.9 percent in August 2013. Inventory levels have also hit a record low not seen since 2016, which Edmunds experts say is creating less of a need for automakers and dealers to pile on costlier incentives.

"Automakers have done a decent job this year at aligning inventory with demand, so there's no need for dealers to have a fire sale," Acevedo said.  "Manufacturers seem to be more comfortable with a longer selldown period that leverages targeted incentives, instead of an aggressive 'everything must go now' mentality."

Edmunds experts note that most automakers have pulled away from zero percent finance deals this year, with automakers such as Nissan and Toyota experiencing the sharpest decline. For Nissan, in August 2017, zero percent finance deals accounted for 13 percent of sales, whereas in August 2018, these deals only accounted for 4.8 percent of sales. For Toyota, in August 2017, zero percent finance deals accounted for 21 percent of sales, whereas in August 2018, they only accounted for 4.6 percent of sales.

"In a somewhat self-fulfilling manner, because fewer automakers are participating in these programs, there is less impetus for other automakers to participate to be competitive," said Acevedo. "Sometimes incentives are a bit of a follow-the-leader game."

More insight into recent auto industry trends can be found in the Edmunds Industry Center at http://www.edmunds.com/industry-center/.

About Edmunds
Edmunds guides car shoppers online from research to purchase. With in-depth reviews of every new vehicle, shopping tips from an in-house team of experts, plus a wealth of consumer and automotive market insights, Edmunds helps millions of shoppers each month select, price and buy a car with confidence. Regarded as one of America's best workplaces by Fortune and Great Place to Work, Edmunds is based in Santa Monica, California, and has a satellite office in Detroit, Michigan. Follow us on Twitter, Facebook and Instagram.

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