With sales slowing in the wake of last week's terrorist attacks, GM and Ford are offering zero-percent financing on all their models. The timing could be great for those already in the market for a new vehicle, but others looking at used vehicles should think twice before jumping. Our Buying a Car section can help.
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That auto sales have slowed in the days following last week's terrorist attacks should not come as a surprise. With Americans spending most of their spare time following the latest news, there's not a lot of time left over to stroll through dealer showrooms. In an effort to stimulate sales, General Motors (NYSE: GM) and Ford (NYSE: F) are offering buyers a tantalizing incentive: zero-percent financing. Don't be surprised if other automakers follow up with incentives of their own. GM was first out of the gate Wednesday with its "Keep America Rolling Program," which offers interest-free financing on all new cars and trucks for certain loan periods. Other periods offer very low interest rates. Making no attempt to bring some originality to the table, Ford followed the next day with "Ford Drives America," which matches GM's offer. The moves shouldn't be viewed as a sign of desperation brought on by the attacks, at least for GM. An 8-K filing from the company said the total production losses attributed to the tragic events of last week will be less than 10,000 units, and the company reaffirmed its third-quarter earnings guidance of $0.83 a share. How consumers react beyond the next few weeks, though, is anyone's guess. "We will closely monitor the economic outlook," said GM CEO Rick Wagoner, "and will be prepared to make the appropriate production adjustments." Ford scaled back production last week by 13%, and said it would fall short of third-quarter earnings forecasts. At least the lost financing revenue from the incentive programs, which last only through October, won't significantly affect the Big Two's bottom lines. GM told The Wall Street Journal the interest-free offer would replace other discounts currently available. Zero-percent financing can save customers thousands of dollars over the life of a loan: At 7% interest, a 48-month $20,000 loan will tack on almost $3,000 in added payments. These programs, then, are certainly great news for those already in the market for a new car. Those considering stepping up from a used car purchase have a tougher decision. Will the money saved over the life of the loan make up for the extra you'll spend for the new vehicle? Fortunately, our car-buying section is chock full of advice, and has no less than nine calculators that will help guide you in the right direction. Give it a try. Rex Moore's car has logged over 130,000 miles, and he has much interest in no-interest financing. The Motley Fool is investors writing for investors.
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