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GM extends zero interest
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October 17, 2001: 2:34 p.m. ET
Interest-free offer has spurred October sales but raised costs for automakers.
By Staff Writer Chris Isidore
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NEW YORK (CNNmoney) - General Motors Corp. said Wednesday it is extending its popular but expensive zero-interest financing offer for nearly three weeks past the previous end of October deadline.
The largest automaker now will offer the incentive until Nov. 18. It gives both consumers and business customers zero interest for up to five years on any 2001 car model, and many financing packages for 2001 light trucks as well as 2002 car and truck models.
"This highly successful marketing program is clearly achieving its objectives to stimulate vehicle sales and to help stimulate economic activity during this critical time," GM Group Vice President Bill Lovejoy said.
GM was the first automaker to offer the zero interest program Sept. 20. Ford Motor Co. followed the next day, and DaimlerChrysler's Chrysler unit and Toyota Corp. followed with more-limited offers near the end of the month. All the other automakers' offers are set to expire Oct. 31, and as of Wednesday none was ready to follow GM in the extension, although none would rule out such a move.
"We assess market on a daily basis to make business decisions to provide customers with competitively priced vehicles," Ford spokeswoman Susan Krusel said.
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GM is extending its zero-interest financing offer that has drawn buyers to new car lots. | |
The zero interest has generated tremendous customer traffic and sales, according to automakers and dealers. In its quarterly earnings conference call, Ford executives said that despite the economic uncertainty October sales are well above expectation and could come in at 10 percent above year ago levels, marking the first month this year that would be the case.
"Car sales are extremely good," Ford Chief Financial Officer Martin Inglis told CNNfn's Market Call. "I would like to think that it was consumer confidence, but I think the incentives have a major part to play in that." (347KB WAV) (347KB AIFF)
Inglis said he is concerned that some using the incentives would have bought new vehicles soon without the offer, and that their purchases were simply speeded up a bit, which could hit sales once incentives end. But the problem with extending the incentives is the tremendous cost. Inglis warned on Market Call that the incentives may plunge Ford to an unexpected loss in the fourth quarter.
"With the current marketing incentives that are out there and industry (sales) levels, it will be quite tough for Ford to earn a profit in the fourth quarter," he said.
Toyota is offering the zero-interest financing on only some of its models - the compact Corolla, its 4Runner sport/utility vehicle and its Tundra pickup truck. But its most popular models, the Camry sedan and the Sequoia, Highlander and Rav4 SUVs, don't have the incentives. A spokesman said Toyota is not at this time planning to extend the incentives for either a longer time or to more models.
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"The zero financing has definitely had a major effect on traffic," Toyota spokesman John Hanson said. "We've also noticed the models moving off the lots are models not offering the incentive." 
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