7-Year No-Interest Loans: What It Takes To Sell Cars In A Pandemic
MARY LOUISE KELLY, HOST:
U.S. new car sales completely cratered due to the pandemic and massive unemployment. That is no surprise. But those sales have already started to recover, partly because there are big deals waiting for those who can afford to buy. NPR's Camila Domonoske reports.
CAMILA DOMONOSKE, BYLINE: Nina Erlich-Williams has got two problems with her car right now.
NINA ERLICH WILLIAMS: We have a 2007 Honda Pilot, which is both a gas-guzzler and has become a bit of a money pit (laughter).
DOMONOSKE: She and her husband started saving for a downpayment for a new plug-in hybrid. Then, the coronavirus happened.
ERLICH WILLIAMS: So the idea of buying a $40,000 car right now just doesn't seem like it makes sense.
DOMONOSKE: Erlich-Williams and her husband run a small business doing PR for nonprofits. Business has dipped already, and they're bracing for worse to come.
ERLICH WILLIAMS: I think right now we're just sort of in suspended animation as we wait to see what happens with the economy.
DOMONOSKE: This kind of suspended animation is bad news for the auto industry. It needs buyers like Erlich-Williams, especially because of how much money carmakers are investing into electric vehicles, like the kind she wants to buy. So as plants reopen their assembly lines, dealers are running ads like this.
(SOUNDBITE OF MONTAGE)
UNIDENTIFIED PERSON #1: No-interest financing up to seven years...
UNIDENTIFIED PERSON #2: No payments until 2021, plus 0% financing for seven years.
UNIDENTIFIED PERSON #3: Get payment relief now.
DOMONOSKE: Dealerships always sound that excited about their promotions. But right now, the yelling might be justified. Seven years with no interest is a really long time. Jessica Caldwell is the head of industry analysis at Edmunds.
JESSICA CALDWELL: To be honest, I've never really seen incentives like these as generous.
DOMONOSKE: In April, more than a quarter of all new car loans had 0% interest rates. She calls that enormously high.
CALDWELL: Auto companies are really faced with the challenge of pulling out all the stops to try to capture the small market that is actually willing to buy a car because we know that it's not a large one right now.
DOMONOSKE: Is it working? At the end of March, sales were down 80%. But according to J.D. Power, they have been climbing for six straight weeks, and there is evidence that these huge incentives can pull buyers in, like Avery Hoppa, who started getting emails from her local VW dealership during this pandemic.
AVERY HOPPA: You know, 0% APR for 72 months and you don't even need to make your first payment for six months. I was like, wow.
DOMONOSKE: Hoppa is a nurse and her husband is a professor. Before the coronavirus, they'd been thinking about getting a bigger vehicle. But then they had to fix their roof, and their VW Golf SportWagen drove just fine. But after that email, it didn't take long to make a decision.
HOPPA: Like, an hour or two (laughter).
DOMONOSKE: The negotiations happened by phone and email. Hoppa's family now owns a three-row Tiguan. Someday, they'll use it for carpools and visits from the grandparents.
HOPPA: When the pandemic's over and our kids have friends around again, you know, we can go for hikes and they can bring friends along.
DOMONOSKE: For now?
HOPPA: Well, it's doing a lot of sitting in our driveway.
DOMONOSKE: Like a lot of us, that SUV isn't going anywhere. And these deals? They might be sticking around, too, if the economy continues to be stuck in suspended animation. Camila Domonoske, NPR News. Transcript provided by NPR, Copyright NPR.