Zero-percent financing is the last resort of a desperate car company. Financing has historically been a lucrative sideline for automakers (the last few years notwithstanding); indeed, Ford and GM were frequently described as banks with a sideline in manufacturing. That was a pretty accurate reflection of where they were making their money–and an explanation of why they stopped, when debt markets when haywire.
As if in response to Toyota, GM on Tuesday offered 0% financing for 60 months or more on a range of 2009 and 2010 models, following a weak February and a recall of its own. Brian Johnson of Barclays Capital estimates such financing costs $4,657 a vehicle, more than $2,000 above last month’s industry average incentive package. The key question is whether this is temporary or signals a broader breakdown in pricing discipline. After all, consumers are still hurting and the industry remains structurally oversupplied.
(Photo: Flickr/StephanoA)
