Car loan may be too good to be true
Getting someone to buy a new car during the coronavirus-induced recession increasingly involves a pitch from a car company on how to skip making a couple of payments.To get more
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Fiat Chrysler launched financing incentives in May that now offer no payments for 120 days — or up to four months — on most 2019 and 2020 model year Chrysler, Dodge, Jeep Ram and Fiat vehicles. The initial rollout in April during the coronavirus pandemic was for 90 days of deferred payments but that's now gone up by a month.
Fiat Chrysler is also offering 0% for 72 months on select makes and models.
Ford Motor is running TV ads that proclaim "six months, no payments" on many new car and truck purchases.
Eligible new car customers who finance through Ford Credit can tap into what Ford calls its "Built to Lend a Hand Program." Ford will pay for three months and customers can defer for up to three months for a total of up to six months. The program is for those buying new 2019 and 2020 model year vehicles, excluding 2020 F-Series Super Duty trucks.
General Motors says its incentives vary by vehicle line and model year. A 0% offer for 84 months is available in some cases to "very well qualified borrowers." GM also offers a payment deferral option on some vehicles for up to 120 days.
Automakers know that financial incentives must rev up consumer confidence and outrun the nagging feeling in the customer's mind that somehow something else could go wrong here.
So suddenly a new car payment can be more affordable each month if you're looking at a 0% rate and a loan term that goes out up to seven years. And some of those offers for qualified buyers may even go across their entire fleets, he said.
The payment deferral plans of 90 days, and now 120 days, give car shoppers more reassurance that they can handle things if the economy doesn't recover quickly.
No doubt, consumers are fearful as we move further into the uncharted territory of shutting down an economy — and then gradually restarting it — to limit the exposure of many workers to COVID-19. Even as economic activity gradually resumes, the extent and ongoing nature of the virus remain a big unknown.Car sales tanked in April. Consumers pulled back dramatically on borrowing by late March as factories, restaurants, stores and others temporarily shuttered operations and laid off workers during the initial fight against the coronavirus.
Auto loan inquiries, for example, fell by 52% between the first week and the last week of March, according to a report issued by the Consumer Financial Protection Bureau on May 1.
Though all states experienced a drop, the report noted, Michigan, California, Nevada and states in the Northeast experienced the largest drops in auto loan inquiries, possibly reflecting some of the large job losses and COVID-19 cases in many of those areas.
