Enticing buyers with zero interest
THE VINDICATOR, YOUNGSTOWN
By DON SHILLING
VINDICATOR BUSINESS EDITOR
YOUNGSTOWN -- Area car dealers are welcoming a second round of zero-percent financing as they try to stop two years of declining sales of new cars and trucks.
"It's enticing some people to buy instead of waiting," said Dominic Muto, sales manager for Crown Ford in Warren.
General Motors, Ford and DaimlerChrysler recently began offering zero-percent financing on many of their models.
A.J. Saculla, general sales manager at Greenwood Chevrolet in Austintown, said last week that it was too early to see much of an effect from the financing offers but he expected them to boost sales. That's what happened when the automakers offered zero-percent financing after Sept. 11.
Car sales picked up at the end of the year, but they were not enough to make up for slow sales earlier in the year.
Sales of new cars and trucks in Mahoning, Trumbull and Columbiana counties totaled 33,229 last year, which was off 6 percent from the previous year. Sales in 2000 were down 8 percent from 1999.
Sales are up
This year's zero-percent financing offer comes in a different environment. So far this year, local car sales are up.
It's been a pleasant surprise because many area dealers were preparing for a down year after the terrorist attacks and the recession, said Steve Chos, executive vice president of the Automobile Dealers Association of Eastern Ohio.
The association's June report isn't out yet, but sales of new vehicles through May of this year were up 9 percent.
Chos said the car industry is faring better than other industries because automakers have been aggressive with incentives.
It's impossible to predict how the year will end for car dealers, however, he said.
Gary Redmond, sales manager at Frederick Dodge in Boardman, said sales have been so good that the dealership is having its best year.
Business should be even stronger when advertising on the zero-percent deals begins today, he said.
Saculla said the zero-percent financing will help because it does more to spur sales than rebates.
"It stands out. It's the best deal they can get. It's free money," he said.
Depends on circumstances
That may not necessarily be true, said Roy Jackson, vice president of indirect lending at Farmers National Bank in Canfield.
It's true zero-percent offers are a good deal, but often customers have the choice of a financing deal or a rebate, he said. Someone who intends to keep a car only for two or three years may be better off taking the rebate and taking out a bank loan, he said.
Still, zero-percent financing is drawing people away from bank financing, he said.
Not only has Farmers lost potential loans, but previous loans are being paid off early as people trade in cars so they can take advantage of the zero-percent offers, he said. This reduces the bank's overall loan portfolio and the amount of loan payments that are coming in, he said.
Don Wehn, senior vice president for consumer lending for Sky Bank, said the new-car financing offers don't hurt as much as used-car offers because the bank does more business in used-car loans. Car dealers offered low-interest loans on used cars earlier this year.
"That hurt us," Wehn said.
Car dealers are offering the zero-percent financing on new vehicles until early September.
Chos said no one knows what the automakers will do to push sales of 2003 models, but he expects some incentives will continue.