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.
We want to hear what you think about this article. Submit a letter to the editor or write to firstname.lastname@example.org.