110 toyota stephano a flickr.jpgZero-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.

Toyota is a sort of desperate company right now.  So it's not surprising that they've rolled out 0% financing on many of its most popular models.  Nor is it surprising that this has forced American automakers to follow suit

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.

Anyone who thought that the Big Three were finally getting a break when the chairman of Toyota was hauled in front of a congressional committee again.  Zero-percent financing for five years is going to make it very difficult for GM to return to profitability--and presumably Chrysler will be forced to follow suit.  These companies are going to be on taxpayer life support for quite some time.

(Photo: Flickr/StephanoA)

We want to hear what you think about this article. Submit a letter to the editor or write to letters@theatlantic.com.