GM is again extending zero-percent financing

Program now offered until Jan. 2, but some vehicles are excluded

November 13, 2001|By Ted Shelsby | Ted Shelsby,SUN STAFF

General Motors Corp. announced yesterday that it will extend until early next year its zero-percent financing program.

This is GM's second extension of its "Keep America Rolling" program since it was introduced Sept. 20 to revive new-car sales after the Sept. 11 terrorist attacks. The promotion, first scheduled to end Oct. 31, was extended to Nov. 18.

The new plan, which runs until Jan. 2, is more restrictive than earlier versions. It excludes all Cadillacs, the Chevrolet Corvette, the new Saturn sport utility vehicle and the Saturn model L100 special edition car.

"When we announced `Keep America Rolling' we hoped it would positively impact automotive sales and help stimulate consumer spending," William J. Lovejoy, GM's group vice president for vehicle sales, service and marketing, said in announcing the new extension. "Results have been beyond anyone's expectations."

Ford Motor Co. and the Chrysler division of DaimlerChrysler, both of which followed GM's move last month to extend their own zero-percent finance plans, have not yet announced new extensions.

Chrysler and Ford have complained in the past that the programs are too expensive. Chrysler's plan is set to expire Nov. 19, and Ford's is scheduled to end Nov. 20.

"I think Ford and Chrysler will have to follow GM's lead," said George E. Hoffer, a professor of automotive economics at Virginia Commonwealth University, "but I think any new plan will be more restrictive than their current plans."

Hoffer said he does not expect the zero-percent plans to cut deeply into the Big Three's earnings this year.

"It's a lot cheaper than closing factories," he said, noting that under their contracts with the United Auto Workers union, the automakers would have to pay about 95 percent of the take-home pay of any laid off worker.

"At this time, profits are less important than market share," said David E. Cole, director of the Center for Automotive Research in Ann Arbor, Mich. "The nature of this game is to pick up market share, and GM has the potential for a significant increase in market share."

Cole said the interest-free-financing programs are expensive for all automakers, but they have stimulated sales of GM's highly profitable pickups and sport utility vehicles.

Mark Aiello, general manager of JBA Chevrolet in Glen Burnie, said business has slowed a bit from the blistering pace of late September and early October. "But it's still very, very good," he added. "November is going to be an outstanding month for us."

Nationwide, new-car sales in October were nearly 30 percent higher than in the same period last years. GM's sales jumped 31 percent.

Under GM's new plan, customers will be able to buy most 2001 and 2002 Pontiac, Oldsmobile, Buick, Chevrolet, GMC and Saturn models interest-free if financed for 36 months, said Terry Sullivan, a GM spokesman.

The interest rate on all passenger cars, the Pontiac Aztek, Buick Rendezvous and mid-size vans jumps to 1.9 percent if financed over 48 months and to 3.9 percent if financed over 60 months.

Sullivan said GM will offer a 3.9 percent loan rate on other sport utilities and on pickups, full-size vans and medium-duty trucks financed for 48 months. The rate rises to 5.9 percent for a 60-month loan.

David Healy, an auto analyst with Burnham Securities, said he was not surprised that GM cut back a little on the generosity of its incentive plan. He said the existing plan added about $200, or roughly 10 percent, to the company's average incentive of about $2,300 per vehicle.

Hoffer said the zero-percent financing plans are "still a good deal for consumers, but the buyers who made out best were those who first took advantage of the plans."

He said the big jump in new-car sales has resulted in a large increase in trade-ins. As a result, he said, used-car prices have declined 10 percent or more in recent weeks.

He said that was good news for used-car buyers, but it can make buying a new car more expensive.

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