7-Year No-Interest Loans: What It Takes To Sell Cars In A Pandemic

Unemployment is mounting. The economy keeps falling deeper into a recession — or worse. The coronavirus continues to spread. But car sales surprisingly are climbing.

Auto sales tanked in March — to 80% below their expected levels. And they remain well below normal. But while much of the economy continues its free fall, car sales have been on the rise for six straight weeks, according to data from J.D. Power, a marketing data and analytics company.

The steady improvement is fueled, in part, by big incentives for customers who can afford to buy. Dealers are promoting 0% loans for as long as seven years.

That's remarkable, says Jessica Caldwell, the head of industry analysis at Edmunds, an automotive information company.

"To be honest, I've never really seen incentives like these," she says.

And consumers are paying attention. In April, no-interest loans accounted for a remarkable 26% of new car sales, she says.

"Auto companies are really faced with the challenge of pulling out all the stops to try to capture the small market that is actually willing to buy cars — because we know that it's not a large one right now," she says.

That market is smaller, of course, because the ongoing economic crisis has many would-be buyers either unable to afford a new car or understandably reluctant to make a big-ticket purchase given the economic risks they face.

Nina Erlich-Williams of Corvallis, Ore., has been thinking of buying a new car for a while. Her family's 2007 Honda Pilot is both a gas guzzler and "a bit of a money pit," she says.

She'd like to get a plug-in hybrid, for environmental reasons, and has been saving up for a down payment. But with the coronavirus crisis, she and her husband feel that it's wiser to hang on to that cash for now. They run a small public relations firm that works with nonprofits, and are expecting a lot of lost business in the months ahead.

"I think right now we're just sort of in suspended animation as we wait to see what happens with the economy," Erlich-Williams says.

On the other hand, those huge promotions are clearly pulling some buyers in despite the economic uncertainty.

Avery Hoppa of Hanover, N.H., got an email from her local Volkswagen dealership advertising 0% annual percentage rate for 72 months and no payments for six months.

Her family's income has not been reduced by the pandemic; Hoppa's a nurse, and her husband's a professor. They'd been thinking about buying a bigger vehicle for a while but put it off when they had to fix their leaky roof. Besides, their VW Golf SportWagen drove just fine.

Then came that dealership email, and in less than two hours, they'd decided they couldn't say no to that deal.

"My husband and I were like, 'This is it! This is the moment we were waiting for,' " she says. After negotiating by phone and email, followed by a social distancing trip to the dealership, Hoppa's family now owns a three-row Tiguan.

Someday, it'll cart around carpooling kids and visiting grandparents. For now? "Well, it's doing a lot of sitting in our driveway," Hoppa says.

Like a lot of us, that SUV isn't going anywhere.

And eye-popping incentives on new cars might be sticking around for a while, too, if the economy continues to be stuck in suspended animation.

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