- The Washington Times - Thursday, November 15, 2001

U.S. automakers reacted quickly after the September 11 attacks, rolling out zero percent financing to lure wary buyers, which resulted in a record month for car sales in October.
But while no-interest loans move cars off the lots, the incentive is a double-edge sword for automakers because it cuts into the bottom line and is taking away future sales.
"It definitely hurts profitability," said Kevin Tynan, auto analyst at Argus Research in New York. "But I think it did what it was suppose to do: It got people into the showrooms."
At the end of September, General Motors Corp., Ford Motor Co. and the Chrysler Group of DaimlerChrysler AG began a zero-percent financing deal on cars and trucks through October in response to dwindling U.S. demand. The automakers extended the deal several times.
Now GM is offering an extended zero-percent financing deal on most Pontiac, Oldsmobile, Buick, GMC, Chevrolet and Saturn models for a three-year term through Jan. 2. Ford is topping that with an extended interest-free program through Jan. 14 for a three-year loan on its cars and trucks.
In October, sales of cars, trucks and parts rose a record 26.4 percent after falling 4.5 percent in September, according to the Commerce Department.
"It's certainly a positive indication that consumers seem to have enough confidence and savings to purchase new cars at a record sales pace despite the economy," said George Pipas, Ford U.S. sales-analysis manager.
Local dealers were raking in sales in October.
"It was definitely a record month for us," said Patrick Shuey, general manager at Koons Ford of Annapolis. "It was perfect timing. We needed the shot in the arm."
October sales were up 43 percent, compared with the same month last year, Mr. Shuey said. November's sales will be above last year's sales, too.
However, inventory is running low at the dealership, which has about 300 units in stock, compared with the 700 units that are ordinarily in stock.
"I figured we would run out of cars before we ran out of customers," Mr. Shuey said.
Century Ford in Rockville had a 97 percent increase in new-car sales last month. General Manager Tim Lawrenson said the zero-percent finance offer lured customers who were in the market to buy and even those who were not.
There's no doubt the financing deals were the reason for the upswing in sales, officials said.
"They would be nowhere near the numbers [they] had without zero-percent financing," Mr. Tynan said.
But strong October sales does not mean the auto industry will report a strong six-month or one-year period. The zero-percent financing may have attracted buyers who weren't considering a new-car purchase until next year.
"We stole some business from down the road," Mr. Shuey said.
Chief Executive William Ford yesterday told a Kansas City, Mo., business group that "maybe the first part of next year isn't going to be great for us."
"There is going to be a payback. Ultimately, we have to find a way to wean ourselves off this," he said.
Kiara McGlaughlin contributed to this article.


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