Edmunds spots upticks in August used-vehicle financing metrics

While trends involving zero percent finance deals for new vehicles intrigued analysts, Edmunds also noticed jumps in annual percentage rate (APR) and down payments to get used vehicles delivered in August.

According to data shared on Tuesday, Edmunds determined that the average APR for used-vehicle financing organized at franchised dealerships in August rose 79 basis points year-over-year to 8.33 percent. The average down payment climbed $121 to $2,601.

The average amount financed for used vehicles rolling over the curb at franchised dealerships in August also moved higher year-over-year to $21,596.

Meanwhile, on the new-car side of the finance business, the big story coming out of the Edmunds data was zero percent ARP was more elusive than expected for car shoppers in August.

The percentage of sales with zero percent finance deals has been cut in half in the last two years — dropping from 14.6 percent of transactions in August of 2016 to only 7.4 percent this August. This continues a trend that started last year, when only 10.4 percent of August auto sales had zero percent financing.

Analysts noted that these numbers are particularly uncharacteristic for this time of year, given that zero percent finance deals typically peak in August and September.

“August truly represents the month that we would have expected to see a turnaround in this trend if one was imminent,” said Jeremy Acevedo, Edmunds’ manager of industry analysis. “Moving forward, shoppers will likely need to do a bit more digging to find other ways to save on a new vehicle because it looks like zero percent finance deals are going the way of the dodo.”

Edmunds analysts pointed out that higher interest rates continued to contribute toward the scarcity of zero percent finance deals in August. The APR on new financed vehicles averaged 5.8 percent in August compared to 4.9 percent last August and 3.9 percent in August 2013.

Inventory levels have also hit a record low not seen since 2016, which Edmunds experts say is creating less of a need for automakers and dealers to pile on costlier incentives.

“Automakers have done a decent job this year at aligning inventory with demand, so there’s no need for dealers to have a fire sale,” Acevedo said. “Manufacturers seem to be more comfortable with a longer selldown period that leverages targeted incentives, instead of an aggressive ‘everything must go now’ mentality.”

Edmunds explained that most automakers have pulled away from zero percent finance deals this year, with automakers such as Nissan and Toyota experiencing the sharpest decline.

For Nissan, in August of last year, zero percent finance deals accounted for 13 percent of sales, whereas in August of this year, these deals only accounted for 4.8 percent of sales.

For Toyota, last August, zero percent finance deals constituted 21 percent of sales, whereas in August of this year, they only accounted for 4.6 percent of sales.

“In a somewhat self-fulfilling manner, because fewer automakers are participating in these programs, there is less impetus for other automakers to participate to be competitive,” Acevedo said. “Sometimes incentives are a bit of a follow-the-leader game.”

New-Car Finance Data

Used-Car Finance Data