U.S. auto sales hit a 30-year low in April, according to Edmunds' industry analysts, but there's a silver lining for car shoppers: Zero-interest loans have simultaneously reached an all-time high. While these findings underscore just how disruptive the coronavirus pandemic has been to the automotive industry, they also point to a historic financing opportunity for well-positioned buyers.
U.S. Auto Sales Hit Record Low In April
Coronavirus Chaos Also Drives Zero-Interest Deals to Record Highs
April Sales Declined 53% Year Over Year
First, the bad news. Based on our analysis of the latest sales data, we estimate that just 633,260 new cars and trucks were sold in April, eclipsing the previous low of 655,000 in January 2009 and translating to a seasonally adjusted annual rate (SAAR) of 7.7 million. To put that number into context, we reported a SAAR of 16.3 million for April 2019. That's a year-over-year drop of 53%.
April 2020 sales also dropped by 37% compared to March's already depressed total of 998,268 units sold. The biggest losers from March to April were Nissan (down 55%), Toyota (-44%) and Ford (-39%).
Of course, a major contributing factor is that dealerships have simply been unable to do business, or at least business as usual. But many have been quick to innovate, providing "touchless" options that comply with state policies and give shoppers peace of mind.
More troubling is the economic havoc that the pandemic continues to wreak. Amid spiking unemployment and a volatile business climate, car shoppers have understandably been reluctant to take on new financial obligations. Fleet sales, meanwhile, have cratered due to the predictable reduction in rental-car demand, depriving automakers of another reliable revenue stream.
Additionally, we haven't yet seen the drop in transaction prices that characterized the Great Recession of 2009. On the contrary, the average transaction price for a new car hit an all-time high of $37,681 in April, according to Edmunds' research. This resilience at the bottom line has surely kept some bargain hunters on the couch.
0% Loans Spell Opportunity for Secure Shoppers
Rather than slash prices, automakers have thus far been pushing favorable loan terms to in-market shoppers, with unprecedented results. To wit, 25.8% of financed purchases in April carried 0% interest rates — the highest proportion of zero-interest deals since Edmunds began tracking interest rates in 2004.
This number is particularly notable for its sudden April increase. Zero-interest deals accounted for just 4.7% of financed purchases in March and 3.6% in February. It's fair to assume that as long as the current economic uncertainty persists, 0% loans will remain abundant.
While it's always appealing to get a loan for free, we should add a word of caution. Edmunds' data shows that the average loan term also hit a record high in April, reaching an eye-popping 73 months. In other words, the typical financed car in April will take more than six years to pay off.
Moreover, the average down payment in April — $3,159 — was the lowest since July 2011, even though the average transaction price has never been higher, as noted above. This indicates that shoppers may be stretching to get into pricier vehicles. Unless you're in a secure financial position that should persist through the pandemic, prudence when contemplating today's extended loan terms is strongly advised.
What's next for car sales in the coronavirus era? No one knows, which is why it's suddenly a buyer's market on the financing side. While automakers look to hold the line on pricing until demand picks up, qualified shoppers can take advantage of interest-free loans on their next cars.