Chrysler Corp. escalated the car industry's cut-rate auto financing wars this week by offering interest-free loans on its cars and trucks.
The zero-percent financing is the most drastic program yet offered by a U.S. automaker in an attempt to spur sagging sales.The interest-free loans are based on repayment schedules of up to 24 months and will be given for 1988 and 1989 U.S. car and truck models. Chrysler said the sales incentive program has no expiration date.
The company is also offering rates of 5.9 percent to 10.9 percent on longer term loans, Chrysler said.
Last week, Ford Motor Co. launched the latest salvo in the incentive wars by offering 2.9 percent short-term loans and expanding its other incentives. General Motors Corp. matched that program on Friday.
Chrysler, which is also offering cash incentive programs ranging from $300 to $2,000 per vehicle, said it has increased the incentives offered on a number of car and truck models.
Bennett Bidwell, chairman of the Chrysler Motors Unit, said the automaker does not plan to reduce its second-quarter production schedules and thinks that business will pick up due to the program.
Several weeks ago, Chrysler had announced a program featuring 4.9 percent loans that at the time was its most extensive program since the late 1970s.
Bidwell said that program was created because the company saw that sales were softening.
U.S. auto sales are down about 8 percent so far this year and truck sales are off by about 2 percent.
Chrysler said the cost of the new round of incentive programs will have a slight negative impact on second-quarter results.
But Bidwell said the automaker's profit margins will still be large enough to offset the cost of the incentive program.
"It's not going to help us. But the only alternative was production cutbacks," Bidwell told a news conference. "It will nick us in the second quarter." He declined to estimate how much the program will hurt Chrysler's results.