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Toyota is offering zero-percent financing on over 10 models

Its action a first for company that avoids incentives

AP Photo

Unsold Toyota 4Runners sit at a dealership in Lakewood, Colo., a Denver suburb.

THE ASSOCIATED PRESS

Published: October 4, 2008

NEW YORK - Toyota Motor Corp.'s unprecedented offer of zero-percent financing on more than 10 models is trying to make the point that tight credit is no excuse for buyers -- in fact, it's literally giving credit away for free.

But after Toyota, the top Japanese automaker, posted a 32 percent drop in September sales that only domestic competitors had experienced until now, the question is: Is it enough to get people to buy?

"I don't think it's going to just open the floodgates," said Jessica Caldwell, an analyst at the auto Web site Edmunds.com. "But it's going to help a lot of people who want a quality car, who don't want to worry about it, and are now going to be able to afford it because of this deal."

Toyota's U.S. division said Thursday night that it will offer the free financing on 11 models, with terms ranging from 36 to 60 months. The incentive will expire Nov. 3.

Toyota is offering the deal on a wide variety of vehicles, including the Matrix, Corolla, Camry, RAV 4, Highlander, FJ Cruiser, 4Runner, Sequoia, Sienna, Tacoma and Tundra. The automaker's hybrids, along with some better-selling models such as the Yaris subcompact, are excluded.

Although Toyota has cut financing rates and offered other deals in the past, zero-percent financing on such a wide scale is an unprecedented move for an automaker that has prided itself on its restraint with incentives. Its American counterparts, meanwhile, have aggressively used cut-rate financing and big cash-back offers as a way to bolster sales in the flagging auto market.

Nearly all automakers said that tighter credit standards knocked buyers from the market last month, when sales industrywide fell 27 percent from a year earlier, hitting less than 1 million for the first time in 15 years.

"What this is a response to is the misconception that getting a loan or leasing a car is difficult to do," Toyota spokesman Xavier Dominicis said yesterday. "At Toyota it's not. Our finance arm ... it's in a position to loan money."

Richard Howse, the senior director of auto finance for J.D. Power and Associates, said that Toyota's offer is likely an attempt to kick-start its sales considering September's disappointing results.

"I don't want to read their minds, but I think they realize they need to move the cars they have now," Howse said. "It'll be interesting to see how many people are able to take it given today's credit environment."

On Wednesday, General Motors Corp. introduced zero-percent financing on several models for up to 72 months, after more than a month of offering all buyers employee discounts, which generally knock 10 percent off the purchase price of a vehicle.

Chrysler LLC, meanwhile, has been offering 72-month zero-percent financing on a range of trucks and SUVs. Ford Motor Co. also offers zero-percent financing for up to 72 months on several models.