Monday, February 18, 2008

According to The Wall Street Journal, Toyota's US division has begun offering customers 84-month loans on new cars. The newspaper states that this is part of an effort by the OEM to prevent damage to its sales as the US economy enters difficult times.

Such seven-year loans follow the arrival of 72-month terms in 2007 that had, until then, been rare for new vehicle finance. The Journal says the move reflects the lengths to which OEMs are now going in an effort to avoid the large cash rebates that they have relied on since GM started the practice in September 2001.

George Borst, the chief executive of Toyota Financial Services, has reportedly told the audience at a financial-services conference in San Francisco that the company started offering seven-year car loans several months ago. Such financing, which carries slightly higher rates than 72-month deals, now represent 4% of all cars Toyota Financial Services lends money on, with the company looking to expand this to 5%.

Rates quoted by Toyota dealers range from 6.9% to 7.59% for 84-month loans, compared with 5.85% to 6.84% for 72-month financing, the newspaper states.

Toyota Financial Services originates loans for about three-quarters of the cars financed in the US at Toyota dealers, or about 50% of total sales for the company. A spokeswoman told The Journal that the seven-year loans are given only to customers with first class credit scores.

GMAC Financial Services, the world's largest vehicle financier, offers 84-month loans but says they make up only a small portion of its business. Ford has reportedly tried pilot programmes related to seven-year loans, but isn't aggressively offering them. "We don't like these loans," Ford Motor Credit's chief executive Michael Bannister said on the sidelines of the conference.

Source: http://www.automotiveworld.com/WVMA/content.asp?contentid=66264