Customers Swarm to Auto Showrooms : Ford, Chrysler Join GM in Cutting Financing Rates; Dealers Swamped

The lure of cut-rate financing sent customers roaring into automobile showrooms as Chrysler and Ford raced Friday to match GM’s ultra-low interest rates.

By noon, telephone inquiries and showroom visits had surpassed what the Bob Baker Chevrolet dealership in National City would normally receive during an entire day.

“Welcome to the APR war,” quipped a salesman at one of the many new car dealerships on National City’s “Mile of Cars” that had introduced financing schemes with low annual percentage rates.

General Motors on Thursday began financing 1986 cars at interest rates as low as 2.9% for three-year loans. Then Chrysler and Ford jumped in Friday with their own cut-rate financing.

Chrysler announced rates starting at 2.4% for two-year loans and 3.6% for three-year contracts. Ford is offering financing beginning at 2.9% for three-year loans.

As an alternative to the low rates, all three car makers are offering cash rebates. The new financing programs exclude some models and expire in October.

Already, car dealers are reporting considerable mileage from the bargain-basement interest rates.

At 11:30 a.m. on Friday, Terry Zinter seemed ready to trade in his 1976 Blazer and ride home in the $12,000, black S-10 pickup truck that sat gleaming in the sun at Bob Baker’s Chevrolet lot in National City near San Diego.

“I just need to hear the figures from the salesman,” said Zinter, a meat cutter in a Chula Vista grocery store. “Maybe I can get them to throw a free stereo in.”

Just 24 hours earlier, however, Zinter was ready to sign on the dotted line for the $7,600 Toyota truck that was his second choice.

“(Thursday) night I thought I’d have to stick with the Toyota, but my mom told me about GM’s financing and according to the numbers (Baker) is giving me, I can get the S-10 for just $50 a month more than the Toyota,” Zinter said. “I can get the truck I want in the color I want with the options I want.”

Willie Steve Nelson unloaded his golf clubs from a well-traveled 1980 Grand Prix and loaded them into the back of the spanking new Chevrolet Caprice station wagon he had just purchased at Baker.

“My wallet will be lighter, but not as light as yesterday,” said Nelson, who said the station wagon was better equipped to carry his wife, Erlinda, their four children and the golf clubs.

Nelson would have driven the car off of the lot without the low APR loan, but the deal was sweet because lower rates would slice his monthly payments by $50.

At the Frank Lincoln dealership, signs advertised a 6.9% APR, far above the 2.4% at Chrylser Corp. dealerships and the 2.9% APR offered at GM lots.

Just a few blocks away, John Van Pelt, general manager of Stanley Dodge, stared at the note pad on his desk and wondered what the new interest rates would do for sales that have remained “spotty” at best.

“Ten minutes ago we went to 2.4% for 24 months, 3.6% for 36 months, 4.8% for 48 months and 9.9% for 60 months,” Van Pelt said. “I just wish we’d gotten word earlier so we could advertise.

“I don’t know if low (financing) will work,” Van Pelt acknowledged as he looked out at Stanley’s sales lot. “I wish I had a crystal ball to look into. But if anything will move cars, it ought to be 2.4% and 3.6% APRs.”

The interest-rate war is important to National City because automobile sales accounted for 31% of the city’s $740 million in 1985 retail sales, said George Webster, executive vice president of the National City Chamber of Commerce.

“That ranked us 23rd among all California cities,” Webster said. “That’s a whole bunch of sales even without cars included. But I wouldn’t mind having two miles of cars instead of just one.”

General Motors said the new rates have sparked a “blockbuster” reaction across the nation, noting that the volume of loan applications at GMAC is up 90% from levels a week ago. One woman in Grand Rapids, Mich., sat on the hood of a car she wanted to buy for half an hour before a Chevrolet salesperson could talk to her, the company said.

In a move to unload bulging inventories of 1986 cars and trucks, General Motors started the fire-sale round of rate cuts by offering 2.9% for three-year loans and 4.8% on the more typical four-year loan on most 1986 passenger cars and a wide range of light trucks. Or, under the program that expires Oct. 8, consumers can opt for cash rebates ranging from $300 on domestic and Japanese built subcompacts to $1,500 on slower selling front-wheel-drive luxury cars.

Chrysler and Ford, with smaller inventories of unsold 1986 cars, responded Friday for competitive reasons, the two car manufacturers said. “We normally would not offer financing incentives because our inventories are the best balanced in the domestic industry, but we must meet the competitive actions of other,” said Ray Windecker, an analyst with Ford.

Until Oct. 12, Chrysler is offering 2.4% for two-year loans, 3.6% for three-year loans, 4.8% for four-year loans and 9.9% for five-year loans. The alternative cash rebates range from $400 to $1,500. The program also includes some 1987 luxury models, such as the Chrysler Fifth Avenue.

Ford countered with 2.9% for three-year loans, 5.9% for four-year loans and 9.9% for five-year loans, available until Oct. 8. Cash rebates range from $300 to $1,000. The program doesn’t included the Ford Taurus or Sable and excludes certain other models.

The low-interest rates from car finance companies also prompted a new round of grumbling from competitors in the car-loan business--primarily banks and credit unions, whose car-loan rates are generally 9% or higher. Finance companies have grabbed a larger share of the car-loan market over the last year because of discount programs that are “basically just a marketing gimmick,” said Howard Cosgrove, a spokesman for the Credit Union National Assn.

“We have generally considered the discount finance rates to be anti-consumer because we feel the car makers are simply passing along the cost to consumers” through higher prices or other costs, Cosgrove said.

Car dealers dispute contentions that they will find other ways to make up the profit lost through lower rates.

“The price is still negotiable,” said a Los Angeles Buick dealer. “People are trying to find out what the gimmick is. Once they discover that there is no gimmick . . . it’s translating into sales.”

But the misgivings of some are not dissuading buyers who want to beat expected price increases for 1987 model year cars--which will hit dealer showrooms during the next few weeks--and who want to buy big ticket items this year before tax reform legislation eliminates the deduction for sales tax next year. Also, interest deductions for car and other consumer loans will be phased out over the next five years.

At Guaranty Chevrolet in Santa Ana, Sales Manager Bruce Hamlin said 18 cars were sold Thursday, the most ever for a weekday. Guaranty stayed open until 1 a.m. Friday morning and “we expect to be even busier tonight,” Hamlin said.

Times staff writers James A. Bates, Stephanie Droll, Greg Johnson, Jeff Rowe and Nancy Yoshihara contributed to this report.