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0% Financing is Back! (That's Good & Bad)

Wednesday, 12 Mar 2008 | 10:29 AM ET

You figured the automakers would eventually scream "UNCLE!"

I'm not sure it's a scream, but it's more than just a whisper. One thing is clear: the automakers are once again turning to 0 percent financing to spur sales that are stalling. As General Motors CEO Rick Wagoner said in Washington yesterday, GM has initiated 0 percent financing with its Chevy Silverado "because Ford and Toyota did it first. It's all their fault."

Whoever is to blame, the bottom line is this move is both good and bad news.

The good news is for consumers. If you are in the market for some of the models on sale with 0% financing, this is a great time to buy. Sure, you won't get to spread that payment out over eight years, but you will be free from paying interest on your loan.

The bad news with the return of 0 percent shows the automakers continue to ratchet up incentives. Not because they want to, but because they have to. After months of trying to hold the line on sweetening deals, building fewer vehicles, and making a concerted effort to raise profit-per-vehicle, they finally are giving in. And much like a group of kids who don't want to get left out, when one moved to 0 percent, others followed.

If these no-interest offers are only for a limited time and remain targeted, then I'm not terribly worried. Automakers and dealers are always greasing the deals to a certain extent. The key is to see if automakers can keep "0 percent" from lingering and spreading.

Questions? Comments? BehindTheWheel@cnbc.com

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  • Phil LeBeau is a CNBC auto and airline industry reporter based in the Chicago bureau and editor of the Behind the Wheel section on CNBC.com.

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