The economic stimulus bill just got a whole lot more interesting for automakers and car buyers alike, as a proposal to make interest on auto loans deductible has been voted in. The proposal, which was championed by the National Automotive Dealer Association, was voted in by a bi-partisan 71-36 vote. If the $800 billion stimulus bill passes the Senate and this provision survives, car buyers will be able to write off auto loan interest on their taxes, saving about $1,500 on a $25,000 car purchase. The new legislation will mark the first time since 1986 that car buyers will be able to write off their car loan interest. It's likely that automakers will shy away from 0% financing in the future and offer more cash rebates for slow-selling models (read, all models) so customers can maximize their savings.
Lawmakers and NADA are hoping the provision will help generate interest in new car purchases, but some detractors feel more should be done up front to encourage car-buying. That may be true, but after looking at January's sales figures, we're guessing that automakers aren't going to look a gift horse in the mouth.