OUR ONLINE NEWSLETTER
Here's a key statistic for you while you are shopping around for auto financing: 58 percent of all car shoppers do not buy within the first 30 days!
The reason is simple enough. There's research to be done, especially on the Internet. Research, such as the information presented at right, can help you plan to save money. And we're all about helping you save money.
Check out this story at MSNBC: all the experts are saying this a great time to be buying a car.
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The scope of the damage in the auto industry is becoming steadily more clear. We don't say that to bum you out -- it's a great time to be buying a car! Consider:
-- Saw an article at Auto Loan Daily that said the average car price is down $1,700 from a year ago. Few months back, prices were $1,300 less than in 08. So the downward pressure on auto dealers continues -- and things haven't even gotten serious yet with the Chrysler bankruptcy (and the upcoming GM shutdown of more than 1,000 dealers). Here's a tip if the Pontiac brand gets whacked as expected: Go find a Pontiac Vibe. It's the exact same car as a Toyota Matrix, and will be much, much cheaper.
-- In our local car ads, we routinely see cars that were supposed to be in the $15,000 range being offered for $10,000 to $12,000. The Kia Optima is now in that price range -- and has the best warranty to boot. It gets outstanding marks from experts such as Consumer Reports.
-- Ford is rocking. On all the quality benchmarks, the cars as a good as anything from Japan if not better, and they are cutting prices to keep up with the competition. Remember, too, that Ford brought in an exec from Boeing a few years back and got its costs under control much faster than the other Detroit automakers. NO GOVERNMENT BAILOUT MONEY has gone to Ford. They are doing things on their own, which is great.
-- Now here's why we are calling it the Great Closeout Sale. Car sales are going to drop from 14 million a year to nine million a year. That's put a big backlog of cars on the market, and prices will be low until that backlog is cleared. After that, car prices will start back up. THESE PRICES WON'T LAST FOREVER>
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This is good stuff, but we have to say to skip down to the item right below first. The best new cars for 2009 is exciting stuff, but for car buyers, the idea that the market may be bottoming is very, very important.
And now to the news: Both Consumer Reports and US News and World Report are out with their top-rated new cars for 2009. Thanks to the slump in prices, a number of the award-winning small cars (such as the Honda Fit) can fit into an average budget even if you have had credit problems in the past.
The US News and World Report top-ranked 09 models include the Honda Fit (small car), Chevy Malibu (midsize car), Infiniti G37 (near luxury), Honda CR-V (small SUV) and Toyota Highlander Hybrid (midsize SUV).
Consumer Reports top choices include the Fit, the Chevrolet Avalanche, the Mazda Miata, the Toyota RAV4, the Hyundai Elantra SE and the Honda Accord.
We always recommend to our readers to go buy the CR Auto Issue (the April issue will be on newsstands through May 4) and to carefully study the used car selections (this year they start on page 78). We also want to say that once again Ford is the highest-rated American manufacturer, and that this year, Subaru came in second (behind Honda and ahead of Toyota) in the manufacturer standings.
As a final point, because CR material is copyrighted and we can't rip them off (we can only encourage you to subscribe to their unbiased services), we have to mention their expert picks for most overlooked cars. The Kia Rondo, the Hyundai Azera and Suzuki SX4 made the list; buy the magazine to see the complete list. That $6.99 magazine could wind up saving you thousands, you know.
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Oddly enough, a bottoming out of the automotive sales slump wouldn't necessarily be good news to you. Why? Because then prices would start to go back up. We've been saying for months that prices this good won't last. And it looks like we might be right.
What's our sign of a market bottom? Partly January sales figures. January is always a slow month for car sales, but this January was ridiculous -- Chrysler down 55 percent, GM 49 percent, Ford 40 percent, Toyota 30 percent and Honda 28 percent. Subaru sales increased 8 percent -- a miracle -- and Hyundai sales went up 14 percent, but company officials attributed that increase to their program of taking a car back from anybody who gets laid off. That's not exactly a sustainable program.
When stretched out over the year, the projected number of cars to be sold is now under 10 million. That's the first time the number has been under 10 million since 1982.
So why do we see a bottom? Because as CNBC reported, the sales rate is now below the scrap rate. That's right -- more cars will be taken off the road this year than put on the road. There are more drivers every year, and that means something's got to give. And that means, to us, we're going to see a sales rebound sometime late this year or early 2010, and that will mean the beautiful bargains currently available for car buyers will dry up and disappear.
It's enough to make you want to apply today.
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Big news from the finance arm of General Motors -- an injection of federal money, and a dropping of the minimum credit score from 700 to 621.
Dealers all across the country reported all kinds of people calling up, showing up or visiting their Web sites after the announcement, CNBC reported.
GMAC received $6 billion in federal aid on Monday the 29th, and announced its easing of credit standards the very next day. It also announced the offering of zero percent financing -- even on five-year loans -- on certain models, the New York Times reported.
The Times called the move from 700 minimum credit scores to 621 "significant." The median credit score in the U.S. is now 723, meaning half the population is above 723 and half is below. The increase to 700, announced back in November, had led GMAC car loan originations to plummet.
?It?s a strong signal that GMAC is back in the game, and that G.M. dealers are back in the game of financing vehicles,? Mark LaNeve, G.M.?s vice president for North American sales and marketing, told the paper.
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We've been telling people for months that it's a great time to buy a car if you can find a loan -- and that more loans are available than you might think.
Turns out lots of people agree with us. The NADA is running ads about credit availability, manufacturers are running ads about credit availability and local dealers all across America are saying the same thing.
But here's the important part. Auto rates for good credit customers have been climbing steadily since September. Rates for bad credit customers have stayed pretty much the same (15 percent or so, depending).
With manufacturers and dealers getting crushed by sagging car sales, the list of incentives, rebates, discounts and price cuts grows daily. The number of NEW CARS available for under $10,000 continues to grow (including newcomers Nissan Versa and Hyundai Accent). It's a broken record, but it's true -- a dealer's pain is your gain, and if you don't buy a car by the end of this calendar year, you may never see prices this low ever again.
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The carnage continues in the auto industry, with USA Today reporting that, on average, two dealers are going out of business every single day. The October sales figures showed Toyota down 23 percent, Ford down 30 percent and GM down 45 percent.
We've been saying for months that bad news for dealers is good news for you. There are unbelievable incentives and discounts out there right now. Our local paper, just this morning, was advertising 2008 Kia Rios at $9,999.
There are also signs that credit is starting to unfreeze, which means these sort of prices won't last. It's true that car loans are tougher nowadays, but they are not impossible, and working through an outifit like ours increases your chances of approval. Our dealers are electronically linked to more than 400 lenders, and that's crucial -- the average bad credit car loan needs to be shopped to more than six banks now for an approval. Back last year, it only took four.
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August sales reports are out, and experts are now predicting the second half of 08 will be even worse for car sales than the first half.
We'll get to the numbers in a minute, but here's what they mean -- incentives will continue, bargaining will continue, and all in all, auto dealers need every customer they can find.
August saw sales by General Motors drop 20 percent; Ford saw a 27 percent decline. Even Toyota saw sales slide 9.4 perdent, as did Honda (7.3 percent). Honda always sold more cars than trucks, so it hasn't been hit as hard by rising gas prices and changing consumer tastes when it comes to buying gas-guzzlers.
If you can line up financing before looking at a car, there may not be as good a time to buy a car any time in the near future.
As Dow Jones Newswire put it: "The gasoline crunch has buyers favoring more fuel-efficient cars and shunning the trucks and SUVs that have traditionally driven Detroit's profits. The industry also is being dragged down by declining retail sales for individual dealerships, tied to the weak economy and soft housing market."
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There's so much going on, we'll just lay it out in bullets:
• For most of the year, we expected there to be a million fewer cars sold. Now we're hearing it could be closer to three or four million fewer cars sold. This puts dealers under great pressure, and works to your advantage.
• If you're looking for a fuel efficient new car, good luck. As overall sales slump badly, most of the big manufacturers -- including Ford, GM and Toyota -- don't have enough small cars to sell. The Wall Street Journal reported GM could have sold another 40,000 cars in June if they'd had them to sell; Ford didn't have enough Focus models to meet demand and Toyota dealers report they are way short when it comes to the Yaris, Corolla or Prius models.
• You now have to take online price guides for used cars with a healthy dose of skepticism. The value of small cars is rising as fast as gas prices; even old cars like the Geo Metro are roaring up in value (thanks to its 40 mpg). Conversely, the reported prices of gas-guzzling pickups and SUVs are much higher than you'll find in the real world; nobody is buying the guzzlers, and the prices are sinking like a rock.
• And finally, it's widely accepted that the Federal Reserve is done lowering interest rates, and that is ready to raise rates if inflation starts to get out of hand.
The bottom line: rates aren't going to stay this low forever, dealers aren't going to be under this kind of price pressure forever, and if you can swing it, now is an excellent time to be thinking about buying a car.
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We admit it. We're addicted to the Consumer Reports Annual Auto issue and we believe no one should go car shopping without reading it first. We have so much respect for their work, we totally respect their copyright and only quote little pieces of their findings when, truthfully, we could steal every word. It's that good.
The print version is $5.99, and considering it can save you thousands, it might be the best money you can spend in any single year.
So what are some of the highlights of this year's edition?
• Reliability tests show continued problems for -- surprise -- Volkswagen and Mercedes-Benz, while Ford remains the quality leader among U.S. manufacturers.
• Honda and Toyota, as usual, top the manufactuer report cards -- but Subaru actually scores better than BMW!
• No car has ever tested as a perfect 100 of 100, but this year the Lexus LS 460L scored a 99. Then again, it lists for $72,000.
• In the projected true cost to own, similar to the Edmunds.com True Cost of Ownership, the Toyota Yaris is the winer (an estimated $23,250 over five years).
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While plenty of experts have predicted a slowdown in new car sales, an Oregon-based research outfit is also predicting a 2008 downturn in the used car market.
Art Spinella of CNW Research based his prediction of a 9 percent drop in used car sales on both a survey of customers and hard sales data.
For instance, Spinella noted that for decades most people interested in a new car would switch to a used car if the economy tightened up, but that in 2007 -- for the first time since 1999 -- both new and used cars sales dipped.
Spinella added a big loser in any slowdown in used car sales would be state budgets, as most states get somewhere around 20 percent of all their tax receipts from car sales.
Our take on the report: any slide in sales is good news for consumers because it means dealers have to bargain (and prices will generally go down).
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The latest batch of IntelliChoice picks for best deals of the month gives high props to the money-saving power of hybrids.
The January report noted a common complaint with hybrids is how long they take to repay their premium price through operational savings. IntelliChoice editors said that's true if you look at fuel economy only, but that when other factors are considered -- including less maintenance and repairs and higher resale values -- hybrids are actually a good deal.
IntelliChoice editors said over the life of the car, Prius owners would be $10,000 ahead of Corolla owners, that Ford Escape hybrid owners would be about $5,500 better off than conventional Escape owners, and that people who picked hybrid Honda Civics over standard Civics would be about $6,200 ahead.
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The average car loan is now five years, four months according to the Federal Reserve. That's up six months since 2002 -- and while it's a good thing for dealers, some financial analysts are starting to get worried.
According to the Los Angeles Times, dealers are getting used to rolling debt from old cars (the trade-in, for instance) into new car loans. The end result is people are getting cars they'll not be able to sell for years (because the accumulated debt will exceed the value of the car). Back in the day, it was hard to get a bank to finance more than 90 percent of the value of the car -- now some lenders will loan up to 125 percent.
With 60 percent of all car loans now at 60 months in length, not only are those in the credit counseling business becoming worried, credit rating agencies such as Standard & Poors are worried that consumers -- stuck with a car they cannot sell -- will simply start walking away from their loans. Another worry: people will take longer between car purchases, depressing an already depressed market.
Our take on the LA Times story: We are firm believers in buying only what you can afford (and it's why we offer a payment calculator on our site). We remember when the average loan was three or four years and the average person kept their cars for a year or two longer than the loan; today the average financed car is turned over within 24 to 36 months.
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The Cadillac CTS is the 2008 Motor Trend Car of the Year. It's the most prestigious award in the auto industry, and interestingly enough, the very first COTY award from Motor Trend went to Cadillac way back in 1949.
Our take: We like to keep track of the Motor Trend winners because we like to note to our readers when, after a few years, they drop into our target price range. The 2000 winner, the Lincoln LS, can be found for around $10,000, depending on condition and mileage; and the 2001 winner, the Chrysler PT Cruiser, can be found for even less. The 2002 winner, the Ford Thunderbird, can be found for around $19,000 nowadays.
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The All-Star winners from Automobile Magazine for 2008 include six European cars, three domestics and three Japanese vehicles.
Of note:
-- The Volkswagen GTI. "Fast, fun, cheap and German. If you don't like it, you're probably dead."
-- The Chevrolet Malibu. "This is the kind of car Americans have wanted from Detroit for years."
-- The Chevrolet Corvette. "There are faster new cars than the Corvette, but all of them cost more."
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From Tom Herald in the November issue of "Auto Dealer Monthly."
-- "It is estimated that 56 percent of the vehicles sold and financed through automotive dealerships are financed by non-prime lenders. This segment of the market represents 19 million automobile sales per year and is expected to continue growing for several years to come."
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According to industry analysts at Compete Inc. in Boston, automakers are currently spending $195 per buyer in advertising.
Compete reported auto advertising was $13.7 billion in 2006, or roughly $370 million per manufacturer. Put another way, that's more than $1 million per day.
The analysts said "well-defined brands with narrower product lines" are the most effective advertisers, as companies such as Mini and Scion averaged $100 less per shopper.
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We like keeping track of the most-researched cars at various auto industry Web sites; it's an easy way to see what's popular and why.
At cars.com, for instance, October's searches were dominated by the usual suspects, the always well-selling Accord, Camry, Civic, Mustang and Silverado.
What was interesting were the vehicles showing a big jump in interest, and there were two common themes -- a redesign for 08 and a General Motors nameplate. The GM vehicles making a strong showing include the Malibu, Cadillac CTS, GMC Arcadia and Buick Enclave.
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The Web site www.thetruthaboutcars.com is out with its list of worst cars of 07. It's based on a combination of reader submissions, editor reviews and "American Idol" style voting.
The full list is here and it's quite well written (in a funny and snarky way). Some of the highlights include:
• Chrysler Aspen. "Ugly, slow ... and badly built."
• Hummer H3. "Thirstier than Lindsey Lohan fresh out of rehab."
• Dodge Nitro. "The answer to a question nobody asked."
The top car on the list, by the way, was the Jeep Compass. It's "mortal sin," the Web site said, "... is the fact that this re-skinned all-wheel drive Dodge Caliber wears the storied Jeep badge. For shame."
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Stop being serious about car research and go read some Dan O'Neil, the funniest writer of which you have never heard. Here, from Time magazine, is The 50 Worst Cars of All Time. One example: the 1975 Trabant. "This is the car that gave Communism a bad name. Powered by a two-stroke pollution generator that maxed out at an ear-splitting 18 hp, the Trabant was a hollow lie of a car constructed of recycled worthlessness."
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The Federal Reserve is reporting non-revolving loans, which include auto loans, rose at a 0.3 percent rate in September. That compared to a 6.4 percent increase in August and it was the weakest showing since October 2006.
Federal analysts blamed the weak month on slumping new car sales and higher gas prices. In an odd way, we like to hear such news BECAUSE IT IS GOOD NEWS FOR OUR CUSTOMERS. It means auto dealers will be more willing to deal.
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