Wow. That's the only word for the auto and auto finance industry right now. And it's not a good wow, either.
7-02-08There'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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Extra, extra -- the Consumer Reports Auto Issue is out
3-26-08We 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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Used car sales expected to dip, too
1-21-08While 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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IntelliChoice picks for January
1-10-08The 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 seven year car loan?
12-30-07The 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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Motor Trend Car of the Year
(12-04-07)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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Automobile Magazine announces 2008 All-Star awards
(12-04-07)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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Bad credit customers now a majority
(November 07)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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Car companies pay $195 per buyer in advertising
(11-29 07)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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Most researched cars
(11-12-07)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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Worst cars of 07
(11-8-07)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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50 worst cars of all time
(Time magazine)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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Slow loans in September
(11-8-07)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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The Sherry Newsletter
(October 2007)Here's the email our crack business analyst Sherry put together for one batch of our subscribers: check back soon for a chance to sign up and get on our newest list.
Evidence continues to mount that haggling in the auto business is at an all-time low. The no-haggle CarMax chain grows bigger every year, the entire Saturn operation is no-haggle, there's a growing number of no-haggle-pricing Web sites (Google it and see) and a growing number of local dealers are shifting to some form of clear-cut pricing.
-- Sounds to me like the Internet has had a major impact on dealerships, and that consumers are the winners
General Motors plants in Toluca, Mexico are testing a new way of painting trucks. The paint goes on over the primer before the primer is dry and the clear coat goes on over the paint before the paint has a chance to dry. All three coats are baked at the same time, so there are potentially big savings in what Dupont Automotive calls the "3-Wet" process.
-- Pardon me if I want to see some information on how well the paint job holds up over time!
Thanks to rising gas prices, automakers are offering subcompact cars with high gas mileage and small price tags. I've been researching cars around $12,000 and you can use this link to read all about it.
-- If you haven't heard of a Cobalt, Yaris or Fit, you probably should.
I've been researching used cars, too, and if you use this link, I believe you'll find some excellent ideas for shopping on a used car lot.
Finally, did you know that more Americans have dinged-up credit than good credit? That's one reason auto dealers are getting better at dealing with people with credit hiccups -- there's a lot of them!
-- Easy online applications are helping in the process, too; Internet financing is growing faster than traditional financing at dealerships.
If you're thinking about taking advantage of all this convergence -- less haggling, easier loans, the summer incentive season from manufacturers -- all you have to do is try this link.
Thanks!
Sherry
Autoloan.com | Carloan.com
PS: My boss hates it when I say this, but it's true -- even if your credit stinks, the rates aren't as high as you might think. The difference between a prime loan and a subprime loan works out to about $1.49 a day, and you can spend more than that on a daily visit to Starbucks.
