Obama Gives California Auto Market to Japan, Undermines US Economy

on Jan 26 in News tagged regulations by Jason

President Obama signed an order today that will allow all 50 US States to set their own emissions and fuel economy standards. While this move has been applauded for it’s emphasis on individual rights, it’s a poorly thought-out decision. Allowing each and every state to create their own fuel economy and emissions rules will effectively create 50 different auto markets, 50 different regulatory authorities, 50 different emissions testing procedures, etc. The net effect? Higher costs for automakers and consumers, and a host of unintended consequences.

With one signature, President Obama granted an overwhelming advantage to Japanese automakers Honda and Toyota when he allowed California to set it’s own fuel economy and emissions regulations.

Take California’s stringent fuel economy and emission standards that were passed a few months ago. Here’s what’s going to happen now that California can enforce it’s own standards:

1. There will be fewer model choices for California residents as most automakers will simply stop selling certain vehicles in California (as VW did with the Jetta Diesel a few years back) in order to meet the fleet fuel economy and/or emissions standard. While many Californians will appreciate the fact that they’ll no longer be able to buy certain trucks, SUVs, and gas-guzzling sports cars, quite a few California residents will not.

2. Guess what? Different rules for different states = more expensive vehicles for everyone. The auto business is all about economies of scale. If each state can set it’s own standards, an automaker could conceivably have to buy different parts for each vehicle sold in each state. That’s going to be expensive.

3. Automakers that specialize in small, fuel efficient cars will have a significant advantage going forward. Unfortunately for the U.S. auto industry, that means Toyota and Honda will likely grab even more market share in one of the USA’s biggest auto markets. Some people may applaud, but I don’t think it’s in anyone’s best interests to see GM or Chrysler collapse because they can’t effectively compete in California because of a poor model mix. Don’t get me wrong, this is a problem that they created for themselves, but we are in an economic crisis…we should be finding ways to minimize to potential for crisis.

4. People will cheat. Just like Californians did back in 2006 to buy new VW Jetta diesels that were technically illegal in CA, people will drive or fly to a state without strict fuel economy and emissions regulations, buy and illegally register a vehicle they can’t buy in California in a different state, and then legally register their “used” vehicle in California…all in order to bypass the law set up by California’s legislature. If you doubt this will happen, you don’t need to look back further than 3 years to see thousands of examples of this very behavior.

5. As people leave California to buy and illegally register cars in other states, California’s sales tax and vehicle registration revenue will drop.

6. As Honda and Toyota grab market share in California, you’ll see more Ford, GM, and Chrysler dealerships go out of business. The net effect is that California will lose jobs.

At the end of the day, this rule only serves to undermine California’s auto market and economy. It’s the epitome of foolishness. I know all of the above will happen because it’s simply a repeat of events that have already occurred. We’re all supposed to learn from history, aren’t we?

Hopefully, the automakers will manage to strike down this order by way of the interstate commerce clause in the U.S. Consitution…but it’s going to be interesting. Shame on you President Obama, you took the coward’s way out on this issue. It would have been better for the country if you had simply made a strong rule and forced everyone to adopt to it.

AccurateAutoAdvice.com Goals For 2009

on Dec 17 in Accurate Auto Advice tagged by Jason

Since I’m a faithful reader of Daily Blog Tips . com, and since Accurate Auto Advice is as much a blog as it is anything else, I feel compelled to follow Daniel’s advice and come up with a list of blog goals for 2009. Here they are:

1. Re-design the architecture of the site. It’s difficult to navigate and it doesn’t give people a lot to grab onto.
2. Publish at least 12 videos – that’s only 1 per month, so it really shouldn’t be that hard.
3. Boost daily unique visitors from nil (where it’s at right now despite my best efforts) to 500. This is going to be tough in such a competitive niche, but it’s time that this site starts earning some income (instead of just using my time). Don’t get me wrong – I’m not in it for the money – but considering all the other stuff I’m doing I should get paid for my time.
4. Continue to provide free, personalized auto advice via email. At this point, the number of inquiries I’m receiving aren’t too bad and I can handle the work load. However, as the site grows, I’m going to have to come up with some sort of way to handle the requests for help.

Faithful readers (all two of you!) please feel free to leave your own suggestions on ways I can improve this site. 2009 is going to be our year!

Car Dealer Tricks: No Payments For 6 Months

on Oct 20 in Car Dealerships tagged Car Dealer Tricks by Jason

When it comes to selling cars, dealerships are willing to try any and all sales tactics and gimmicks. They’ll copy programs from different industries, disregarding tremendous differences between businesses. While dealerships are to be commended for their creativity and ingenuity, sometimes the sales tactics end up costing consumers.

The “No payments for [blank] months!” sales gimmick doesn’t work in a consumer’s favor – at least when it comes to buying a car.

One example of a bad-for-consumers sales gimmick is the concept of “No Payments for [blank] Months!” The concept, borrowed from the furniture industry, seems solid enough. The dealership sells you a car and promises that you won’t have to make any payments for some period of time (let’s say 6 months).

Here’s how it works:

The dealership sells you the car for a price that includes 6 months worth of car payments. After the financing is approved, the dealership gives you a check for the amount of your first 6 payments. In effect, it’s no payments for 6 months.

Here’s why it’s bad:

1. You pay more interest, finance charges, and sales tax with this “deal” than you would if the dealership discounted the car for the same amount that they’re giving you to make your first 6 payments. Granted, you’d have to make the payments yourself, but you’d save money in the long run.

2. You can’t negotiate the price. Dealerships will be quick to tell you that you’re not going to get a discount if you decide to take them up on their ‘no payments for 6 months’ offer. While these deals sometimes work out to be very good, most of the time you end up paying more for the car than you otherwise would.

3. You need more time to get into an equity position. If you buy a car but don’t make payments for 6 months, you effectively create negative equity. After all, the car is depreciating as you use it, but you’re not paying anything to cover some of your depreciation. At some point when you do start paying, you’ll have already lost months of value before you ever make a payment.

Mitsubishi tried this promotion a few years ago, and all it got them was a large number of customers that would never buy a Mitsubishi again. The promotion was “no payments for 12 months,” and people clamored into dealerships to get a new Mitsubishi. However, after 12 months had gone by, these people had experienced a full year of depreciation without ever making a payment. As these people tried to trade-in their cars, they found out they were FAR behind in terms of reaching an equity position. In other words, they were stuck with the cars for a very long time.

Save the “no payments” deals for the furniture store (where they belong).

Thumbprints To Buy Cars?! Absurd.

on Oct 16 in Financing tagged Financing, theft by Jason

Buying a car is often complicated, time-consuming, and it usually requires copious amounts of personal information. In order for an identity thief to impersonate you and buy a car in your name, they have to know an awful lot about you. Not to mention the fact that even if the thief manages to deceive the dealership and the auto lender, the ruse doesn’t last very long. Most vehicles purchased with false identities are recovered in a matter of days or weeks. So why would an identity thief go to so much trouble? Risking arrest while spending hours buying a car using a false name hardly seems worth the few days or weeks you’ll get to enjoy driving the stolen vehicle.

I guess I’ll never understand how the criminal mind works.

Still, the fact remains that identity thieves falsely purchase cars on a regular basis. While banks, dealerships, and credit bureaus develop processes to prevent this crime, one simple and relatively low-tech option has done wonders to deter identity thieves – requiring a thumbprint on the vehicle purchase contract.

Requiring a thumbprint to buy a car deters thieves, but it’s hardly necessary.

Collecting a thumbprint allows law enforcement to determine the ACTUAL identity of the person who signed the contract after the fact, all but guaranteeing an identity thief will be caught. While this program is currently voluntary in the city of Los Angeles, many car dealerships that have been victims of identity theft are excited to begin the program.

Unfortunately, many potential customers are also deterred by the thumbprint requirement. Some consumers regard a thumb print on a contract as an invasion of privacy. Others are concerned about their “biometric” identity information being stolen. Most consumers, however, find providing a thumbprint to buy a car excessive and perhaps a little insulting. After all, shouldn’t the current system stop theft in the first place?

The answer, refreshingly, is yes.

The vast majority of falsified vehicle purchases occur at dealerships with loose or non-existent identity checks. Conscientious dealerships will pause a transaction if there is any question about names, addresses, social security numbers, and/or dates of birth not “adding up.” Between the credit bureau, the driver’s license, the credit application, and the story from the identity thief, most of the time dealers have more than enough information to stop the false purchase from happening in the first place.

But sales people and sales managers often hide or ignore facts that don’t agree with the records, deciding that the conflicting information is “incorrect” in order to complete the sale. The truth is that most well-managed dealerships have no problems with identity theft because the stop the problem when it walks in the door.

If a dealership asks you for a thumbprint, there’s very little harm in providing it. Still, the fact remains that your personal information ought to be enough. Hopefully someone will put a stop to this practice and ask car dealers to pay a little more attention to the documents they already have.

Extended Warranties: Careful Who You Buy Them From

on Oct 13 in Warranties tagged Warranties by Jason

In my experience in the car business, people have a love/hate opinion of extended warranties (a.k.a. service contracts). People love them when they cover a repair, but they hate paying for them. While I have some great extended warranty buying advice, I thought I’d share a story that reinforces one of my basic rules for buying an extended warranty. Always, without question, buy a manufacturer-backed extended warranty. Here’s why:

1) When you buy a warranty from an auto manufacturer, you’re buying great customer service. When a covered part breaks on your car, the auto manufacturer’s extended warranty will usually pay for your repair without question. Auto manufacturers understand that failing to cover a repair might influence your next car purchase decision, so they take care of you to make sure you come back to them. After-market extended warranty companies, however, have no interest in maintaining a long-term relationship with you. Rather than cover repairs, after-market companies look for ways to deny coverage (even on ‘covered’ parts). Even worse, when an after-market warranty company does pay for a repair they often don’t pay the full amount. The repair shop must then either discount their work or attempt to collect the difference between their normal rate and the rate the warranty company pays from you. Bottom line – after-market warranty companies make money by denying your claims. Auto manufacturers make money by selling you more new cars. Don’t buy a vehicle extended warranty from an after-market company.

2) Manufacturer-backed warranties pay for better parts. Most of the time, a manufacturer-backed warranty will pay for OEM-quality parts. After-market companies, looking to save every dollar, rarely pay for OEM quality. Instead they’ll ask your repair shop to use after-market parts of lower quality, and in some cases they’ll only pay for used parts. Yikes.

3) Manufacturer-backed warranties will last. Here’s a scary story – a company called Automotive Professionals Inc. stopped honoring 250,000 service contracts when they filed bankruptcy in April 2007. The vast majority of those warranties are now completely worthless. The chances of this happening with a manufacturer-backed warranty are remote at best.

4) Manufacturer-backed warranties are easy to use. Finally, and perhaps most importantly, using a manufacturer’s extended warranty is easy. When you buy the warranty, most manufacturers enter it into their computer system. That way, when you go to any of their dealers, your warranty information is a few keystrokes away. Claims are just as easy too – most manufacturers have automated systems for processing extended warranty claims. Basically, all you need to do is show up. The manufacturer takes care of the rest.

Make sure to read our Extended Warranty Buyer’s Guide if you’re in the market for a new car, and remember to compare prices among different dealers before you buy a warranty.

7 Credit Crisis Bad Credit Car Buying Tips

on Oct 09 in Financing tagged bad credit, Financing by Jason

If you’re like a lot of Americans, the current financial crisis has come as a bit of a surprise. While the government works out a plan to solve the credit problem, many consumers are finding it difficult (sometimes even impossible) to buy a car. It’s not that cars are too expensive – far from it in fact – it’s that there aren’t a lot of banks lending money. This is especially true if your credit is less than perfect. “Sub-prime” car loans for customers with bad credit are harder than ever to acquire. However, there are some tips that will help you maximize your chances of getting a car loan if you have bad credit.

1. Buy a new Toyota. Toyota Motor Credit is now one of the largest auto lenders in the US, and for good reason – they can borrow money from Wall Street at interest rates that other auto lenders can only dream about. That means they can offer loans at a better interest rate to consumers, even customers with bad credit. While Honda, BMW, and Mercedes also enjoy preferred lending from big banks, they don’t offer the sort of terms that Toyota provides for credit-challenged customers.

2. Buy a new truck or SUV. There has NEVER been a better time to buy a new truck or SUV. Huge discounts, generous cash incentives, and aggressive finance offers are available for anyone looking to buy a new truck or SUV. While it’s going to be more expensive to fill-up these vehicles, all the discounts and incentives mean a person with less-than-perfect credit can often get a loan offer. Just make sure to buy a smaller truck or SUV (say a Toyota Tacoma or Rav4) that you can afford to fill up.

3. Have you called your credit union? Credit unions often use generous lending guidelines that are favorable for most consumers – especially for anyone with a poor credit history. They also offer a personal touch and a loan approval process that many consumers find friendly and helpful. If you don’t currently belong to a credit union, check with your employer and/or H.R. department to find out what options are available to you.

4. Check out the certified used cars. GM, Ford, and Chrysler now offer aggressive certified used vehicle programs with great warranties and aggressive financing, just like Toyota and Honda have been doing for years. If you’re trying to buy an inexpensive vehicle with bad credit, a CPO car might be worth a look.

5. Stay away from “buy-here-pay-here” car lots. Because of the current credit climate, a buy-here-pay-here dealership may seem like a decent option. However, for most consumers, a buy-here-pay-here car loan is a bad idea. First, the payments are rarely reported to the credit bureaus, meaning that you’ll get little or no benefit from making all of your payments on time – your credit score will not improve. Second, many of the vehicles being offered at these dealerships aren’t worth half of what consumers are being asked to pay. Steer clear of this option if at all possible.

6. It’s all about cash. Now more than ever before, auto lenders are requiring substantial amounts of cash down. Historically, lenders have found that requiring a large cash down payment from a customer dramatically reduces the chances that they will default on their loan. So, if you’re trying to buy a car and your credit is poor, it’s time to buckle down and save. Put off any non-essential expenses, save as much cash as you can, and you’ll increase your chances of getting approved with every dollar you can put down. Figure 10-20% of the purchase price will be your required down payment.

7. Get your family involved. While we’ve never been an advocate of co-signed loans, if the situation is truly desperate a co-signer can often help a person with bad credit get a car loan. Spouses, parents, and siblings are the most helpful, and they usually have to reside in the same state. It’s also important to note that co-signers don’t help much with an approval if you’ve already had a car loan without a co-signer. This should be a last-resort option.

It’s important to remember that this credit crisis will likely be short-lived. Analysts estimate that the credit climate will normalize in the next 18 months. While it will never be like it once was (when nearly anyone could get a car loan regardless of credit history), people with bad credit should be able to get car loans again very soon. Make sure to apply for credit at a few different lenders too – that will help you figure out what your options are. We have a recommended list of auto lenders you can register with.

Ask AAA: First-time Car Buyer With Great Credit Score But No History

on Oct 06 in Financing tagged Financing, first-time buyer by Jason

Here’s a question we received recently:

I am looking to buy a new car and am a little scared about financing. I was turned down by Bank of America because they don’t accept anyone for financing with less than three years of credit. I am 26, my credit score is 745, and I have 5 credit cards (all without balances). I want to get financing, but do not want to do any guess work. Can you tell me who might consider financing me for a car?

Answer:

I wouldn’t put too much stock in the opinion of any one bank. In my experience, there are really two kinds of lenders – banks that want to be in the business of auto loans and banks that don’t.

Most banks don’t want to be in the business of lending money on cars. It’s a difficult business for a bank to be in without a large dedicated auto lending staff. I’ve been amazed multiple times by the vast difference in lending between banks.

Take your situation. You have a 745 credit score, and assuming you’ve had the same job and residence for at least six months, you should have no trouble getting a loan — even being a first time buyer. In fact, you should even be able to get a decent interest rate. Yet Bank of America turns you down. ANY ONE of the captive auto lenders (GMAC, Ford Motor Credit, Toyota Motor Credit, etc.) would love to have your business. The same goes for the larger national auto lenders like Chase and Wells Fargo.

My advice would be to contact your local credit union. They will probably offer you the best finance terms of any lender. However, I would also suggest you keep an open mind towards dealer-provided financing. You definitely fall into the “A” credit category, and auto dealers (with their huge lending portfolios) can often beat the best deal you can find on the street. If you get pre-approved at a local credit union or two, you’ll have a good estimate of what you can expect in terms of interest rate.

My recommendation: You should apply to a local credit union and ignore the fact that Bank of America “doesn’t look at people with less than three years.” You have an excellent credit score, and assuming you’ve got good job and residence stability, you should have no trouble getting financing.

Extended Warranty Buyer’s Guide

on Oct 02 in Warranties tagged Warranties by Jason

If you’re buying a new or used car, you’re probably going to be offered an extended warranty (aka service contract). Dealerships and banks often sell these products, and for good reason – they provide security and piece of mind. However, if you’re not careful, you could end up paying too much or getting the wrong coverage. By the way, if you’re not sure about buying one in the first place, check out Should I Buy An Extended Warranty before you read this. Without further delay, here’s what you need to know about buying an extended warranty:

1) Don’t call it a warranty. While the common term is “extended warranty,” the correct term is actually “service contract.” What’s the difference? Warranties cover defects only, a service contract provides service to a specific set of parts regardless of why they failed (except for abuse and acts of God).

2) Only buy a service contract backed by an auto manufacturer. Simply stated, manufacturer-backed service contracts are the best. Buying a service contract from an after-market vendor can be a complete waste of money. After-market service contract companies often dispute claims, they’re difficult to work with, and they sometimes fail to pay all your repair costs. The auto manufacturer wants to sell you another car someday, so their service contracts are usually excellent in terms of coverage, ease of use, and customer service. Read more about why you should buy a manufacturer-backed warranty…

3) Buy the best coverage. Don’t bother with buying anything less than a comprehensive service contract. What you’re looking for is a service contract that covers everything on the car, excluding wear and tear items. Buying the best coverage makes sense – even a repair of a small trivial item, like a bad power lock switch, can cost hundreds of dollars. Why not cover every part? Besides, buying lesser degrees of coverage usually doesn’t save much money. In many cases, the cost difference is a few hundred dollars. Get the highest level of coverage and you’ll be glad later.

4) Buy the longest term you can (provided the mileage makes sense). When you buy, try and match your coverage years with the miles you’re going to drive. For example, if you drive 15k miles a year, a 6yr/100k mile service contract makes sense. If you drive 10k a year, a 7yr/75k mile service contract would be better. Whatever you do, get the most you can – service contracts are most valuable in the last year of their coverage. Having said that, don’t pay for a service contract that lasts less than a year. They’re rarely cost effective.

5) Compare prices. This is the most important part of buying a service contract – since you’re only going to buy a manufacturer-backed service contract, you need to compare prices at lots of dealerships. The standard practice at most new car dealerships is to sell service contracts for $800-$2000 over cost. That kind of profit margin can easily double your expense. So, when you’re offered a service contract, find out what the up-front cash price is. Next, write down that price and ask if that’s the “best price” they can give you. Finally, tell the finance person that you’ll think about it and get back to them soon. When you get home from the dealership, call around to other competing dealers and ask them for their best price. A few minutes worth of work can save you a few hundred dollars.

6) Read the service contract. The vast majority of dealer employees are honest, however, that doesn’t mean you should trust everyone you meet. When it’s time to pay for your service contract, make sure to read it carefully. Be sure you understand the level of coverage you’re buying, the number of years and miles that you can drive while covered, and your deductible. Also, make sure the contract is for a manufacturer-backed warranty. I’ve heard of a few dealership personnel selling someone a after-market service contract and telling them it was factory-backed.

7) Check out the manufacturer’s service contract online. Most manufacturers have great websites that explain their coverage – just remember that the price online isn’t necessarily the price you’ll pay. Ford, for instance, sells their service contracts to their dealers for much less than they’ll sell them direct to customers. Your local Ford dealer can often beat the price you find online by a few hundred dollars – the same goes for Toyota, GM, and a host of others. In fact, the price you find online should be the most you pay.

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Here are some links to manufacturer’s service contract websites with more information:

Chrysler Service Contracts – servicecontracts.daimlerchrysler.com – Dodge, Chrysler

Ford ESP – GenuineService.com – Ford, Lincoln, and Mercury

GM Protection Plan – GMProtectionPlan.com – Buick, Chevrolet, GMC, Pontiac

Honda Care – HondaFinancialServices.com – Honda, Acura

Hyundai – HyundaiUSA.com – Hyundai

Toyota Extra Care – ToyotaOwnersOnline.com – Toyota, Scion, and Lexus

Ask AAA: Camry Power Window Warranty Problems

on Sep 29 in Maintenance & Repairs tagged repairs, Warranties by Jason

Here’s a question that was recently sent to us:

I lease a 2006 Toyota Camry and recently the driver side window made a really loud noise when I rolled it down, and then I wasn’t able to roll it back up. I paid the dealership $150 for them to look at it and tell me that the whole window needed to be replaced. Apparently, the window clips broke and since the clips come from the manufacturer I would need the whole glass replaced. My warranty expired about 5,000 miles ago, but I consider myself a good customer. The dealership told me it would cost $400 (less the $150) to repair. They also offered me 20% discount. I feel that this repair should be taken care of by the dealer or Toyota – what should I do?

Answer:

First, what the dealer has told you is correct. It’s silly, but once the clips holding the glass to the mechanism break, it’s time to replace the whole apparatus.

Since the dealer isn’t willing to repair the window free of charge, you can try and find an independent repair shop to do the work for less. However, the 20% discount the dealership offered you likely makes them the cheapest place to go.

As far as getting your repair covered completely, there is something called “after warranty assistance.” It’s not really easy to get, but I would definitely try. Just keep in mind that since your warranty is completely past, you will likely have to pay something. The question is, how much? After warranty assistance will usually cover 50-80% of the cost, so that should be your goal.

Our Recommendation: Speaking with the GM is usually productive in this situation, but you want to give the service manager a chance to come through for you. We would suggest you call and ask the service manager for after warranty assistance before you call the general manager.

New Title Washing Laws No Substitute For Caution

on Sep 25 in Bad Used Cars tagged used car checklist, used car inspection by Jason

The U.S. government recently announced some new regulations that are designed to stop the practice of “title washing,” a process that frauduelent car dealers use to “wash” away a vehicle’s history of salvage by titling cars in states with imperfect systems for finding salvage history. Title washing can hide a car’s flood damage or salvage history, and lead to a consumer paying much more than they should for a flawed vehicle.

While these regulations are definitely needed, the fact is criminals will always find a way to bypass regulations. Rather than relying upon the government to protect your next auto investment, here’s what you can do to reduce the chances that you end up with a car with a “washed” title:

1. Don’t buy a car from a private individual if their name isn’t on the title of the car they are selling. When it’s time to sell a car with a washed title, a lot of con artists will say that they’re “selling this car for my friend or relative, that’s why my name isn’t on the title.” If this story is true, they should be able to supply their friend or relative when it’s time to complete the transaction (as recommended in our 7 tips for buying a car from a private party post). If not, you should be suspicious.

2. Inspect the car carefully. While most salvage and flood damage vehicles are easy to spot – you can use your nose to smell must and mold from flood damage, and you can look for signs of body repair to spot a major salvage repair – some salvaged vehicles are impossible to spot without a full mechanical inspection. This is just one more good reason to pay your local mechanic to inspect any used car you’re going to buy.

3. Get a vehicle history report. Carfax and Autocheck both offer vehicle history report services, and for a relatively small amount of money you can get a guarantee that the car you’re looking at doesn’t have a washed title.

4. Use your head – if it’s too good to be true, walk away. One of my biggest pet peeves is with consumers that don’t understand one simple fact: If it seems too good to be true, it IS too good to be true. If you find a used car selling for half as much as all the similar used cars you find, ask yourself “What’s wrong with this car?” Nine times out of ten the people who get taken advantage of didn’t bother to stop and consider why the car they bought was “such a good deal.”

If you follow these four tips your chances of buying a salvaged or flood-damaged car drop to about zero.

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