Car Insurance, Loan, Purchase, Lease Decisions

What to do when you are ready to embark on a Car or Truck shopping project

These days there are really great tools for all of us who want to be well educated and ready for getting the best deal possible. One of the latest new tools is the web site Checkbook.org

This site provides you with the ability to find out each week what are the current incentives that are being given to dealers in your geographic area. The newsletter / list of incentives costs US$7.

You need to check out also your local credit union to find out what are the best loan deals at the moment. There are rarely good deals given by the auto manufacturer or the car dealership.

You need to check out also the local library and read the recent issues of Consumers Reports, of course you can also check out Consumers Reports Web site to see whether the vehicle you are considering is considered reliable and what is its safety record.

For the later, the safety record, you can also check out the Insurance Institute for Highway Safety.

Which Cars Have the Lowest Insurance Costs?

Out of the nation’s 20 best-selling vehicles, the cheapest car to insure is the Chrysler Town & Country with the average insurance premium of $940. That’s according to insure.com. Other cars on insure.com’s list include the Ford Escape, GMC Sierra pickup and Chevrolet Impala. Insure.com also has the top 10 list for the most expensive models with the Dodge Ram pickup as the most expensive to insure with an average premium of $1,336.

According to insure.com, the differences in premiums are due such factors as histories of theft, repair costs and safety.

One thing interesting to note is the differences between the most and least expensive ones are not huge. If you exclude the two cheapest ones and the two most expensive ones, the differences are less than $200. So the differences may not seem that significant. But it may be more than other factors that effect the cost of a car like fuel efficiency. For example, the yearly cost difference between a car that averages 30 mpg compared to a car that averages 25 mpg is only $200. This assumes that you drive 10,000 miles a year and the gas price is $3/gallon.

State May Pay You for Replacing Your Vehicle

The state of Texas just recently started a new program called Drive a Clean Machine. The program is designed to remove older, more polluting vehicles from Texas roadways in counties with high ground-level ozone. Texas is using a carrot rather than a stick approach by giving vouchers worth $3,000 if you meet certain requirements. First, you have to live in participating Texas counties and your 2007 net income must be below certain limits. Second, your vehicle must meet certain conditions such as a failed emissions test or be at least 10 years old. Third, there are requirements for the car vehicle that you purchase. Please refer to the Texas website for the full details and for instructions on how to apply.

There are a lot of hoops to jump through, but the $3,000 ($3,500 for buying a hybrid) may make it worthwhile.

California also has a similar program, but it only pays $1,000.If you find other states with similar programs, please post links in the comments.

Tips for Automotive Purchases

This Bankrate article has some useful tips to save money on buying a new or used car. Many are the standard tips such as considering buying a used car, weighing fuel costs and cleaning up your trade-in.

Another common tip the article mentions is to shop for the best loan deal before buying. The article recommends checking your local credit unions for the lowest rates. One credit union it doesn’t mention is Pentagon Federal Credit Union which currently has some very competitive auto loan rates. I last mentioned PenFed in my March post. Anyone can join this credit union by joining an association. For more information on joining, please see this Bank Deals PenFed post. To find local auto loan deals, the website BankingMyWay is a useful resource that is much better than what Bankrate.com provides.

Beware of Auto Identity Theft When Buying a Used Car

Four years after you buy a used car, the police confiscate it and you never get it back. This actually happened to a lady in South Florida. Her story is in this Sun Sentinel article. She had a sporty gray Mitsubishi Eclipse which she bought at a large car dealership. Both she and the dealership weren’t aware that it was a stolen car that had its vehicle identification number (VIN) replaced with another car’s VIN.

According to the article, cloning operations often target high-end models and their business is booming. Consumers often lose their cars when such fraud is found because the vehicles are considered stolen property.

Vehicle Cloning Prevention Tips

As the article describes, the thieves can be sophisticated and can be difficult to detect. They forge, duplicate or alter titles so VINs placed on the clone matches the documents. There are some steps you can take to reduce the chance of this happening to you. Here are some vehicle cloning prevention tips mentioned by the National Insurance Crime Bureau (pdf):

• Check the vehicle’s VIN with appropriate government agencies and your state bureau of motor vehicles.
• Analyze the ownership pattern for any new or late model vehicle with no lien holder.
• Trust your instincts: If a used vehicle deal sounds too good to be true, walk away.
• Have a private company conduct a vehicle history search.

Obtaining a Vehicle’s History Report

A vehicle history search can be done on the internet. Two choices are AutoCheck from Experian and CARFAX. Both searches cost around $25. The CARFAX tool is nice in that you can get a free and immediate summary of the car’s year, make, model and a few other car details by just entering the car’s VIN. I tried this out with my car and it worked perfectly. You’re then given the choice to purchase the vehicle event history.

Car Companies in China - A Summary

There has been a lot of talk lately about automobile manufacturers in China and their potential march to export in Europe and the US.  So I decided to do a quick summary of the various brands and manufacturers as a guide.

Chang’an Auto

Cherry

FAW (located in Changchun)

Dong Feng Group (located in Wuhan)
Geely (located in Taizhou)

Golden Dragon (located in Xiamen)

Huanghai (located in Liaoning province, currently developing SUV and light trucks)
King Long United Automotive Industry (located in Suzhou)
Then you have the joint ventures various manufacturers have in China

GM and VW have JVs in Shanghai

Toyota has a JV with FAW in Tianjin

BMW has a cooperation agreement and manufacturing with Brilliance Auto 
Ford and Honda have their own manufacturing plants in Guangzhou and Chongqing respectively.

To give you some idea about the scale of car sales in China, here are some statistics (from Xinhua agency):

• China car sales were at 1.54 million vehicles in Q1, 2007
• 1.12 million were sedans, while SUV were in the range of 71K vehicles
• The #1 spot is measured at 104.8K vehicles — sold by GM
• The #1 spot for single model was held by Santana - a VW model made in Shanghai.  (Keep in mind that the Santana is a tried and true model — When I first went to China in 1987 the Santana was already on the streets of Shanghai as a taxi cab vehicle)

As you can tell the automobile market in China is growing fast and is becoming a leading market worldwide.  How soon will the vehicles made in China find their way to the US market (they are already in Russia, Africa, Middle East) is tough to say, but that will happen.

Keep in mind also that the Geely and Cherry (Cherry makes the QQ) are in the range of US$4000 so they will definitely be striving to be a price leader soon enough.
    (two images  from  businessweek.com)

Incentives for Hybrid Vehicle Purchase (tax rebates, HOV lanes, etc)

Here is a list of incentives that are either in place or being considered in various States across the US:

Tax Incentives: (please make sure you consult your tax advisor - the information below is NOT a tax advice)

• Federal Tax Credit: Per IRS, this tax credit is subtracted directly from the total amount of federal tax owed, and applies to vehicles purchased after January 1, 2006. The value of the tax credit varies by the type of vehicle purchased and ranges between $250 (for the not so efficient GMC trucks in 2007 model year) and $3000 for a Ford Escape 2WD 2008 model year for example. The popular Toyota Prius gets $1575 for the 2007 model year;
• Colorado: Also offering tax credit in the range of $2000-$3000; Interestingly some of the less efficient hybrids (e.g. Chevy Silverado, Dodge Ram) do not appear to qualify for the tax credit. More detail here
• Kansas: considering a $2500 for first 1000 people who apply for it. The state has already a $750 tax credit available but very few people have applied
• Other states - like Arkansas for example - are considering removing the state sales tax on sale of hybrids that are at least twenty-five percent (25%) higher than the miles per gallon rating designated for a comparable model that does not have hybrid characteristics.

HOV Lanes — this is another benefit of owning a hybrid. In several states already, this incentive will give you faster transit times as you can use the usually less congested High Occupancy Vehicle lane on the local highways. States like Arizona, California, are either considering them or have them in place already.

The Cost of Owning a Hybrid Vehicle is Discussed

Recently there have been a bunch of articles dealing with the cost of owning and operating a hybrid vehicle. In January (2007) Intellichoice, published analysis as well. Here is the summary table based on their analysis.  You need to be careful though — the assessment done by Intellichoice still assumes that going forward the tax rebates given by the Fed. Gov’t will continue and that the price of gasoline will continue to rise.  This is not necessarily the case.

Article published by Consumer Reports also shows that most hybrids also recover the initial premium buyers have to pay on purchase of the vehicles, but the overall cost benefit is not very pronounced.

At the end of the day, we all need to consider the hybrids.  It is a good choice both from the standpoint of reducing carbon emissions, and from the standpoint of driving fun — hybrids do have fast acceleration thus making them interesting to drive.  Plus the growing volume of hybrid purchased will continue to drive even their initial cost down.

Buying that “New” car — payments or cash

Reading through a bunch of personal finance magazines recently and talking with some car dealers, it turns out that consumers have started to extend loan rates for those flashy, fancy new cars and trucks they are buying. New car loan rates have now extended to 60 months and some credit unions are even offering loans up to 72 months! This seems very strange to me. Why? Because 72 months is 6 years! Are you really going to own that vehicle in 6 years ???

However, there appears to be some mitigating factors for those new long loan rates — cars simply last longer. Which should be also a sign that you can expect to drive a car for more than 6 years and not worry about significant repairs in that time period. This is good news for all of us consumers (as long as we abstract ourselves from the cost of financing a loan at an average currently of about 6.2%)

Think about this — approximately the same financed amount could mean significant interest costs over the increased number of years. For example, if you would like to buy that nice new mid-size sedan with a price tag of about US$35K, put $5K down and finance $30K the difference between financing over 3 years vs. financing over 7 years could mean additional interest of approximately US$5K. Here is a simple tool to help you evaluate the impact of prolonging paying off an auto loan.

Best Engines — Engines are an important buying factor

You may not know that, but based on research I came across years ago, in the US car buyers rank engine size and quality as one of the more important factors in their car selection. In Europe, styling is more important — a stronger factor in selecting a new car, while in the US, engines rule.

So, the recently published ranking Ward’s should be something of importance to readers in the States.  According to Ward’s the best ranked engines are:

• Audi AG 2L turbocharged DOHC I-4 (Audi A3)
• BMW AG 3L DOHC I-6 (Z4 3.0si)
• BMW AG 3L turbocharged DOHC I-6 (335i)
• DaimlerChrysler AG 3L DOHC V-6 turbodiesel (Mercedes-Benz E320 Bluetec/Jeep Grand Cherokee CRD)
• DaimlerChrysler AG Hemi 5.7L OHV V-8 (Chrysler 300C)
• Ford Motor Co. Duratec 35 3.5L DOHC V-6 (Ford Edge/Lincoln MKX)
• Ford Motor Co. 4.6L SOHC V-8 (Mustang GT/Mustang Shelby GT)
• Mazda Motor Corp. 2.3L DISI turbocharged DOHC I-4 (Mazdaspeed3)
• Nissan Motor Co. Ltd. 3.5L DOHC V-6 (Infiniti G35)
• Toyota Motor Corp. 3.5L DOHC V-6 (Lexus IS 350)

If you notice the new Ford Edge uses one of the listed best engines.  All in all you could use this list as another important selection criteria filter.  So the Lexus IS 350, Infinity G35, Mazda speed 3, Mustang GT, Ford Edge, Chrysler 300C, Mercedes-Benz E320, Jeep Grand Cherokee, BMW 335i, Z4, Audi A3….are vehicles to consider in the final list…

Going forward we will look at additional criteria and data to help you make the important Car Purchase decision.