The “Cash for Clunkers” program that we told you about on June 19 has received a shot in the arm in almost-last-minute actions by the House and Senate. They approved an additional $2 billion to continue the unexpectedly popular rebate program through Labor Day.
Opponents of the program feel like:
Richard Shelby, the top Republican on the Senate Banking Committee, said the program “has squeezed months of normal activity” into a short period of time.
And though rebates are reportedly difficult to process, dealers and automakers love the program:
“There is no question that ‘cash for clunkers’ has succeeded,” said Dave McCurdy, chief executive of the Alliance of Automobile Manufacturers, the chief trade group for General Motors Co, Chrysler LLC, Ford Motor Co, Toyota Motor Corp and other big carmakers.
Have you participated? If so, were you going to buy a new car, anyway?
After a few years of not catching onto consumers’ shifting tastes towards more environmentally friendly vehicles, General Motors has teamed up with Segway to develop the PUMA, or Personal Urban Mobility and Accessibility, a tiny self-balancing, two-wheeled vehicle powered by electricity. The PUMA can reach speeds of thirty-five miles per hour.
It’s an interesting concept, but much like the original Segway, I don’t think it will catch on except in unique circumstances. The only place I see Segways are in shopping malls, where they drivers are part of the facilities security or police. I have had my own personal experience with a Segway; several years ago, I rode one of these devices in Disneyland’s Tomorrowland exhibition.
Dean Kamen, the inventor of the Segway, created massive hype before unveiling the Segway, promising it would revolutionize urban transportation. He would have predicted that these personal transportation devices would be ubiquitous by now, particularly in cities. That hasn’t come to pass yet. In fact, Segway is judged to be a failure.
How the PUMA device is heading in the same direction. But perhaps there is room for success; I have seen an increasing number of Smart Cars on the roads and in parking lots.
Here’s a video of GM and Segway’s collaborative PUMA vehicle. Can you see yourself in one?
If you have not been aware of the recent news, General Motors and Chrysler have asked the government for more money, but the Obama administration is pushing back. The government’s task force has determined that the restructuring plans submitted by the companies in return for continued financial support are inadequate.
As a result, the Chairman and CEO of General Motors, Rick Wagoner, is resigning from his position and Chrysler is heading towards a possible merger with Fiat. With GM, the government will provide the company with the funds it needs to operate for sixty days. There is a possibility that General Motors will not survive in its current form two months from now. Chrysler, on the other hand, will only have thirty days to turn around a plan for moving forward.
Bankruptcy may be the answer for both companies. To prevent consumer trepidation about buying a car from a company that might not support its obligations like warranties and maintenance, the Treasury Department has stepped in. The government plans to back warranties on all GM and Chrysler vehicles purchased while the companies exist in their current state of collapse or restructuring.
If you typically buy cars from GM and Chrysler, would you be more or less inclined to purchase a vehicle right now? Are you confident your car will receive the support it needs from these companies or the government throughout its usable life?
A few months short of five years ago, I purchased a new 2004 Honda Civic to replace a failing older model that had not been in my care. Today, this “new” car is passing 100,000 miles on the odometer, and it’s still running great. While I occasionally find my mind wandering towards the purchase of something sportier, at this time, I plan on sticking with the Civic until maintenance costs more than the car is worth. I hope to stretch ownership for another 100,000 miles.
Here are the expenses I’ve put into the car so far:
Accessories
$745
Insurance
$9,894
Interest on Auto Loan
$413
Fuel
$7,042
Parking
$302
Registration
$239
Service
$3,208
Tolls
$3,645
The main accessory I purchased was a lower-end GPS device, which was ultimately stolen from the car while it was parked for the weekend in a particularly bad parking space in Queens, New York. I never replaced the device. The next most expensive accessory was a replacement stereo that fully integrated with my iPod. The service category includes regularly scheduled maintenance as well as a slew of oil changes. It also includes my $500 deductible after a “minor” accident, a tire replacement after one was punctured and unrepairable, and a couple of traffic tickets.
I paid off my non-industry auto loan with an interest rate of 2% somewhat quicker to keep my total interest expense down to $413. Also, according to edmunds.com, my car has depreciated a total of $7,580 since it was purchased.
Many of the expenses should be controlled better, and it may be time to re-evaluate my insurance coverage.
Consumer Reports leaves little to the imagination when in the April issue, the editors state emphatically, “The best vehicles are built by Honda, Subaru, and Toyota.” Yet, if you are feeling patriotic, you want to single-handedly save an entire domestic industry, you’re not worried about future service from a company that may no longer exist, or you want to do your part to try to save thousands of American jobs, you may ignore this and buy an American car. For you, CNN has parsed Consumer Reports’ ratings to find the highest ranked domestic vehicles.
Family sedan: Chevrolet Malibu at $21,605, 30/22 mpg
Small car: Ford Focus at $15,520, 35/24 mpg
Upscale sedan: Lincoln MKZ at $32,695, 28/18 mpg
Luxury sedan: Cadillac DTS at $46,280, 23/15 mpg
Small SUV: Ford Escape Hybrid at $29,645, 31/34 mpg
Mid-size SUV: Ford Taurus X at $28,270, 24/17 mpg
Pick-up: Chevrolet Avalanche at $35,460, 20/14 mpg
Green car: Ford Escape Hybrid at $29,645, 31/34 mpg
Consumer Reports admits, as they have been for the past few years, that the quality of American cars is increasing and that the fact that a car is produced by a Japanese company doesn’t automatically guarantee reliability.
The testers at Consumer Reports do not receive cars directly from factories as other publishers do. Rather than reviewing a superbly tuned and tested vehicle, designed specifically for those who write reviews at other publications, Consumer Reports publishers buy cars from dealers just like a typical consumer would. They visit the dealerships and buy the car directly without mentioning their association with Consumer Union. This ensures they’re seeing the same product the typical auto consumer would see.
Occasionally, Consumerism Commentary readers email me with financial questions. If you want to see a topic discussed here, you can do this as well. Just email me at flexo or tips at this domain name. I can’t answer every email personally, but I’ll do my best to connect you with the resources you need.
Last week, I received this question from Justin about auto loan refinancing:
I’m interested in refinancing my car loan. I was younger and dumber when I bought my car, so I didn’t pay much attention to the financing side of it. I am currently in a 11.96%, 72-month loan, and I’ve knocked off about 2 years so far. I have good credit so I know I could get a better loan. Do you at least have some tips for me as to where to start looking?
With good credit, you should definitely be able to find a better deal, saving you hundreds if not thousands of dollars over the course of the loan. My first inclination is to check BankRate for a comparison of rates for auto refinance loans. Interestingly, the only loan available through BankRate for my location was a 36-month loan through a lender called “up2drive” for 6.90%. I am not convinced that BankRate is providing me with a full picture of what might be available.
I would start with the local banks with whom I already have a relationship. For me, this would consist of Wachovia and TD Bank, but if you are a member or could become a member of a credit union, they often can provide deals you may not find from a traditional bank.
If you’re interested in comparing refinance options to determine how much you might save through the course of the loan, take a look at this calculator. It is designed for home mortgages but the calculation is the same for auto loans.
When you do refinance, unless you choose a shorter period than your original loan, you’ll be extending the total number of payments you’ll make, although those payments will be smaller. I would suggest, if possible, to pay more than your monthly amount if the terms of your new loan don’t penalize you for doing so. To make the most of the money you spend on cars,, pay off the loan as soon as possible and keep the car as long as possible. Don’t feel that you need to buy a new (or new-to-you) car once you stop sending monthly payments to the bank.
I have never refinanced an auto loan. I’ve had loans on two cars at different times, both Honda Civics. The first I sold when I no longer needed a car for work, and used the proceeds to pay off the loan. The second was financed outside of the banking system at a low rate at 2%. This was a loan with a family member, a situation that led me to go outside a strict debt avalanche system and pay off the debt as soon as possible.
I would welcome additional comments and suggestions from readers who have experience with auto loan refinancing or who have thoughts to share on the topic.
This is today’s big news, and you’ve probbably heard about it already. This morning, President Bush approved three-year loan to GM and Chrysler which would give these companies $13.4 billion now and $4 billion in February. There are strings attached.
Although the loans have terms of three years, the government will require the companies to pay the balance back in full by March 31 if the corporate leaders cannot find a path to stability. The government will become part owners of the companies and will have oversight of executive decisions. The deal also requires that the automakers limit compensation and benefits, provide competitive wages, and eliminate the “jobs bank.”
The jobs bank allows union auto workers to still receive pay after being laid off, and even the Japanese, non-union automakers have a similar policy. The union has suspended the jobs bank already.
Do you think the automakers are making enough concessions in exchange for these loans? My concern is that even with this money, one of largest government interventions in a supposedly free market economy, the industry might not be salvageable.
The CEOs of Ford, General Motors, and Chrysler are heading to Washington, D.C. today for the second time to plead for government assistance. The first trip resulted in public relations faux pas. They flew to Congress on private corporate jets, spending much more company money than necessary. This brings to mind the image of someone driving a Bentley to pick up a welfare check. More importantly, they appeared before Congress without a solid plan for improving their companies’ health.
The Big Three corporate leaders got the message. They’re coming back, driving from Detroit to Washington with hybrid vehicles. That moves has made a lot of noise in the new media, but the important part is the plan.
Like the hybrids, the CEOs have made a symblic gesture to reduce their salaries to $1 each per year, but only if they get their bailout loans from the rest of the country. Beyond the symbolism, it’s the plan that’s important. General Motors is offering the most drastic proposal of the three, including a reduction in workfroce by at least one third and reducing the number of plants. Ford wants to increase production of the small Focus, simplifying and reducing the expense of the design.
Are these proposals enough?
The domestic auto industry will most likely get their money. This time around, they’re asking for $34 billion, more than the $25 billion they thought would do the trick last month. They might not get all of what they want, but I don’t see Congress letting these companies fail.
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I would start with the local banks with whom I already have a relationship. For me, this would consist of 
