If your credit score has gone up or down 20 - 30 points lately, it might have nothing to do with your recent borrowing habits. FICO (formerly Fair Isaac Corporation) has radically changed its methodology to the new "FICO '08." As a result, the three-digit FICO scores you get through credit reporting bureaus Experian, Equifax and TransUnion may have changed dramatically in recent months.
FICO's rationale and how it applies to specific types of borrowers is detailed in our new article. FICO says that half of the U.S. population will see their score fall under the new system, while the other half's score will stay the same or go up. That's going to affect thousands, possibly hundreds of thousands, of the nation's car loans.
Dealers are basically honest and can regulate themselves. True or false?
I'd love to know your opinion on this question and I bring it up for two reasons. This week I read a news item that said the government was considering creating an oversight agency that would, among other things, prevent fraudulent lending practices of dealers. Apparently, this is the number one ranked complaint from consumers, according to an annual survey by the Consumer Federation of America and other consumer groups.
What caught my eye was the list of shenanigans that goes on in the finance and insurance room (F&I). When I got done reading the list I felt sick to my stomach.
The auto sales gusher could be turned off Tuesday if the U.S. Senate fails to approve an additional $2 billion in funding for the Cash for Clunkers program.
The surprisingly successful program exhausted the first $1 billion in about a week and the House quickly approved additional funds to keep clunkers running. Now the fate of the program rests with the Senate where two senators dropped their opposition Monday saying the program is having the desired environmental effect.
Also on Monday, Cash for Clunkers was credited with driving a healthy sales spike which gave Ford their first positive sales month in two years.
But all that momentum could be reigned in if the program is halted by lack of funds. While the measure was debated yesterday a vote is expected sometime today.
While clunkers was being praised by many, it was clear that the program was not exactly user friendly. Shoppers reported that the paperwork required took hours to complete. Dealers were confused about how to dispose of the trade-ins. Furthermore, while the cash behind the program was dwindling, the number of replacement cars on the lot was also diminishing.
Combine a $4,500 Cash For Clunkers (C4C) rebate with the applicable federal hybrid tax credit ($1,700) and you can get yourself behind the wheel of a 2010 Fusion Hybrid for only $21,795.
So you've got a clunker that qualifies for the $4,500 rebate, and now you're wracking your brain for options for a replacement car. We're thinking along the same lines even though we aren't likely to cash in -- at Edmunds, we go fantasy car shopping all the time. So we put together a short list of vehicles, their combined fuel efficiency ratings, and figured out what the net cost would be after the government's C.A.R.S. (aka Cash For Clunkers) incentive.
We're not saying these are the only choices out there. We're not saying these are the greatest cars ever built. We're just saying these are 10 great cars you should take a look at if turning in a clunker. And we tried to put together a variety of makes and body types to jog your thinking. For a complete list of eligible trades and replacements, see our Cash For Clunkers page.
Keep in mind that final details of the program are not expected until July 24, and that all the vehicles listed here are the base model with an automatic transmission. We also assumed for the purposes of this exercise that these replacements would get the maximum credit amount of $4,500. Take a look after the jump.
As it emerged from bankruptcy GM announced it is considering selling new cars on eBay.
Car dealers have always had a love hate relationship with the internet. Mostly hate.
In 2000 when the internet was first sending ripples of terror through the car business, dealers fought to beat back the transparency that the internet brings to the buying process. A few years later, at a NADA conference, dealers talked smack, bragging how they had repelled the attack and how "all roads still lead to the dealership."
But now a humbled GM, reemerging from a speedy bankruptcy last week, announced it's working on a deal with eBay Motors to sell its new cars on the internet. The cars would still be delivered by local dealers.
Is this a path to profitability for General Motors? Or just lipservice to a generation of young buyers who currently get their books, music and movies with just a coupla clicks.
With the CARS (aka Cash for Clunkers) program expected to go into effect July 23, Edmunds.com has released a handy list of vehicles that are eligible as trade-ins. You can review this list to see if that old car in your driveway qualifies as a trade-in vehicle (clunker), and note that the list shows in what category the trade-in belongs.
We've also got a complete list of new cars that meet the Clunkers mpg requirements, these are the vehicles which you can apply your clunkers trade-in amount towards. Again, the category is called out so you can see how best to maximize the program.
Edmunds.com is working to make the Cash for Clunkers bill as understandable -- and more importantly useable -- as possible. For more information, and to see a table that describes the fuel economy requirements see our Cash for Clunkers page. Check back often for updates and additional resources.
Holidays mean specials on new cars. And what could be more patriotic during Independence Day weekend than buying an American car? From today through July 6, GM is offering 0 percent financing for up to 72 months for qualified buyers on select 2009 and 2010 vehicles in dealer stock, including Chevrolet Silverado and GMC Sierra pickups; Chevrolet Suburban and GMC Yukon XL; Chevrolet Impala; and the Pontiac models: Vibe, G3, G5, G6 and G8, Solstice and more.
Most other vehicles, such as the Chevy Malibu Hybrid, will have reduced rate financing of 0 percent for up to 60 months, instead. Note that you have to take delivery by July 6 according to the current offer. For details on all GM offers and models, see here.
My 2000 Mitsubishi Galant has a trade-in value of $2,437 but it isn't technically a "Clunker."
Many folk have been asking about Cash for Clunkers, how it will apply to their specific situation and details of how the program will work. I have a clunker. It's a 2000 Mitsubishi Galant. I'd love to turn it in for a $4,500 voucher but I can't. The mileage is too high -- 21 mpg combined. Not only that, but I'm not looking to get into a car payment right now.
But based on the email we're getting about this bill that was passed last Thursday, a lot of you are sharpening your pencils and staying up late at night looking for loopholes in this government program.
"Hey, what if I trade in TWO clunkers? Can I get $9,000?" Or, "Can I tow in a rusting piece of junk and get my voucher?" And even, "Can I put an ad in the paper, find someone with a clunker, trade it in and buy a car for me? Then I'll give the guy $500."
Calm down everyone. You're making this WAY too complicated. Here's how to think this through.
Avoid the long wait to pick up your new car at the dealership -- ask to have it delivered.
One of the great secrets of car buying is that most dealerships are willing to "deliver" the new car you want to buy. It's best to push for the delivery just before you agree to the deal. Say something like, "Well, I think the price is reasonable but I can't get down there to pick it up until the weekend. Could you deliver it to my office over the lunch hour?"
In some cases the answer might be, "Yes, but it will cost you." But the vast majority of the times, they will jump at the chance to ink a new deal and say yes. Basically, they send the car, along with a salesman or porter, to your home or office with all the documents. A "chase car" follows to take the salesman back to the dealership. They are in and out in 15 minutes.
There are many advantages to having your car delivered, not the least of which is your time and aggravation. But the biggest advantage isn't immediately obvious. Here's what it is.
In a series of press conferences today, President Obama and GM's CEO Fritz Henderson released details on GM's earlier filing for Chapter 11
bankruptcy protection.
Saying, "give us another chance," Henderson promised that the bankruptcy filing would be "the start of a new and better GM." He predicted that the restructuring process would take from 60 to 90 days. GM has launched its own site to help keep the public informed of its latest efforts and promotions.
Henderson was preceded by President Barack Obama who essentially said that Chrysler's apparent reemergence from bankruptcy bodes well for GM's long term success. He noted that after entering Chapter 11, Chrysler sold more cars in May than in April. However, he didn't mention that most of those sales were at fire sale prices.
General Motors followed Chrysler into Chapter 11 bankruptcy protection this morning in an effort to restructure and reinvent itself as a profitable company.
Since there is a lot of noise coming from the media and Washington, it creates the feeling that the product itself -- the car you are driving or are thinking of buying -- has somehow changed. It hasn't. Many GM cars are dependable, practical, even exciting vehicles that will provide years of service.
So we come back to the two most persistent questions: Should I consider buying a GM now that the shadow of bankruptcy has fallen on this company? Has anything changed for me, the GM owner?
Further proving that there's never been a better time to buy a new vehicle from recession-battered domestic automakers, Chrysler has announced zero-interest financing for 72 months on certain 2008 Chrysler
, Dodge
and Jeep
vehicles through Chrysler Financial
. This is on top of factory-to-consumer cash incentives
that the bankrupt automaker is already dangling to lure buyers into its showrooms.
The financing option is available through June 1, before Chrysler Financial is taken over by GMAC, and comes as Chrysler seeks to sell 2008 models before being merged with Italian automaker Fiat SpA.
Let's think about this "Cash for Clunkers" Bill
for just a second. I mean, who's going to take the chance to dump the old gas guzzler and move up to sleek new gas sipper?
Most of the clunkers I've seen are driven by guys named Earl who hang one arm out the window as they drive around way too slow with a back seat that looks like a recycling station. Earl might like to trade in the clunker for a $4,500 voucher to buy a sleek new Honda Insight. But how's he going to qualify for a loan to pay the remaining balance on the Insight?
While the clunker aspect of the bill has gotten most attention, it's the truck angle that might be its real intention.
Day two of the downsizing of the American auto industry brought GM's announcement that it would "wind down" its dealership group over the next year by eliminating 1,100 outlets.
Mark LaNeve, GM's vice president of vehicle sales, speaking from his car via OnStar, said that dealers would be receiving letters today notifying them that they would not have their contracts renewed next year. This will allow these dealers to make an "orderly transition" to another business or close their doors permanently.
The long time frame will also allow dealers to sell off their remaining inventory. LaNeve said that if the dealerships were simply to close, GM would have to take control of their unsold cars.
The dealerships receiving letters today were selected due to low sales levels or poor CSI (Customer Service Index) levels. These dealers only constituted about seven percent of the total sales for GM.
Dealerships could see up to a million new shoppers this year thanks to the "Cash for Clunkers" bill.
A measure to offer vouchers of up to $4,500 to take polluting gas guzzlers off the road and replace them with new cars is picking up speed. President Obama and House Democrats have settled on a version of the bill and revealed more details about how it would work. It still must pass the full Congress before going into effect.
Since we last saw the plan, it has been reworked and some of the earlier objectionable elements have been scrapped. It now appears that it will not call for the crushing of used cars and is completely optional. It also has been tweaked to lessen the impact on low income families and will not cut into the classic car market.
Still, some groups say the measure will not significantly improve fuel economy of many vehicles on the road. The government is expecting that the program may stimulate 500,000 to 1 million sales, but based on Edmunds' users we could see up to 3 million additional new car sales created by the program.
For more details on this issue please see our detailed breakdown of the proposed program here as well as an environmental analysis on Green Car Advisor.
Hyundai cars, such as the Genesis pictured above, outsold Nissan during April while Ford outsold Honda. Go figure.
When oh when will the "pent-up demand" for cars kick in and flood the lots with qualified and, yes, confident buyers?
That happy day is bound to come eventually since four million Americans postponed car buying last year. And as April sales indicated, we are on track to see only about 9.3 million Americans buy a new car.
But will the bubble burst in time to save Chrysler/Fiat? And what about GM?
More important for you, if you are part of that pent-up demand, is this the time to pull the trigger on that new car?
The latest Highlights from Edmunds.com and its blogosphere.
Karl on Cars Could the Ford Mustang Ever Happen Again? The Ford Mustang turns 45 this year. Edmunds.com Editor-in-Chief Karl Brauer examines the circumstances that led to the success of one of the longest-running vehicles in production and questions whether that success can be ever duplicated. Also be sure to check out the Mustang retrospective on Straightline, where they tried to find the best Mustang of each generation. Follow the links to see of you agree with their choices.
Green Car Advisor The 'SmartWay' To Purchase a Green Vehicle Can Save You Some Green Many people buy fuel-efficient vehicles to save money on gas and help reduce emissions. A new program by the U.S. Environmental Protection Agency can also get you a better interest rate on your car loan if it has been certified as a "SmartWay" vehicle. A number of banks and credit unions are participating in this program designed to reward consumers who choose to purchase a green vehicle.
Straightline New Tire Tech: Continental Extreme Contact DW & DWS Continental has released two new high-performance tires for varied weather conditions. The Extreme Contact DW and DWS feature some of the latest advances in tire technology. One of the more notable features is a series of letters molded into the tire treads. If any letter is worn out, the tire is no longer considered optimal for the corresponding weather condition. Straightline editors were given the opportunity to try these tires and offer their impressions.
Tax day is roaring up on us April 15 and if you're a car guy, you're probably using TurboTax to file your return. Sorry, but I couldn't resist that obvious joke.
Seriously, there's been so much news flying around about car buying stimulus measures -- which are often tax related, that I thought a short wrap up would be in order.
Here are a few things to help you get ready for tax day ... and adjust to a changing marketplace.
(Will the government's pledge to back warranties on domestics help salesmen like Lucas Crabtree at Glenn Thomas Dodge in Long Beach, California?)
"If I was a car buyer right now my head would be spinning!" a friend said to me this week.
There was a one-two-three-punch this week with the ouster of GM's Rick Wagoner, the government's annoucement of warranty protection (plus the cash for clunkers proposal) and the new array of incentives offered by Ford and GM.
One day after Chairman and CEO Rick Wagoner was forced out of his job as the U.S. Government restructured domestic automakers, a new round of comprehensive incentives were announced by Ford and GM.
The incentives mark a new approach to motivating buyer behavior. Both incentive packages have at their core a buyer protection plan to take over payments in the event of unexpected jobless. This approach was pioneered by Hyundai last year and proved very successful.
GM was set to launch its incentives, called "GM Total Confidence" to much fanfare when Ford unexpected announced its own incentives package and buyer protection program called "Ford Advantage Plan."
The elements of GM Total Confidence, which are in addition to zero- or low-interest financing incentives, cash rebates and customer loyalty promotions, include:
- Payment protection for the first 24 months of ownership so that if the buyer suffers job loss, GM makes nine payments of up to $500 per month;
- A protection plan that ensures the value of a buyer's trade-in;
- OnStar's safety and security plan for a year as standard fare;
- Fully backed, 5 year/100,000 mile limited powertrain warranty with roadside assistance and courtesy transportation.
(A big inducement to buying new is the peace of mind of getting a bumper-to-bumper warranty.)
You would like to buy an American car but would the warranty still be honored if the automaker goes bankrupt? And what about the availability of parts and service?
In a move to build confidence in American vehicles, and spark sales of domestic vehicles again, the Obama administration has announced that warranties on new cars purchased during this restructuring process will be honored, even if the manufacturer goes out of business. This removes at least one big reason American buyers have been shying away from vehicles by the Big Three automakers.
Experienced Edmunds users do their pricing homework before they hit the dealership lot, and with our new New Car Inventory tool, can often see which specific car is available on which lot. But let's say you go to a dealership without having done all that, or you see a different car (new or used) on the lot that piques your interest. How do you know the salesperson is offering you a fair price right then and there? Or what you can really afford to pay for it?
The answer is simple: Look it up on your mobile phone or PDA. Edmunds.com Mobile offers users of mobile phones, PDAs and other mobile devices a selection of the same information found on our standard site, including vehicle pricing, specifications and reviews, and our Auto Loan Calculator. And if you don't think you're getting a good price (or good treatment) at the lot you're visiting, you can find another one nearby by using our Car Dealer Directory.
You don't need to download anything to access the site. Just type m.edmunds.com into your mobile device's browser. It's free to use, although your service provider may charge you for time spent on the Internet, of course.
Many of the worst car-buying decisions happen because customers are on the lot and don't have all the information at their fingertips. With Edmunds Mobile, that doesn't have to be you.
While new cars sales are down big time -- despite massive incentives that include zero percent or nearly as low interest rates -- used cars have been selling comparatively well. Because of this buying climate, a new version of a given model may prove cheaper to purchase than a used example, due to the aforementioned incentives and the fact that used car loans typically have much higher interest rates compared to new car loans.
In an attempt to bolster sales, AutoNation
, with 232 dealerships nationwide, has announced a new program where it will cover monthly car payments for up to six months if a car buyer loses his or her job. The "AutoNation Payment Protection" program will last 12 months, and follows in the footsteps of Hyundai's Assurance Program. Hyundai's program has been a big hit and sales have risen by 25 percent since it debuted in January.
The AutoNation Payment Protection program is being offered at no charge with purchases of new and used vehicles and is also available on leased vehicles. To qualify, a person must have made at least three monthly payments, lost their job involuntarily, and applied for state unemployment. If a person still cannot make the payments after the six month grace period, the dealer will buy the car back at its market value. The customer would be responsible for any negative equity.
In this unpredictable economy, a program like this might instill some confidence in the buying public. And the great part about the AutoNation program is that you're not limited to just the Hyundai brand. AutoNation owns a dealership of just about every major brand.
Follow the link to get the full story from Auto Observer.
Must be nice to be a Mini salesman. The customer starts to negotiate and you can just say, "Ah, sorry, that doesn't work here. See, we're selling Minis."
Both the Mini and the Mini Clubman are selling at full MSRP, even in this economy, according to Edmunds' TMV. But now comes proof that hard times have even reached Mini. Mini is now offering low interest financing on all their models.
This surprising news comes only a few months after Mini announced that they had sold out their entire production run and had no cars left for buyers. It's amazing what a few months of economic meltdown will do to a company's attitude.
Basically, the deal is 2.9% on all 2009 and 2008 new MINI vehicles (with some restrictions) for up to 60 months. Mini also, claims the deal applies to all credit tiers, but must be on approved credit with MINI Financial Services. The offer excludes new 2009 Convertibles and expires at the end of this month.
Nowadays, any segment of the automotive industry that isn't in decline is considered a success story. And so it is with certified pre-owned (CPO) vehicles. According to Edmunds data, while new car sales dropped 20.1% and used cars dropped 8.1% as a percentage of franchised dealership sales in the last 12 months (Feb. '08 - Jan. '09), CPO vehicles have risen 6% during the same time. (In fact, a month ago, Edmunds reported that approximately half a million car shoppers that would have bought new cars in the previous three months had opted for used cars, including CPO vehicles, instead.) This trend continues despite the record-setting rebates available on many new cars, whereas CPO vehicles only qualify for special APR financing.
Automakers, in response, are pumping up their CPO programs. Last month, Toyota extended its certified used program to its Prius, Camry and Highlander SUV hybrids, making it the first dedicated certified pre-owned program for hybrid vehicles. As more of the popular hybrids come off lease, the new Toyota Certified Hybrid program will allow more people to get into these fuel-efficient vehicles at a price they can afford.
BMW, which leases a huge percentage of its new cars, is pushing its CPO program as well. They're offering 0.9% financing on MY 2006 vehicles through April 30th. That will allow many consumers who coveted the BMW name, but couldn't afford one, to finally get in the driver's seat. Although it wasn't true a few years ago, today every mainstream brand offers a CPO program. You can get details on all the individual CPO programs here.
Currently, CPO vehicle prices average $1,284 more overall than non-certified vehicles, but they come with the peace of mind that only a comprehensive inspection and a factory-backed extended warranty can provide. And because they don't take the depreciation "hit" that new cars do, you're typically getting a better bang for your buck. It's no wonder, then, that buyers are opting for CPO over new or plain old "used" vehicles.
(Car buyers often buy the warranty under pressure. Photo by Andrew Reed.)
A friend of mine said she just got a screamin' deal on a 2009 Chrysler Town and Country Limited but she was concerned because she bought the extended warranty and didn't know if she needed it. She knew that there was a lifetime power train warranty but she was wondering if it applied to the transmission.
Normally, a car maker doesn't put incentives on an all new model. They usually test the market waters first and see what kind of reaction the car gets from the buying masses. But in today's economy they don't have that "let's wait and see" time luxury and need to do whatever they can to scrape up some sales action, pronto. Hence incentives on all-new models such as the Hyundai Genesis coupe and Mercedes-Benz GLK compact crossover.
In these tough times, many normally upstanding consumers (financially speaking) have found themselves behind on their car payments. As such, car repossessions are at an all-time high. Here are some tips to consider if a repossession looks likely.
Although the 4.5-liter Duramax turbodiesel V8 was fully developed, GM decided to shelve the program for a few reasons. One is that in the light-duty truck sector, the diesel would require expensive exhaust treatment technology to meet the latest emissions standards. The other chief reason is that diesel engine options tend to be pricey and GM wasn't certain that folks in these cash-strapped times would want to pony up the additional cost at purchase time. GM states that they do want to build this engine and would consider a joint-venture manufacturing of the baby Duramax.
In our recent article, How To Get an Auto Loan During the Credit Crunch, we said that consumers could expect that higher interest rates and bigger down payments would be required to buy a new car. A new report from Comerica Bank illustrates what that really means to Joe Consumer: The total cost of buying an average-priced vehicle rose from $27,160 in the third quarter of 2008 to $27,700 in the fourth. That's a $540 difference, which isn't exactly chump change.
When you buy a car the sales tax and the interest on the loan may soon be deductible, the U.S. Senate decided yesterday.
Is this the catalyst that will open the floodgate for shoppers to return to the car lot? It's debatable. While a deduction of any kind is welcome, and might spur to action shoppers who are currently on the fence, it remains to be seen how much money this will actually save consumers.
When Maryland Democratic Senator Barbara Mikulski proposed the measure, as part of an auto industry stimulus plan, she said it would save a family $1,553 on a $25,000 car. But that projection might be a little too optimistic. For more information, and some sample savings calculations, see our news item in Straightline.
Meanwhile, car buyers can get unprecedented deals using Edmunds calculators which pull in all the numbers you need to negotiate a great deal. It's also important to review the car's True Market Value price and pay particular attention to incentives and rebates. Finally, a visit to the "Predicted Price Trends" for TMV will show if the car's price is forecast to go up or down.
TransUnion LLC, one of the three major credit bureaus, will begin offering a new model for evaluating borrowers' ability to repay lenders. The new FICO model, called FICO 08, is trying to better predict which customers are most likely to default on their loans.
Introduced by Fair Isaac, FICO 08 will distinguish chronic late-payers from consumers who have isolated late payments. It will assign lower scores to borrowers with high levels of revolving (credit card) debt. The system would seem to be a good thing for people who miss the occasional payment because their bill got buried under a pile of papers (and we know who we are, don't we?)
FICO 08 will also help prevent people from trying to improve their subprime credit score by becoming authorized users on the accounts of other people with better credit. (Some credit-repair Web sites have made this a practice.) The down side of this is that it also affects families where the spouse or child is signed on as an authorized user to help boost their credit. Think college students, for example.
Credit scores in FICO 08 will still range from 300 to 850; your score could go up or down under the new system, although it's estimated that overall, more people will see their credit rise rather than fall.
The other major credit-scoring companies will also incorporate the new scoring system. Equifax will introduce the FICO 08 score in June. Experian hasn't announced a date yet but is already at work to convert its system as well.
We've always said that your credit score is key to any loan. Now it's more critical than ever to clean up or consolidate credit card debt. See here for more details on cleaning up your credit.
Incentives on new vehicles -- even ones that used to command sticker price and above -- are getting to crazy levels. Why? Dealer lots are still full of new 2008 vehicles that aren't moving (not that the '09s are moving so well, either). In fact, on average, 39% of the cars in lots in December 2008 were that year's models, compared with only 19% for 2007.
The average "days to turn (DTT)" -- the number of days from when a dealer receives a car to when it drives off the lot -- is at a record 86 days for the industry overall. Here's the December DTT for the Big 6. (All names include their subsidiaries except for Ford's Mazda.)
Chrysler Group 124 GM 99 Ford 88 Nissan 83 Honda 59 Toyota 58
Of the above, GM, Nissan, Honda and Toyota are at all-time highs. Toyotas that used to be sold before they even came into the showroom are now sitting on the lot for two months!
What this means to consumers is deals galore. In an unusual reversal of the general rule, it may even be a better deal to get a new car (with incentives on it) than a late-model used car. But the deals aren't limited to '08s; there are some great deals on '09s as well.
Thanks to a loan from the government, to the tune of $1.5 Billion, Chrysler Financial is now offering 0% financing (for up to 60 months) on 11 Chrysler, Dodge and Jeep vehicles. Included in the program are Chrysler Town & Country, 300 and 300C, Jeep Grand Cherokee, Commander, Wrangler, Dodge Grand Caravan, Charger, Magnum, Challenger, Ram Pickup and Ram Heavy Duty. Customers need not have perfect credit to get the 0% rate either, with the minimum credit score being 620, instead of the 700+ that had been the requirement.
Of course, 0% financing does nothing to help consumers who are still afraid of losing their jobs, homes or both. Even with Toyota's [annoying] "Saved By Zero" campaign, sales still dropped nearly 37% in December. So it is clear that cheap financing alone will not be enough to save Chrysler.
That uncertainty in the future of the weakest of the domestic auto manufacturers has resulted in my advising, anyone who asks me, to avoid Chrysler products. I just can't see recommending their vehicles when there is no guarantee that the company will still be around by the time the loan is paid off. This is especially true when there are so many other more competitive products out there from other manufacturers. Sure, if Chrysler is sold off or liquidated, Jeep will likely survive in some form, but Dodge and Chrysler products are a big question mark. Yes, that is just my opinion.
For the latest incentives and rebates, click here.
Last week, Honda rolled out their incentive and rebate programs for January. Curiously absent were any special finance programs. Instead, Honda seems to be promoting leases with lease and dealer cash on most models. I am not sure why they have taken this route at the same time most other brands are offering subvented finance rates as low as 0%. However, Honda has always been a brand that "does it their way," and I am sure they have their reasons.
Consumers looking to buy a Honda this month should be aware of this and should not expect any fantastic financing offers like they might be seeing at Toyota, Ford or other manufacturers. For a list of all current incentives and rebates, click here.
This is the first installation of my weekly highlighting of deals and offers that I see as beneficial to you, the consumer. If I see a particularly large amount of cash incentives, a super low lease or finance rate or an incentives trend, I will make note of it here. Today I would like to highlight a deal on a crossover utility vehicle (CUV).
While it may not be at the top of anyone's shopping list, the Subaru Tribeca
is certainly worth a second look. The Tribeca offers some unique styling, good road manners, lots of features and amenities, better than average reliability and resale value and a flexible seating arrangement. In addition, and why it makes my list this week, is the fact that there is as much as $4000 dealer cash on MY08 models and $1000 on MY09 vehicles, along with a TMV price that is at or below invoice price. MY08 models also have 0% financing for as long as 63 months. I like the Tribeca, and these offers make it that much more attractive.
One thing to keep in mind that the cash available on the Tribeca is dealer cash, and not customer cash. This means that the dealer can use the cash in any manner they see fit, passing it along to the consumer at their discretion. However, my experience has been that most dealers will indeed pass the cash along to the customer as a way to lower the final selling price.
While most agree that you should buy the vehicle, and not the deal, sometimes the deal can make the vehicle that much more appealing. Tune in next Thursday for another highlighted deal of the week.
One obvious reason for slow car sales is that consumers are afraid they will lose their job and default on their auto loan. Hyundai wants you to know they understand that and they're cool with it.
Under the "Hyundai Assurance Program" you can turn your car back in and walk away from your loan if... Well, it's a pretty big "IF" and there is a lot of small print. But the new program is probably going to spawn a host of imitators as automakers struggle to overcome the objections of on-the-fence car buyers in a slow economy.
The Assurance Program is offered free with every new vehicle sold by Hyundai and it lasts for the first year of ownership, either for sales or for leases.
Hyundai achieved a higher level of acceptance once it offered it's 10-year, 100,000 mile warranty some ten years ago. Now it hopes to overcome the fears of consumers in an economy that is fraught with job insecurity.
Thanks to a recent infusion of funds from the TARP
and the Fed, GM today announced new reduced financing with rates as low as 0% APR for up to 60 months on select new cars and trucks. The reduced rate financing is available to qualified buyers today through January 5, 2009 on many 2008 and some 2009 vehicles (see list below). In addition, many of the vehicles listed below have stackable bonus cash and/or dealer cash ranging from $500 to $4,250. This means that the financing can be used along with bonus cash.
Just as important, GMAC has lowered the credit score requirement for buyers to qualify for these reduced rates. A credit score of 700 had previously been required for a buyer to qualify with GMAC. Now, that threshold has been lowered to 621, allowing an estimated 75% of additional buyers to qualify for the loans.
"We're very excited to offer this reduced rate financing through GMAC to encourage our customers to get back into the game," said Mark LaNeve, vice president, GM North America Vehicle Sales, Service and Marketing. "This enables even more qualified customers to finance through GMAC at their local GM dealership, and provides additional financing capacity with conventional and reduced rate APRs for our dealers to make sales. With GM's Financing That Fits, and the Red Tag Sale now underway that offers supplier pricing, customers have an opportunity to get a variety of extremely attractive offers through the end of the year."
2008 Model Year Vehicles:
0% APR for up to 60 months on '08 Chevrolet TrailBlazer; GMC Envoy; and Saab 9-3, 9-5, 9-7X
0.9% APR for up to 60 months on '08 Buick Lucerne
1.9% APR for up to 60 months on '08 GMC Yukon and Yukon XL; Chevrolet Tahoe, Suburban and Avalanche; Cadillac CTS, SRX, Escalade, DTS, STS and XLR 2.9% APR for up to 60 months on '08 Buick Lacrosse; HUMMER H2 and H3
3.9% APR for up to 60 months on '08 Chevrolet Equinox, Colorado Ext and Crew cab and Light Duty Silverado; Pontiac Torrent; GMC Canyon Ext and Crew cab, and Light Duty Sierra
4.9% APR for up to 60 months on '08 Saturn Astra and Sky; Pontiac Solstice; Chevrolet Corvette and Heavy Duty Silverado; and Heavy Duty GMC Sierra
2009 Model Year Vehicles:
3.9% APR for up to 60 months on '09 Chevrolet Cobalt; Pontiac G5; and Cadillac CTS
4.9% APR for up to 60 months on '09 Pontiac G6; Chevrolet Malibu, Light Duty Silverado and HHR; Saturn Aura; and Light Duty GMC Sierra
5.9% APR for up to 60 months on '09 Chevrolet Avalanche and Heavy Duty Silverado; and Heavy Duty GMC Sierra
Check out the current incentives and rebates available on GM, and all other vehicles here.
Americans have stopped buying cars and who can blame them?
With the stock market crashing and dire predictions of Detroit's bankruptcy, people are just not in the mood. But in all the thunderclouds of verbiage coming out of Washington along with the recently announced bailout, there's one word I'm not hearing: "stimulus package."
What's it going to take to get people buying again? Because, buy they must. No car company -- not even the mighty Toyota or Honda -- can't survive at the current sales numbers. So, what we are really talking about is a bailout of the car industry, not just Detroit.
Consider this: in a "normal" year, about 16 million people buy cars. This year, only about 12.7 million people have gotten new wheels. That means about 3.3 million Americans have postponed a needed trip to the car lot.
What will get those 3.3 million people off the dime? When will they say, "It's safe to go back to the car lot?" That's the part of the bailout that's being ignored. It doesn't make sense to carbuyers yet.
Look, it's one thing for a bunch of politicians and auto execs to reach an agreement. But that's not what it's about. It's all about boots on the ground. Or more to the point, customers on the car lot.
We have already seen a massive bailout of the banking industry where the government merely threw money at failing companies to keep them afloat. Notice how the real estate industry is going gang busters now? Maybe that should tell you something.
The stimulus part of the bailout is not an important part of the concept -- it's the most important part of any plan. If we give the car makers a loan, it won't do much more than put the auto industry on life support for another few months. But if the bailout can include a way to get car buyers on the lot, then the tide will turn.
So what's it going to be? For those of you who are reading this, who have put off getting a new car, what would it take to get you in that new car today? For starters, we have to offer loans that people can qualify for. But what about tax credits? Interest-free loans? How about a government guarantee to honor extended warranties and supply parts and service? Or, this is really wild, how about an amnesty program to forgive the negative equity many consumers are now carrying?
Ever notice how the best advertisement for a restaurant is a line of people waiting for a table? Get the stimulus package in order and 3.3 million people will flood car lots and pump cash back into our economy. Just think how that will look on the 5 o'clock news.
As the Edmunds Oracle Weekly Top 3 guy predicted early this morning, an initial bailout has been provided to save GM and Chrysler from a catastrophic demise. The White House today announced a $17.4 billion rescue package to help the two ailing giants survive into the Obama era. A TARP-funded $13.4 billion will be released over the next few weeks, and an additional $4 billion is on tap for February, pending the approval of Congress and then-President Obama.
We welcome this news, but we think consumers need a shot in the arm as well. No amount of government assistance will make a significant difference if consumers stay on the sidelines, and right now the economic downturn is forcing them to do just that. Consumers need financial incentives to purchase cars -- e.g., tax rebates or deductible interest -- in order for the bailout to be a resounding success. Here's hoping that this crucial next step will be taken in the weeks to come.
Dealing with an automaker's finance arm shouldn't be a harrowing experience, but it sometimes is. Recently, J.D. Power came out with their 2008 Consumer Financing Satisfaction Survey, which measures customer satisfaction with new vehicle finance services according to four criteria: application approval process; customer contact; payment/billing process; and provider offering.
The rankings are divided into categories: Luxury loan, luxury lease, non-luxury loan, and non-luxury lease. BMW took both luxury categories, while Hyundai took the non-luxury loan and Ford the non-luxury lease. Interestingly, Honda ranked third (which is still quite good) in three of the four categories.
I noticed that Toyota and Nissan, which I personally found to be a pain to deal with on my own vehicles, were nowhere to be found. Just goes to show you; 27,964 surveyed consumers can't be wrong.
So for now, forget about the dealership experience. What's your experience been with the finance companies? Good, bad or otherwise?
The recent credit crunch and associated downturn in the economy has contributed to the bottom falling out of the lease business. While many leasing companies like GMAC and Chrysler Financial have completely stopped leasing, others have severely cut back on their subsidized lease rates. This has resulted in a bit of sticker shock for lease customers who are approaching the end of their current lease.
Leasing has traditionally comprised about 20% of new car purchases. Most of these lease customers tend to come out of one lease and go right into another one (myself included). This has resulted in a large number of people who, expecting to lease another vehicle, are seeing payments 20-40% higher than what they were paying for their previous lease. Unable, or unwilling, to pay such a premium, many lease customers are thinking of buying their currently leased vehicle. But is this a good idea? How do you decide?
It probably won't surprise you to hear that car sales are still way down as of November. Our sister blog, Auto Observer has the whole story.
But that means you can probably get a really great deal on a new car right now, particularly on 2008 model. And to help you make the most of this opportunity, check out our Car Buying Tips for a Slow Economy article.
Well, believe it or not, 0 percent financing for a 60 months will save the consumer $532 over the life of the loan. That means that by paying 0 percent interest, rather than the current going rate of 7.55 percent, saves $5,532 all together.
The only time you wouldn't want to take the low interest is when you are unsure if you will keep the car for the entire 60 months it takes to pay off the loan. If you bail out after three years you lose the savings you would have gotten from the interest on the loan.
Moral of the story -- don't just look at the numbers and say, "Wow! $5,000 off!! Gotta have it!" You can run the numbers rhough our "Low APR vs. Cash Back Calculator." Remember that paying interest is like getting cancer, it's a silent killer.
While credit may still be tight for many buyers, and cut-rate financing may not be as prevalent on some popular models it used to be, there are still sources for lower than average finance rates available to car buyers. One of the best places to look to for lower than average finance rates are credit unions. What most people don't know is that they are easier to join than you think.
Perhaps feeling the heat from Toyota on its recent announcement that it would offer 0% financing on the Corolla, Honda this weekannounced new incentives on the majority of its Civic models. But are promises of low financing all they're cracked up to be?
According to the terms, "qualified buyers" can get the Civic for 1.9% financing for 24 or 36 months. The Corolla's 0% incentive is for a 36-month loan. But as we've seen, it's become increasingly difficult for those with average or good credit to be approved for a low-rate loan. And while most lenders aren't forthcoming about just how good a customer's credit needs to be in order to qualify for the best rate, analysts generally agree that a buyer's credit score must be somewhere above 700 to be considered. Combine that with the fact that many people these days can't afford to pay off a car in merely two or three years, and you soon realize that these offers are moot to all but a select few.
We''ve been hearing a lot about the frozen tundra of credit availability and how folks under 700 FICO need not apply. Well, Phil and I did a little research and got the low down on what's really happening to consumers in search of new wheels.
Why Are Car Buyers Staying Away from the Dealership?
Can I Get a Car Loan?
How Have Credit Requirements Changed?
Is It a Good Time To Buy a Car?
Car-Buying Tips in Troubled Times
Because automakers are hurting so badly, it might be one of the best times ever to buy car -- just be sure to check our Rebates and Incentives information to make sure you get every manufacturer and dealer incentive coming to you. Yes, it's true: Both auto financing and leasing standards are tougher, but nowhere near impossible to overcome. If your credit's not great, you'll have to pony up more cash up front to make it happen. But the people who are shut out of vehicle financing are likely to be those who truly should be -- because they're bad risks. Call it a market correction.
But what about you personally? Have you found it tougher to buy a car, or do you know people who have? Are you polishing up your credit score? Are you shopping the used car market instead? Or have you taken advantage of the chaos to score a great deal? Let us know!
Last week I told you how GMAC would now only offer credit to customers with a credit score of 700 or above. Other lending institutions have also tightened up their lending requirements by demanding higher credit scores and/or more money down. Some consumers are surprised when they are notified by a car dealer that their credit score is going to result in a higher than expected interest rate or down payment requirement. However, most customers are clueless when it comes to their own credit score and how it is calculated. Luckily there are websites out there that can offer consumers some insight into how credit scores are calculated and what factors influence their score.
myFICO.com is a website run by the credit agencies. For a fee, you can pay to get your credit report and your actual credit score. They also offer tools, articles and advice pertaining to your credit and finances.
whatsmyscore.org is a free site that also offers lots of tools and advice on maintaining and improving your credit score. The site has an excellent tool that can help you estimate your credit score. They also offer money advice on things like saving for college and renting an apartment.
Last, and certainly not least, Edmunds offers several articles on financing and credit, along with some tips and advice in our forums.
Using the tools and advice offered on these various websites will enable you to have a better understanding of how credit works, how your FICO score can impact the interest rate you pay on loans and credit cards and to help take better control of your finances.
On Monday I told you how Toyota was now offering 0% financing while GMAC was limiting some long-term loans and had virtually ceased leasing. Now it seems that GMAC has gone one step further by now requiring applicants to have a credit score of at least 700 in order to get approved for a loan. GMAC blamed "lack of stability in the global capital and credit markets" as the reason for the new policy.
This has the potential to have a major impact on GM sales. According to information from Experian Automotive, 43.5% people who financed new or used vehicles during the second quarter of 2008 had credit scores under 680. While third-party lenders, banks and credit unions will still make loans available, consumers will almost certainly not see anything close to the 0% financing that is being offered by other manufacturers' captive lenders. GM buyers will likely look elsewhere if GM dealers can't offer competitive finance rates.
It is important to remember that Cerberus owns a controlling 51% of GMAC. Cerberus also owns Chrysler. Cerberus has virtually eliminated leasing through GMAC and has now cut off lending to potentially half of GM's buying public. While it is likely that Cerberus is simply trying to improve its ability to sell asset-backed securities in order to maintain liquidity, the cynic in me thinks there is something a bit nefarious going on here. Is Cerberus trying to squeeze GM sales for its own benefit? hmmm...
Even in this crazy economic climate, most people can get still auto financing. Preparation and knowing what to expect at the dealership can make the difference between getting a car loan (yes, a good one) and not getting one at all. Below are the most common auto financing pitfalls that consumers experience:
#1: Not knowing their credit rating when they apply for an auto loan.
#2: Overspending once they get to the dealership.
#3: Not knowing the current interest rates being offered in the marketplace
#4: Not having approved financing in hand before entering a dealership
#5: Assuming a zero-percent loan will save more money than a cash-back rebate
#6: Falling victim to the F&I officer, who may try to confuse you by "intertwining" different elements of your deal. ("We'll give you an extra-low price on the vehicle, but this interest rate is the best we can do.")
#7: Not reviewing the contract for "extras" that have been thrown in before signing.
#8: Succumbing to pressure and exhaustion by signing the contract, despite confusion, second thoughts, or misgivings.
Most people forget that the price of the car is important, but the financing deal is often moreso. Paying a slightly higher interest rate or extending your payments for a few more months adds up to hundreds, sometimes thousands of dollars more. If you take time to do a little homework, you'll leave the dealership confident that even in these strange economic times, you got a good deal.
As Phil reported yesterday, the credit crunch that is currently paralyzing short term loans from bank-to-bank and loans to businesses and municipalities has not done the same to consumer lending. Loans can still be had, especially to those with good credit. However, credit availability is not equal among the manufacturers' captive finance companies.
As my colleague Lee pointed out earlier today, unlike the so-recent past, car loans are no longer as easy to get as a Happy Meal. In the economic paradox of our times, car makers are offering big incentives in an effort to move metal, but car loans are tougher to get.
That said, if you are credit worthy and are in the market for new wheels, you still need to do your homework. There are a lot of tempting incentives out there, and they're not just on vehicles you wouldn't typically be considering. Toyota, for example is offering 0 percent financing on Corolla, Camry and RAV4, in addition to its larger SUVs and trucks. GM is offering low (though not 0 percent) financing as well on most of its vehicles.
Don't know whether to take the low financing or cash incentive? You can compare the two using Edmunds Low Financing versus Cash Back calculator. That and many other useful tips can be found in this article on buying a new car in a slow economy.
In addition to the virtual stand-still of the nation's credit markets
, another obstacle may be making it harder for you to get an auto loan. According to a recent study by Experian Automotive, consumer auto loan delinquencies are on the rise.
Finance companies saw the percentage of loans that were more than 30-days past due rise 9% over the same period last year. Loans that were more than 60-days past due were up 11%. In dollars, that adds up to more than $25 billion in past due notes.
With many lending institutions already hesitant to make new loans along with their desire to keep their funds liquid, consumers will likely encounter further difficulties in obtaining auto loans in the coming months.
Banks have also been tightening up their lending requirements at the very time when consumers have seen their credit-worthiness head south. Experian is reporting that the percentage of auto loans made to consumers with a credit score higher than 680 is down nearly 6% from two years ago. In the past, a credit score of 720 was usually required in order to qualify for the most favorable finance rates. Today, many finance companies are flat out turning down consumers with a credit score below that mark.
This drop in consumer credit-worthiness has helped to contribute to a sharp downturn in auto sales this year. Of course, the upside for consumers is that the manufacturers are even more desperate for sales, and have opened up the incentives spigot in an effort to spur sales. If you have the credit, or the cash, good deals are aplenty.
In case you haven't heard enough bad financial news, yesterday's car sales figures elicited comparisons to the dark days just after 9/11.
It was also the first time in 15 years that monthly sales fell below a million units. Only 965,671 vehicles were sold in September, compared with 1.3 million vehicles sold in September a year ago.
A comprehensive sales analysis story in Auto Observer stated, "Last month's sales disaster was indiscriminate: It affected luxury and economy models, big and small, fuel sippers and gas guzzlers, foreign-made and domestic. The U.S. Big three and Toyota suffered mightily as they have for months, but in September even Honda - whose fuel efficient fleet had helped it largely achieve positive sales comparisons this year - saw its sales decline by 20 percent."
Clearly, Americans are in a wait-and-see mode. They are waiting for Wall Street to stop predicting the end of the world, waiting to see if the next president has any answers for us.
In the mean time, if you really need a car, this is a buyer's market -- big time. While credit is tight, there are still avenues for car financing and even some leases that will get you in a new car without breaking the bank.
Why are they so mad? Because I told the truth. And my boss, understanding the way of the world, knew that anger often accompanies revelations of this kind.
Times are tough in the auto industry. The housing crisis has not only shocked consumer confidence, but it has also put a tremendous strain on the willingness and ability of lending institutions to offer loans to both businesses and consumers alike. This "credit crunch" has contributed to the decision by many automotive captive finance companies to either drop leasing altogether (Chrysler Financial) or severely curtail new vehicle leases. The result is that many lease customers are discovering major sticker shock when their current leases are up and they look to lease a new vehicle. To illustrate this point, I decided to compare the cost of leasing a 2009 Nissan Murano with what it cost me to lease my 2006 Murano back in May of 2006.
It's hard to imagine any good news about credit right now. According to Bloomberg.com, Senate Banking Committee Chairman Christopher Dodd said, ``I was told today you have to have a FICO score of 720 to qualify for a car loan. The effects of this could be huge.''
Huge, indeed. Before you can buy or lease a car, a dealer checks your credit, and if you don't pass the smell test, the rate s/he offers you will be higher... or you might not qualify at all.
We've got lots of information on the importance of your credit score and tips for subprime borrowers. (Is 710 the "new" subprime?) But the bottom line is, not only do you need to know your score, you need to know what's keeping it from being the best it can be. For example, when I refinanced my mortgage, I discoverd that my score was getting dinged for an outstanding payment owed to a book club from five years ago... and I knew nothing about it.
So where's the silver lining? TransUnion, one of the big three credit reporting agencies, got caught giving away too much information about its customers to insurance and credit marketers (read: unsoliticed phone calls and junk mail). As a result of a successful class-action lawsuit, TransUnion now has to provide free, 24-hour credit monitoring to pretty much the entire country. The benefit of this is that you'll be able to see your TransUnion score, what's affecting it, and receive 24-hour credit monitoring (which will help protect you from identity theft, a service not to be underestimated). Whether you get six or nine months free depends on whether you opt to take a little cash that might come your way with the settlement. Personally, I would forego the cash, because it's likely to be pennies or a couple dollars at most. (Analysis on the settlement can be found here.)
The settlement is old news, but now you can register for benefits at a special site set up for the purpose. It's super easy and we strongly recommend you tell all your friends about it. (To make this work, you will need to have an email address.) This service is far beyond the once-yearly credit report that these companies are normally obligated to provide.
People keep asking me if it's safe for them to lease now. They've heard a lot about all the problems with leasing that have plagued Chrysler and the other domestics.
The short answer is that a good lease (if you can find one) might be even better now. Here's why.
When you lease a car you don't have to worry about how much the car depreciates. You just give it back when the lease is over. If you decide you really want an SUV (and can afford the gas) go ahead and lease it. When you're done driving it in three years, the thing might be worth nothing, but it's not your problem.
(By the way, if you want to hear more about trends in the leasing business, you should check out the interview with GM's Troy Clarke when he visited Edmunds.com's Santa Monica, Calif., offices yesterday.)
Here's another little wrinkle that's interesting for people already in leases. If you're currently leasing a fuel efficient car, you might want to check its Edmunds TMV price. It's possible you could buy it at a bargain price and resell it at a profit. But be careful of sales tax -- that can wipe out any money you would otherwise make. Here's an article about buying your leased car.
In an article in Automotive News it was reported that three dealerships in Arizona are being investigated for abuses committed against servicemen at nearby military bases.
Servicemen from Fort Huachuca, many of whom are sent to Afghanistan or Iraq, were warned by their superiors to steer clear of Wildcat Mitsubishi in Tucson and Ideal Automotive (Mitsubishi and Suzuki stores) in Sierra Vista. The State of Arizona is investiging the dealerships' practices after the local Better Business Bureau received 30 complaints about the businesses over the last three years.
The dealerships are owned and operated by Rick Johnston and his sons Heath and Beau.
It made me angry to hear about the alleged abuses but it didn't surprise me. Car salesmen love young customers with cash who aren't particularly well informed. Furthermore, military men are taught to respect anyone with an air of authority.
It reminded me of what Nick James told me while I was writing "Confessions of an Auto Finance Manager." He said that the Finance Manager always looked for customers that where uninformed. In particularly he looked for customers who had good credit but thought their credit was bad.
"If I sensed that they (the customers) were uninformed about their credit score I knew I could offer them say two points over (the prime rate) and they would agree to it. I could tell them, 'We ran your credit report and, well, we both know you've had a few problems. But you're nice people so I'm going to help you out.'"
It's bad enough ripping off trusting people. It somehow seems even worse taking advantage of the people who are serving their country.
After seeing our latest leasing and incentive information, I was struck by the fact that Chrysler has left the leasing game. As far as I know, this is the first time a major carmaker has done that.
Boiled down to its essence, leasing could be thought of as another way of saying long-term rental -- typically anywhere from two to four years. You essentially are paying for the use of the vehicle, its depreciation in value over the term of the lease. You are not paying for the entire value of the vehicle; at the end of the lease the vehicle is worth a certain amount.
If the vehicle's value when new is say $30,000 and at the end of the lease it's worth $15,000, then you've used up $15,000 of that vehicle's value, and your monthly payments are essentially based on that. Great, you get to drive a $30,000 car while making payments that are based on $15,000. Of course, the trade-off is that you don't own the vehicle at the end of the lease. Now you know why you see so many new BMW 328s driven by new college grads.
Some years ago we hired an investigative journalist to be an undercover car salesman. He got a job in a Los Angeles-area dealership and learned all the insider tricks of the trade. The result was "Confessions of a Car Salesman" one of the most widely read articles on our site.
Now, get ready for more confessing. On Tuesday, "Confessions of an Auto Finance Manager" will be added to the promotional box on the lower right hand corner of our site.
This time around Nick James, a six-year veteran auto finance manager, has decided to clear his conscience. For the past year I've been interviewing him, taping our conversations and learning the kinds of magic the pros work on a car contract.
A Dodge dealer in Albuquerque, N.M.,started selling Ram pickups at half price and -- guess what? -- they started flying off the lot. But here's the interesting thing is. The dealer said he was still making money.
This story actually reveals an important lesson about incentives. There's a lot of money out there and knowing how to use it can get you a great deal.
Here's how the Dodge dealer explained his Ram sale in an Automotive News article: there's now $9,000 in customer and dealer cash on the Ram. Add $9,000 to the $15,000 selling price and the dealer has $24,000 for a $30,000 pickup. Apparently, the dealer counts on getting another $3,000 in parts and service.
Last Thursday we told you about the latest incentives but we didn't really go into detail about how to use them.
Let's take a look at the 2008 Lincoln Mark LT for example. If you check it on our Incentives page you'll see that there is $6,500 customer cash, plus some bonus cash ($500) for recent college grads and $750 for people who finance with Ford. But that's just the beginning. Besides low APR financing at 3.6 percent, there is also $500 in dealer cash which is listed on our site as "marketing support."
The tricky part of dealer cash is that they don't advertise it and it up to them to decide how much of it will be shared with the customer. Still, knowing about it will help you make a better deal.
So in the case of this Lincoln, the MSRP is $39,865, the invoice is $35,940 and the TMV price is $36,520. However, once all the incentives and rebates are applied, you could buy it for $30,020.
On Tuesday
I talked about how various factors can influence your monthly vehicle cost and to think about this when you are choosing a vehicle. Often times, however, the vehicle we like the best isn't the least expensive choice. Have you ever thought about how much of a monthly price difference would make you look past your number one pick and go to a different vehicle? Could such differences make you consider some vehicles and cross others off your list? Can there really be that big of a difference in the monthly cost of comparable vehicles?
When shopping for a vehicle, most people tend to buy the most vehicle that they can afford, with the highest monthly payment that their budget allows. Often, buyers haggle over that last $10 per month without looking into other monthly expenses that they may be facing. Some of these expenses hurt their bottom line, if they are not considered ahead of time.
"Confessions of a Car Salesman" has been on our web site for a number of years but we still get a lot of heated email about it.
The emails fall into three categories:
"I am a car salesman and your article stinks [or substitute your favorite four-letter word]. The author is a bad person [or substitute another four letter word]."
"I used to be a car salesman and your article accurately depicts what it's like in the average dealership."
"I went to buy a car and your article prepared me for the games they would try to play on me."
Now we are moving into new territory: the finance office aka the "F&I Room." Beginning in a few weeks, we will be posting a series of articles called "Confessions of a Finance Manager." The writer is a gentleman who worked for six years in the finance office of various dealerships and closed more than 6,000 deals. It should keep our email box full for a long time...
After you have picked out the new or used vehicle of your dreams and you are ready to sign the papers, you will most likely be ushered into the dealership's finance and insurance office. There, you will probably be presented with the option of adding something called GAP insurance to your monthly payment, usually for only a few dollars per month extra. So what exactly is GAP insurance, and should you buy it?
GAP is often used as an acronym: Guaranteed Asset Protection. This type of insurance promises to make up the difference between the amount you owe on the vehicle and the amount it is actually worth (the gap), in the event of a loss due to theft or an accident.
As most of you reading this probably know, your vehicle will lose value the moment you drive it off the lot, especially in the case of a new vehicle. In fact, in most new vehicle finance scenarios, you will likely owe more than the vehicle is worth for many years. In the event of a total vehicle loss, most insurance policies will only pay the current value of the vehicle. Since the current value is likely less than the amount owed, the difference becomes the responsibility of the vehicle owner.
We try to cover topics that we think you might find beneficial. However, there may be questions you have that we have not yet answered. So, post questions you would like to have answers to, and we will try to address them in future entries.
We're not in a recession of course, and yet here at Edmunds.com we've been getting a lot of questions from people who are stuck with high car lease or loan payments. How can you stay afloat until good times return?
Refinancing a car loan is sometimes an option to reduce costs. If your credit has improved or interest rates have dropped you can lower payments...
The other day I received a question from someone asking whether or not a dealer can deny the top tier interest rate, even though the customer claimed to have excellent credit. The customer might not have been denied the top tier interest, but may have actually been a victim of interest rate markups. Unfortunately, this is a practice that can happen, and not just to those with perfect credit. In fact, it often happens more often with people with less than perfect credit...</DI
Question: Can I pay for a new car with a Visa credit card? If not, do dealers require a certified or cashier's check?
Most dealers will take a credit card as partial payment of a vehicle, but generally they will not let you pay for the entire vehicle on a credit card. Since the credit card companies charge a 2-3% transaction fee on every purchase, it could cost the dealer hundreds of dollars in fees if they put the entire amount on a card. This is an amount that they would almost certainly want to pass onto you in one way or another...
At the beginning of every month, all of the auto manufacturers report their prior month's sales figures. Whether these press releases announce higher or lower sales, the tone of the release is always impossibly optimistic; hey this is public relations we are talking about.
Acura gave us the following release:
Record sales of the MDX luxury SUV and continued strong demand for the RDX turbocharged crossover SUV lead Acura to August sales of 16,436 units, down 10.0 percent versus last August. Acura year-to-date sales reached 122,357 units...
Most informed car buyers are aware that leasing can result in a lower monthly payment versus financing. Most people would also assume that if you are comparing two vehicles, the one with the higher MSRP would be more expensive to lease. However, this is not always the case. To illustrate this point, compare the hot new Acura RDX to the popular BMW X3.
Recently my parents purchased a Honda Odyssey minivan. They were all set to pay cash when I explained to them that it might actually cost them less, in the long run, if they financed it.
How can this be? Well, while the seemingly unending rise in interest rates may be bad news for those with adjustable rate mortgages and credit card debt, it presents a nice opportunity for those with money in the bank...
Question: My husband and I are having problems purchasing a new vehicle due to our past credit history. Is there any way we can purchase a new vehicle with previous credit problems? Please email me back.
I think it was a stroke of genius for GM to give away an Escalade to yesterday's Superbowl MVP. Frankly, I found that more exciting than most of the game.
Question: I need to trade in my Ford Explorer which I am upside down on the payoff. How do I go about it so it does not get it all added back on to my purchase? I'm trying to make the payments lower?
Answer: You can make a cash payment for the amount that you are upside down. We suggest you do this directly to the finance company rather than complicating the deal at the car lot...
Most dealers will take a credit card as partial payment of a vehicle, but generally they will not let you pay for the entire vehicle on a credit card. Since the credit card companies charge a 2-3% transaction fee on every purchase, it could cost the dealer hundreds of dollars in fees if they put the entire amount on a card. This is an amount that they would almost certainly want to pass onto you in one way or another...
At the beginning of every month, all of the auto manufacturers report their prior month's sales figures. Whether these press releases announce higher or lower sales, the tone of the release is always impossibly optimistic; hey this is public relations we are talking about. 
