I recently heard an article on KJZZ radio in Phoenix about Eco Driving . It is a very interesting concept. Almost like going through drivers ed all over again. The reporter on KJZZ drove the same course 3 times and improved her MPG by about 20%. The other interesting thing is that when they drove the route, it added about 10% to the time for the trip. If your trip normally takes 20 minutes, it will now take 22 minutes. I would believe that your trip done with normal driving habits could sometimes take the same 22 minutes if you had raced up to stoplights and had to spend extra time waiting for the light to change.
Over the course of a year that 20% can add up to real savings in money and gasoline. This organization claims that anyone driving any car can with some training and driving tips can achieve almost the same rate of improvement.
I also read about a venture between Microsoft and Fiat. They have created a Blue and Me computer system that is offered on some cars built by Fiat and Ford. You then download software for your home computer that works with data that can be downloaded from the car. This then analyzes your driving habits and offers advice as to how you can improve your MPG. This sounds like a good idea. I have always preached that the easiest and most cost effective adjustment to improve fuel economy is to the driver of the car.
October 24, 2008
October 23, 2008
Auto Finance Debacle
I have been in the automobile business all my life. The used car dealership I run has been selling and financing cars for over 50 years. I understand that the term of the loan has to be long enough for the payment to be affordable, yet short enough so the customer can attain an equity position when he wants to trade and before the car completely depreciates.
I watched in disgust as the mortgage bailout bill was passed. This bill was proposed by most of the same people who had helped create the mortgage mess. I had wondered when the automobile and credit card lenders would try to arrange their own bailout. The automobile lenders knew they were cutting their own throat. Most people want to get a new car every 2-3 years. A car will typically lose around half of its value in 3 years. Most car loans are 5-6 years and are usually made with a small down payment. When the typical new car buyer drives his car off the showroom floor he owes $4,000-$5000 more than it is worth. This means that when the customer wants to trade up, he owes more than the car is worth. When he wants to trade, the difference between what the car is worth and what is owed is added into his next car loan starting a vicious cycle.
The captive auto lenders have gone along with this in order to help sell the product, even though the know a lot of these loans will blow up in their faces. The borrower knows that credit is easy to get. He will dump the present car on the lender and get one through another bank or finance company.
Typically the lender uses the stream of payments from current customers to fund new loans. If enough of the current loans default, the stream of money coming in isn’t enough to fund new loans. I would believe this is the root of the auto lenders problem, a problem that they foresaw, helped create and did nothing about. Why do they deserve the governments help and support?
I watched in disgust as the mortgage bailout bill was passed. This bill was proposed by most of the same people who had helped create the mortgage mess. I had wondered when the automobile and credit card lenders would try to arrange their own bailout. The automobile lenders knew they were cutting their own throat. Most people want to get a new car every 2-3 years. A car will typically lose around half of its value in 3 years. Most car loans are 5-6 years and are usually made with a small down payment. When the typical new car buyer drives his car off the showroom floor he owes $4,000-$5000 more than it is worth. This means that when the customer wants to trade up, he owes more than the car is worth. When he wants to trade, the difference between what the car is worth and what is owed is added into his next car loan starting a vicious cycle.
The captive auto lenders have gone along with this in order to help sell the product, even though the know a lot of these loans will blow up in their faces. The borrower knows that credit is easy to get. He will dump the present car on the lender and get one through another bank or finance company.
Typically the lender uses the stream of payments from current customers to fund new loans. If enough of the current loans default, the stream of money coming in isn’t enough to fund new loans. I would believe this is the root of the auto lenders problem, a problem that they foresaw, helped create and did nothing about. Why do they deserve the governments help and support?
October 16, 2008
Industry auto lending practices
4 or 5 years ago, in an effort to bolster sales, the auto industry made it easier for a customer to qualify for a car loan. The standards were relaxed. If you looked at the customers budget, you could understand that this car was costing too large a percentage of his paycheck, but he was allowed to buy it anyway. 2 years later, food, gasoline, rent and everything has gone upin price. The customer isn't keeping up with expenses. He can't afford the $500 plus he is paying per month for the car and insurance payments. He gives the car back to the finance company, and buys a car that he is paying $300 per month on. His credit isn't quite as good as it was, but at least he can pay his rent and still get back and forth to work.
As an auto lender, I look very carefully at every customer who comes to our dealership. I would like to sell a car to every person who walks in, but I know that isn't possible. And besides, I don't want to pushe someone over the edge and cause him to lose everything.
As an auto lender, I look very carefully at every customer who comes to our dealership. I would like to sell a car to every person who walks in, but I know that isn't possible. And besides, I don't want to pushe someone over the edge and cause him to lose everything.
Its been a long time
I almost forgot I had started this blog. Things have been busy and writing gets put off. I finally remembered and decided it was time. A lot of things have happened in the car business in the last 3 months. The Van Tuyl organization is playing monopoly on east Camelback road. The only new car stores they do not own between 12th st and 16th st are Courtesy Chevrolet and Coulter Cadillac. They bou7tght the old Mel Clayton property and put the Fordfranchise with the Lincoln Mercury dealership at 13th st and Camelback. I am not sure what will happen on the corner of 16th st.
At least 5 new car dealerships in teh Phoenix area have closed, several more have closed the satellite lots and shrunk back to the original dealership. 15 used car dealerships have closed up that I know of. There is an opinion that 35-40% of the dealerships that were in business in 2007 will not be here in 2009.
The flooring companies that lend money to dealerships for inventory are tightening up. If you are in default, they are not cutting anyone any slack. They come in and take the inventory, and thedealership is virtually out of business.
The automobile lenders have become overly protective of their money, in order to get a car financed, you almost have to be able to pay cash for it. If you don't have a 700 isaac score and a large down payment you are not going to be qualified to finance a car.
I just got an issue of a magazine called Auto Finance Executive. I don't remeber seeing it before but on the cover was an article titled "Zero Sum Game" or "How 0% Financing Undermined The Auto Finance Industry" The article speaks of how in the summer of 2001 auto sales were slowing down. After Sept 11,2001 sales went down 23% the first week. GM came out with its "Keep America Rolling Plan" or)% financing on cars. It worked cars sold like hotcakes. Forfd and Chrysler soon followed suit. This pushed buyers to get new cars before they normally would have. Terms were pushed out to 60 and 72 months. After a couple of years of this even Hyundai gave in to the 0% deal.
One of the reasons GMAC is in trouble is because over 35% of the car loans they made 06-08 are.9% interest or less. this means that they are losing money on every one of those loans. The magic of 0% has worn off for the manufacturers, but the consumer has been conditioned that this si the way he wants to buy a car. The consumer now hesitates when he is told he has to pay a down payment and interest when he buys that new car. Sales of new cars in 08 are expected to be about 2 million less than in 07.
But the industry will most likely not learn, when this recession bottoms out, the 0% deals will be back again.
At least 5 new car dealerships in teh Phoenix area have closed, several more have closed the satellite lots and shrunk back to the original dealership. 15 used car dealerships have closed up that I know of. There is an opinion that 35-40% of the dealerships that were in business in 2007 will not be here in 2009.
The flooring companies that lend money to dealerships for inventory are tightening up. If you are in default, they are not cutting anyone any slack. They come in and take the inventory, and thedealership is virtually out of business.
The automobile lenders have become overly protective of their money, in order to get a car financed, you almost have to be able to pay cash for it. If you don't have a 700 isaac score and a large down payment you are not going to be qualified to finance a car.
I just got an issue of a magazine called Auto Finance Executive. I don't remeber seeing it before but on the cover was an article titled "Zero Sum Game" or "How 0% Financing Undermined The Auto Finance Industry" The article speaks of how in the summer of 2001 auto sales were slowing down. After Sept 11,2001 sales went down 23% the first week. GM came out with its "Keep America Rolling Plan" or)% financing on cars. It worked cars sold like hotcakes. Forfd and Chrysler soon followed suit. This pushed buyers to get new cars before they normally would have. Terms were pushed out to 60 and 72 months. After a couple of years of this even Hyundai gave in to the 0% deal.
One of the reasons GMAC is in trouble is because over 35% of the car loans they made 06-08 are.9% interest or less. this means that they are losing money on every one of those loans. The magic of 0% has worn off for the manufacturers, but the consumer has been conditioned that this si the way he wants to buy a car. The consumer now hesitates when he is told he has to pay a down payment and interest when he buys that new car. Sales of new cars in 08 are expected to be about 2 million less than in 07.
But the industry will most likely not learn, when this recession bottoms out, the 0% deals will be back again.
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