Alpha Auto Finders - AAFAUTO.COM

Many Americans are wondering what the GM and Chrysler bankruptcy means to them. Current and past customers worry about whether their warranties will be honored. In addition to being reluctant to take on another payment in the uncertain economy, others are afraid to purchase vehicles because they’re not sure what will happen to resale values.

Well, neither of these are really important to worry about. Warranties will be the absolute last things to be in jeopardy. In fact, support contracts, like insurance, must be backed by trust funds that cannot be tapped for any other purpose. Those services have been sort-of prepaid.

Also, resale values are going to go up not down. This increase in used car prices has been in the making for several years as the big 3 started reducing the number of vehicles produced and the rental fleets stopped purchasing as many vehicles. After 9/11, Detroit was making too many cars and they had to sell them pretty much at cost to sell them all. This saturated the market as well as soaked up a lot of America’s available credit.

Contrary to popular belief, American manufacturers have not lagged the Japanese in quality. The problem has been in first year depreciation. That’s why the program vehicles we’ve been selling for the last 14 years have been such a great deal.

But GM’s bean counters are on to us and they want to increase the resale value of domestic cars to match the imports and also increase margins. The best way to do this is to reduce supply and competition. So they are going to build fewer cars and have fewer dealers.

The obvious next question is, “What are the valid automotive worries going into the next few years?”
Although job loss slowed this last month, all of us are tightening our belts a little and many are watching and waiting. Truthfully, if a person is looking for a good used car, i think it’s a good idea to buy now. As the supply of new and program vehicles continues to dry up and prices increase, demand for used vehicles will increase. Already the note lots are having trouble getting inventory under $5K, so this has caused the low-end vehicles to double in price. 

There’s no substitute for homework. So research what you think is best for you and if you’re looking at purchasing a vehicle in the next year or so, do it now or be prepared to pay premium price.

I briefly considered a third option — buy a decommissioned missile silo to use as a bunker along with as many guns as possible (don’t forget the ammo) and join a “NObama” bumper sticker militia. But I think I’m going to hold off on recommending that option… for now.

-rocky

What we’ve been telling people for the last 10 years is starting to show up in the ratings.

Buick and Jaguar took the top reliability spot from Lexus in the most recent JD Powers research.
http://www.motorauthority.com/buick-and-jaguar-end-lexus-14-year-reign-in-jd-power-and-associates-dependability-study.html

Thing is, this isn’t the first time. The Buick Century beat Lexus for a couple of years in the early 2000s. GM and Ford have dramatically increased their quality in the last 10 years, but the imports still have this reputation of reliability. This makes the domestics a great bargain, particularly as program units.

One word of warning, supplies of new and almost new vehicles continue to decrease. These shortages are causing prices to go up and will trickle down to even the older units. Expect prices to go up a couple of thousand accross the board in the next 3 to 6 months.

We’ll keep you advised.
-rocky

Purchasing a used car can be a very smart thing to do mostly because of cost savings and particularly if one pays cash.
Here are some tips that will help:
1. Do your homework. When you find a vehicle you wish to purchase, look up the book values in both NADA and Kelley Blue Book. Generally trade-in value is what you want to pay. Also search the Internet for common problems to watch out for. Arrange your financing ahead of time if not paying cash.
2. Always get a CarFax. This will help avoid vehicles with title problems and previous damage histories. A one-month subscription is the best way to go unless purchasing a vehicle from a CarFax certified dealer. A vehicle with a “branded” title (previous salvage, rebuilt, etc.) often will plague its owners with strange issues such as abnormal wear, electrical problems, and compromised safety equipment.
3. Have a mechanic check the car. Bear in mind that checks of this type tend to be pretty nit-picky. But that’s the general idea. Either you can negotiate to have important repairs done as part of the deal or use them to negotiate down the price. Also, this is a good time to think about safety or maintenance items such as tires and brake linings. Most importantly, depending on how confident the mechanic is about the motor and transmission, you can avoid costly repairs as well as the need for an extended warranty.
4. The year vs. mileage rule. Many people think that the best used car to purchase is one that has very low mileage because they assume it has very low use. This is not necessarily true and there are many parts such as belts and gaskets that simply are a function of age. In addition, highway miles cause less wear to a vehicle than in-town miles. Because of the low-mileage perception, it may be possible to buy a newer car with high mileage for the same price as a low-mileage older car. This is best illustrated if you look at the book values of different year models of the same car and you should be able to find the sweet spot between the two extremes. Generally newer is better.
5. Import vs. domestic.  When deciding between import and domestic, there are two factors most people consider — reliability and depreciation. Unfortunately, neither of these really applies to used cars in the way people they think they do. Depreciation is a consideration when purchasing new cars because Honda,
Toyota and Nissan historically hold their value better particularly in the first 5 years. However, as used vehicles, the domestic product can be an absolute bargain because it often takes most of its depreciation in the first year. With respect to reliability, the domestic product has a bad reputation based on vehicles built in the ’70s and ’80s. However, since Toyota shared six sigma and process improvement technologies with the rest of the world, all vehicles regardless of manufacturer are dramatically more reliable. Most newer cars require no repairs and only occasional oil changes for the first 100,000 miles. Reliability considerations should include two other factors that are more important — age and cost of repair. Many import vehicles, because of the perceptions listed, can be more expensive than domestic vehicles that are 3 to 5 years newer. In addition, import vehicles cost more to repair (both parts and labor), and often require expensive maintenance such as timing belts. There is no substitute for homework. Find out ahead of time what to expect. In my experience, the most cars for the money is in domestic V6 built in 2000 or later.
6. Don’t buy extended warranties. Many aftermarket extended warranties are not worth the paper they are printed on. Even if you find one that isn’t too bad, most people, if they followed the instructions above, don’t need them. My advice is, if you think you need an extended warranty, you should probably find a different car. Still, we occasionally sell a few warranties and there may be circumstances where they are worth gambling on. But these should be rare exceptions.
7. Program vehicles. Any used vehicle that finds itself back in the possession of the manufacturer is a program vehicle. The majority are rental repurchases, but some are company cars (driven by company execs), lease returns and lemon buybacks. CarFax will show where they came from. These vehicles can be an incredible bargain in the domestic product because of the depreciation issues mentioned above. In addition, many domestic manufacturers have excellent warranties that are transferable to subsequent owners. Be aware, there may be program cars that have D & R (damage and repair) and dealers are not required to disclose this information unless the frame is damaged. Even then, it’s a good idea to request a CarFax and proceed with the mechanic inspection. Take a really close look at program vehicles as an alternative if you are looking at new. Your neighbors can’t tell the difference between a zero mile and a 10K mile car and only you will know you paid $10,000 less.

-rocky

http://www.aafauto.com

 

GM, Ford and Chrysler now will live to fight another day, but a lot of people seem to be asking what the bailouts mean to average folk.

Well, for the economy in general, the bailouts are intended to strengthen the economy, but more importantly they are intended to strengthen consumer confidence in the economy — specifically with respect to lenders and the auto industry. Consumer confidence causes consumer spending which in turn boosts the economy in a bizarre snowball effect. But making the snowball roll uphill like that is tough.

In that respect, the snowball should gain some ground. According to this article from US News, GMAC immediately lowered the required credit score and issued 0% financing offers.
http://usnews.rankingsandreviews.com/cars-trucks/Auto-Bailout/

This story also stated, “Slow sales coupled with low financing and new incentives make a winning situation for many buyers.” So my previous comments hold true. It is still a really great time to buy.

However, in spite of 0% financing and great rebates, I still am not recommending that anyone purchase new domestic vehicles. In particular, Chrysler products have the most attractive incentives, but lose the most value as soon as they are driven off the lot. There are a few exceptions and I will be happy to one-off answers for specific vehicles. So please feel free to ask.

Here’s the secret behind 0%. Special financing offers are offered in lieu of rebates. So, for example, on a $15,000 car, interest over 5 years at 5% is about $2,000. So instead of a $2,000 rebate, the manufacturer offers 0%. Often buyers will be better off if they finance through their local bank and apply the rebates to the principal. Even better, buyers should find a low-mileage used vehicle such as a program vehicle that would qualify for new car financing. They can save thousands off of a new one even after rebates.

If someone wishes to purchase a Honda, Toyota or Nissan, I recommend doing some homework right now and looking at buying new. I do not recommend Hyundai and Kia for most buyers unless they live near a dealership where they can redeem the warranty. Even then, the Korean cars tend to be a better bargain used because they also have a high first year depreciation (but beware, the 100K warranties often are not transferrable).

None of the imports are much of a bargain even now. The bang for the buck is in the domestic product and contrary to popular belief, GM and Ford are comparable quality and get the same or better gas mileage. There is no substitute for homework. A little research on the web can save you from buyer’s remorse.

Be sure and check back next week. I will provide tips for used car buyers and I will explain what program cars are, why they are a good deal and why i think they will become rare in the near future.

-rocky

With the economic downturn, there has never been a better time to buy whatever you have been putting off purchasing. Why? Because everyone else is putting it off, too.

It is a buyer’s market and for those smart enough to realize that interest rates and prices cannot go much lower, there is money to be saved. By purchasing a house or car now and locking in the low rate to take advantage of even lower pricing, people can save tens of thousands of dollars off luxurious items they wouldn’t normally be able to afford.

Here’s just a couple of examples from our dealership, Alpha Auto Finders.

2008 Cadillac DTS - MSRP: $48,540, Retail: $29,825
Sale Price: $21,995 (That’s a savings of $26,545 off MSRP and $7,830 off retail)

2007 Mercedes CLK 350 - MSRP: $52,445, Retail: $42,845
Sale Price: $35,995 (That’s a savings of $16,450 off MSRP and $6,850 off retail)

Be careful, though. There’s a lot of both houses and cars that have hidden issues. For houses, use a reputable inspection service before getting too serious.
Do the same for cars. Get a CarFax history report and have a mechanic you trust look over the vehicle before purchase.

Please feel free to ask questions.
-rocky