Which cars could drip in price?
THE import tariff reduction applies only to imported passenger cars. Even more specifically, it applies to imported passenger cars from countries with which Australia does not have a free trade agreement — essentially Japan, the European Union, South Africa and Korea.
Japan started selling the world's first household hydrogen fuel cell this year, and stands on the verge of selling fuel-cell vehicles. But there are still difficult challenges involving the manufacturing, storing and transporting of hydrogen. For these reasons, some experts say the advent of the hydrogen economy might be a pipedream.
Fossil fuels, which have been supporting modern civilization for over 100 years, contain two fatal flaws: they are not sustainable and they cause environmental pollution. In contrast, hydrogen can be manufactured even from water, and is clean with no harmful emissions.
"When the oil runs dry, it is necessary to substitute something different. Hydrogen is a leading candidate for alternative energy," said Professor Kazunari Sasaki, director of the International Research Center for Hydrogen Energy at Kyushu University in southern Japan.
Japan, with energy self-sufficiency of only 4 percent, has been forced to pursue diversified energy sources. It has been consistently developing fuel cells that generate electricity from hydrogen and oxygen, and is now in the forefront of this field.
Replacing oil with hydrogen all at once is unrealistic, Sasaki says. Therefore, he suggests, “We should increase the proportion of using hydrogen technology little by little in fields where there are benefits. Those are at home and in vehicles."
Japan imports most of its oil from the Middle East, and 40 percent of this is used in vehicles. If even a small part of the nation’s cars switch to hydrogen, it would be significant.
Only a handful of automakers are currently leasing fuel-cell vehicles, or FCVs, called the ultimate eco-cars because of their zero emissions, by way of experiment. These include Japan’s three major automakers – Toyota, Nissan and Honda – the German auto giant Daimler, and the U.S. auto giant General Motors. Less than 100 fuel-cell vehicles are on the road in Japan, and a few hundred in the world.
One obstacle is the high price of such cars. An FCV is currently valued at around US$1.1 million. Toyota leases its FCV for US$9,400 a month, or US$110,000 a year.
In 2015 Toyota and Daimler are expected to introduce mass production of FCVs, after 20 years of research and development. They will have to substantially reduce the price, however.
"By the time FCVs are commercially available in 2015 they will be cheaper than a Rolls-Royce, but it will be difficult to price them down to the level of a Corolla,” said Kenichiro Ota, a professor at Yokohama National University. A Rolls-Royce costs around US$550,000 and a Corolla $22,000.
The FCVs themselves seem to meet all expectations, apart from cost. At the Tokyo Motor Show in Chiba City east of Tokyo early this month, the author test-drove Toyota's latest fuel-cell vehicle, the FCHV-adv, believed to be the world's most advanced model. It runs 515 miles on a full 156-liter high-pressure hydrogen tank. The car’s motor is the same as that of an electric vehicle, with no unpleasant engine sounds and almost no vibration, and the ride was comfortable.
According to Shogo Saegusa, a senior researcher at the Japan Automobile Research Institute, FCVs face five key challenges: low efficiency, endurance reliability, cold-start durability, travel range and high cost.
However, Japan's three auto manufacturers have already extended the travel range of their FCVs to a level similar to that of gasoline vehicles. Toyota has achieved 515 miles, Honda’s FCX Clarity has reached 385 miles, and Nissan’s X-TRAIL FCV is up to 310 miles.
Hydrogen must be artificially produced as it does not exist in isolation in nature. This means it is a secondary energy like electricity, not a primary energy like fossil fuels.
Since hydrogen is a gas at room temperature, it must be reduced to minus 487 degrees Fahrenheit to liquidize it, or kept under pressure to retain it as a gas. In short, a great deal of energy is required at each stage of manufacturing, storing and transporting hydrogen. After several studies, car manufacturers adopted the high-pressure hydrogen tank for FCVs.
Although the cost of compression is less than that of manufacturing liquefied hydrogen, it still requires considerable energy and technology. Naturally, expanding the infrastructure of hydrogen stations is also a challenge in making the vehicles popular. Currently, Japan has only 14 stations in major cities capable of pumping compressed hydrogen into vehicle tanks.
Energy supplies are secure, however, as hydrogen can be made not only from natural gas or kerosene but also from water or seawater. That is the one reason Japan, in trying to build a society without fossil fuels, has been pushing ahead with hydrogen.
I need a car, yet I hate the very thought of them. Cars are responsible for the sprawling suburbs that have alienated us from one another. I see those long lines of commuters sitting on the 401, day after day, and I can only conclude cars are evil.
But I'm going to buy one and I want something cheap, reliable and I don't care about image. Fuel economy? Of course. A good warranty from a company that will back it up – I want that too.
So sharpen your pencils and get to work. What do I want?
Amelia.
Cato: You've come to the right country, Amelia. Canada may be a big place, but it's a small-car country, an entry-level nation, the land of frugal, affordable transportation. More than half the cars sold here are entry-level runabouts. You have choices.
Vaughan: Choices? Amelia has issues. If cars are evil and ripping the fabric of society then what has possessed her to suddenly abandon her principles and cross over to the dark side. She should either go straight to Honest Faustus Used Cars or, better still, just get a transit pass.
Cato: What are you doing Vaughan? This isn't the Life section. Just answer the question, suggest some cars and leave the amateur psychiatry to the amateur psychiatrists. Perhaps Amelia has seen the light – recognized the need and is going to fill it. With a subcompact or so-called B-sized car, I think.
Toyota
2009 Toyota Yaris
Vaughan: Accepting that even B cars clog the 401 and alienate us from one another, here's a list for Amelia: Honda Fit, Toyota Yaris, Chevrolet Aveo, Nissan Versa, Hyundai Accent, Kia Rio and Suzuki Swift.
Cato: To be honest, they all are completely functional, reliable, fuel-efficient runabouts. More like them, but even better cars, are coming next year.
Ford Canada in the summer will start selling the made-in-Mexico Fiesta subcompact – currently the second-best-selling car in Europe, and then toward the end of the year, Mazda has its Mazda2.
Vaughan: I see your strategy Cato. Delay her decision until she comes to her senses and gets that transit pass. Very good. Maybe you can join me in the Life section some day.
Cato: Amelia, ignore Vaughan's sad attempt at career advancement and put the Toyota Yaris on your list. Toyota sells not only a sedan version, but also a four-door hatchback and a two-door hatch.
All three versions share a 106-horsepower, four-cylinder engine. It's fuel-efficient and adequately powerful. This little runabout is an acceptable city car, but for long highway stretches the cabin is noisy and the seats are thinly padded.
Vaughan: You have plenty of padding so that's shouldn't be a problem for you, Cato.
Cato: Seen your profile lately? In any case, Amelia, the Yaris is solidly reliable and the U.S. Government gives it a good, but not great, four-star crash test rating right across the board.
Vaughan: I'm recommending the Hyundai Accent. We were just on a Hyundai dealer lot and it was advertising a new Accent for $9,995 – all in, with the incentives.
Cato: Yes, and Hyundai makes sedan and hatchback versions of the little Accent and both are powered by a 110-hp four-banger. The Accent does its chores nicely, with a pleasant interior and an airy cabin.
Vaughan: Reliability is not a worry, either. Plus safety. In frontal impacts, the Accent earned a five-star rating for driver and passenger.
Cato: And then there is the Nissan Versa. The Accent is loaded up with more sales sweeteners – incentives – but Nissan has a pretty attractive sticker, too.
Vaughan: I think the Versa is a real bargain here. The conscience-stricken Amelia has two body styles to choose from: a four-door sedan with a 107-hp, four-cylinder engine and a four-door hatchback with a 122-hp, four-banger. The sedan is cheaper and the smaller engine is more fuel-efficient.
2009 Nissan Versa
Cato: The Versa is a big car for a subcompact. The cabin is very spacious and there is decent cargo room, too. Plus it has a four-star crash test rating for both driver and passenger.
Vaughan: I'd also suggest a test drive of the Honda Fit. It's pricey because it's imported from Japan, but is the most versatile and functional small car, period.
Cato: Great design. Seats flip and fold every which way and fuel economy is excellent, as are the safety scores. If you are willing to spend a bit extra, the Fit is an excellent buy. If not, I'd suggest the Versa.
Vaughan: I'd recommend the Accent and maybe a guilt donation to Friends of the Earth.
WASHINGTON — Ford, Subaru and Volkswagen lead the insurance industry's annual list of the safest new vehicles, according to a closely watched assessment used by car companies to lure safety-conscious consumers to showrooms.
The Virginia-based Insurance Institute for Highway Safety awarded its "top safety pick" on Wednesday to 19 passenger cars and eight sport utility vehicles for the 2010 model year. The institute substantially reduced the number of awards compared with 2009, because of tougher requirements for roof strength.
Ford Motor Co. and its Volvo unit received the most awards with six, followed by five awards apiece for Japanese automaker Subaru and German automaker Volkswagen AG and its Audi unit.
Chrysler Group LLC received four awards followed by two each for Honda Motor Co. and General Motors Co.
Toyota Motor Corp., BMW AG, Mazda Motor Corp. and Mitsubishi Motors Corp. were shut out in the annual IIHS review.
Ford's recipients include the Ford Taurus and Lincoln MKS passenger cars and the Volvo S80 and C30 passenger cars and the XC60 and XC90 SUVs.
Ford said in a statement it is "committed to providing customers with safe vehicles for a broad range of real-world crash conditions."
Subaru recorded winners with the Subaru Legacy, Outback and Impreza cars and Tribeca and Forester SUVs. Subaru was the only automaker with an IIHS winner in all four vehicle classes in which it competes.
The automaker, which has bucked the brutal U.S. sales market with a 13 percent increase during the first 10 months of 2009, attributed its safety success to a unique engine design that sits low in the vehicle chassis and moves down and under occupants in a frontal collision.
Tom Doll, executive vice president and COO of Subaru of America, said the awards were a "tribute to the engineering that goes into Subaru products."
Volkswagen scored with the 4-door versions of the Jetta, Passat and Golf, the Audi A3 and the Volkswagen Tiguan, a small SUV. Mark Barnes, Volkswagen of America's chief operating officer, said the "safety of our cars is of the utmost concern, from the initial design stages all the way through the maintenance procedures at dealerships."
Chrysler won the award for the Chrysler Sebring and Dodge Avenger sedans equipped with optional electronic stability control, the Dodge Journey midsize SUV and the Jeep Patriot with optional side thorax air bags.
Scott Kunselman, Chrysler's senior vice president-engineering, said the awards underscore the Auburn Hills, Mich., automaker's "engineering capability and leadership in occupant protection."
General Motors Co. and Honda Motor Co. both received two awards. GM was recognized for the Buick LaCrosse and the Chevrolet Malibu while Honda won for 4-door versions of the Civic with optional electronic stability control and the Honda Element.
Other winners included the Nissan Cube, the Kia Soul and the Mercedes C Class.
The vehicles are selected for best protecting motorists in front, side and rear crash tests based on Institute evaluations during the year. The vehicles are required to have electronic stability control, or ESC, to qualify for the award. Earlier this year, the Institute said vehicles would need to receive its highest score in its roof strength evaluation to qualify the safety pick designation.
"With the addition of our roof strength evaluation, our crash test results now cover all four of the most common kinds of crashes," said Institute president Adrian Lund. "Consumers can use this list to zero in on the vehicles that are on the top rung for safety."
The Institute awarded its top prize to 94 vehicles in 2009 and attributed the decline in awards this year to the roof strength requirement. The Honda Accord and the Ford Fusion both dropped off the list because 2010 versions didn't earn high enough scores on the roof test.
The Toyota Camry would have made the list, the Institute said, if it had received the highest rating in rear crash protection. The Institute said the Camry's seats and head restraints were rated marginal for protection against whiplash injuries.
Ford did not need a federal bailout like GM and Chrysler did and it has been posting considerably better financial results.
Now comes word that the 2010 Ford Fusion was named Motor Trend magazine’s car of the year, beating out the Toyota Prius, BMW 7-Series, Chevrolet Camaro and others in the closely watched competition, Associated Press reports.
It was yet another accolade for Ford Motor Co.’s midsize sedan, which got high reliability scores in the most recent rankings from Consumer Reports and was the top-selling car made by a Detroit automaker through October.
What’s more, Ford, Subaru and Volkswagen lead the insurance industry’s annual list of the safest new vehicles, according to a closely watched assessment used by car companies to lure safety-conscious consumers to showrooms, AP reports.
Why has Ford been doing so well? Leadership? Innovation? Marketing? Execution?
Does its recent string of successes influence your buying decision?
OMAHA, Neb. — Car dealers must inspect used vehicles for safety defects and either make repairs or warn potential buyers before they are resold, the Nebraska Supreme Court ruled Friday.
The high court said that an "as is" sticker does not absolve dealers of their duty to look out for public safety.
"There is a relatively great magnitude of risk of injury in the circumstance where an unknowing buyer drives off the dealer's lot in a used vehicle which has a patent safety defect, such as defective brakes or steering," the court said. "The dealer is better equipped than the purchaser to perceive such a defect before it causes harm."
The decision is similar to those handed down by courts in other state, including Kentucky, Minnesota, Montana and Ohio, that recognize dealers' obligation to ensure the safety of used vehicles.
With the ruling, the high court overturned the dismissal of a 2006 lawsuit filed in Douglas County District Court by an Omaha couple who alleged that Woodhouse Ford Inc. was liable for injuries caused when their van shifted out of park.
The high court said that while Woodhouse sold the van "as is" and disclaimed all warranties, the Blair dealership may have been negligent for not inspecting the vehicle for safety defects. It ordered the case back to the lower court for trial.
Melany Lanagan, the attorney for Elizabeth and Mark Wilke, said the court's decision was "a very positive thing for consumers who are going to be buying used cars. It's all about safety."
She said most consumers believe used cars bought at Nebraska dealerships were being inspected before being sold, but that isn't necessarily true.
Woodhouse has said in court documents that it has such a high volume of used vehicles that it is unable to inspect all of them.
The dealership's attorney could not immediately be reached Friday.
The Wilkes sued Woodhouse for negligence and breach of implied warranty of merchantability over the "as is" sale of a 2002 Ford Econoline on Sept. 18, 2004. They said the dealership should have known the vehicle was defective at the time of the sale.
The couple said in court documents that Mark Wilke drove the van off the lot, parked it at a friend's house and removed the keys. The couple's then-3-year-old daughter pulled the gearshift out of park and the vehicle rolled over Elizabeth Wilke's right foot and thigh, causing her to fall and hit her head.
A federal regulation requires vehicles with automatic transmissions be made so that the key must be in the ignition to shift out of park. An automotive engineering consultant said in court documents that there were problems with the van's brake shift interlock system, transmission shift cable and key shift interlock that allowed the Wilkes' van to shift out of park.
Woodhouse has said in court documents that Elizabeth Wilke's injures could have been prevented if Mark Wilke had used the emergency brake and if the girl hadn't pulled the gearshift.
The high court ruled that the Wilkes could not sue for breach of warranty under the Uniform Commercial Code because the van was sold "as is." But it said the couple could sue for negligence because car dealers have "a duty to conduct a reasonable inspection of the vehicle prior to sale in order to determine whether there are any patent defects existing at the time of sale which would make the vehicle unsafe for ordinary operation."
Woodhouse has said in court documents that it did not inspect the van before it was sold. But the high court said it would be up to a jury to determine whether the van's safety defects would have been found during an inspection.
It might be a good time to consider trading in that late-model used car or truck and pick up a new one, according to two national automobile associations.
The auto experts base their assumption on a variety of factors:
• The Cash for Clunkers program depleted the used-car inventory, because the cars that were traded in were crushed, not sold again.
• People are holding onto their used cars for an average of a year longer than they did five years ago.
• Rental car companies are holding onto vehicles longer.
• And new cars are in short supply during the economic recession.
Local dealers have mixed views on the subject.
They all agree Cash for Clunkers was a success, but they also say the event pushed many buyers into the market early. Instead of waiting several more months to buy, they bought early, getting rid of their old cars and buying something new.
Other dealers say the program pushed many lifelong used-car buyers, who would have driven their rides until they could be driven no further, into the new car market for the first time.
Independent dealers say they are paying higher prices at used-car auctions. New dealers say their inventory of used cars is holding strong. Some dealers have refilled their lots with new vehicles, while other dealerships are waiting for factories to increase production. And a seller of lower-end used cars said he can’t keep up with demand.
“A dealer with normal demand, stationed in a normal metro area, should be able to give you normal market value (for your used car), because he is in need,” said Juan Flores, director of valuation at Kelly Blue Book. “Right now, as a customer, you might have a leg to stand on. You might be able to negotiate.”
Bottom line, said Paul Taylor, chief economist for the National Automobile Dealers Association: “There are currently about 5 million fewer used cars (coming) into dealerships on a yearly basis.”
The confluence of events has driven up the price of late-model used cars in each of the first eight months of the year, Taylor said in an e-mail to The Daily Sentinel.
Kenneth Simon, general sales manager for Western Slope Ford, Lincoln, Mercury, Toyota, 2264 U.S. Highway 6&50, said during the height of Cash for Clunkers there was a shortage of late-model used cars, but the market has corrected itself. And the manufacturers who supply new vehicles for his dealership have been able to maintain his inventory, he said.
The story is different at Grand Junction Chrysler Jeep Dodge, 2578 U.S. Highway 6&50. Chrysler shut down its factories for two months and is taking another month and a half to ramp up production, said Mike Edwards, general manager.
Edwards said the dealership would average 35 to 45 sales a month, but with vehicles going out the door and no new stock coming in, he’s down to 32 vehicles. Edwards said he expects 132 new vehicles during the next two months. When they arrive, his lot will be fuller than it has been in months.
Edwards said late-model used cars are holding their value, but Ron Bubar, owner of Grand Junction Subaru, 2496 U.S. Highway 6&50, said those used-car prices are now either leveling off or declining, compared with two months ago after Cash for Clunkers ended. Incidentally, Bubar said, during Cash for Clunkers the dealership sold 42 vehicles. It was the best month it ever had, he said.
Bubar said he is not overpaying for used trades at auctions because he doesn’t want to be stuck with cars sitting on the lot for months that he cannot sell.
“We want inventory to turn quick,” he said.
On the new-car side there are some shortages. Bubar said he has been in communication with his district manager four times this week, pressuring him for more inventory because of consumer demand. Subaru has increased its light-vehicle sales in the past 10 months by 13 percent, according to a report released Nov. 3 by Automotive News.
“It’s a good problem to have,” Bubar said.
The dealers that are suffering from increased used-car prices are the smaller independent used-car dealers, said Mike Alano, sales manager for Modern Classic Motors, 975 Independent Ave.
Alano said he is having to pay more for used vehicles at auction because dealerships that were dropped by downsizing manufacturers are now restocking depleted inventories through those same used-car auctions.
“Now I’ve got to compete with them,” Alano said. “Getting a nice used car right now is very difficult.”
Looking for a new used car for her son, Denise Huffines, from the Roaring Fork Valley, is learning the problem is not finding the car, but finding the right car at the right price.
“I never buy new,” she said while looking at a used Toyota in the lot at Grand Junction Subaru. For the $6,000 she is willing to spend on a used car, she is finding that a decade-old ride is going to cost in the neighborhood of $6,000, which she said was about right.
“I think they are pretty reasonably priced,” she said.
Meanwhile, Kay and Pier Maraschin, from Grand Junction, were shopping for a new Toyota Prius hybrid at Western Slope Toyota. They already own a 2006 model of the same car but want the latest features.
Kay said she won’t be trading in the Prius but is working hard on her husband to part with an old pickup. A trade-in could offset their biggest gripe about the car: It costs $4,000 more than they want to spend.
Until drivers decide they want new cars, those vehicles will sit on dealer lots.
Bob Belcastro, manager of Belcastro Motors, 841 N. First St., knows all about cars sitting for too long on his sales lot. He said sales are way down, and if no one is buying, no dealer wants to load up on used cars.
“No sense having 2 1/2 million (cars) sitting here if you only talk to 10 customers a month,” he said. “We’re not moving that much product. I don’t know who is.”
Jim Wilcox, owner of A Pawn Shop, 353 Pitkin Ave., said he is. His vehicles are, for the most part, around a decade old and sell for a few thousand dollars.
Compared to last year, Wilcox said he has twice as many people bringing in vehicles for loans, and half as many are returning to pay off their loan. Also, compared to a year ago, he is not shopping for inventory. Instead, people are bringing in more vehicles than he can sell.
“I am turning down cars that I normally would buy, and I’m selling the hell out of them, and it really surprises me,” he said. “I’m giving less for cars now and selling for less ... and doubling sales.”
The Japanese and German car manufacturers have come out of the latest survey very well, with the Honda Civic coming out with the top honour of being the most reliable car on the market today. There was even more reason for the Japanese car giant to celebrate with two more of their cars featuring heavily inside the top 5 cars with the Honda Jazz in third place and the Honda Accord scooping fourth place.
Maintaining a sense of European pride within the top ten was BMW who managed to take the second and fifth placing with their 3 and 5 series cars respectively. The BMW brand also managed to score another success with the subsidiary brand Mini which managed to come in eighth place.
The remaining places in the survey were filled by the Audi A4, the Mercedes C Class, Toyota Avensis and Volkswagen Golf. The two brands BMW and Honda were tied on reliability statistics but it was the German manufacturer who managed to walk away with the overall prize having taken more votes overall.
The auto experts base their assumption on a variety of factors:
• The Cash for Clunkers program depleted the used-car inventory, because the cars that were traded in were crushed, not sold again.
• People are holding onto their used cars for an average of a year longer than they did five years ago.
• Rental car companies are holding onto vehicles longer.
• And new cars are in short supply during the economic recession.
Local dealers have mixed views on the subject.
They all agree Cash for Clunkers was a success, but they also say the event pushed many buyers into the market early. Instead of waiting several more months to buy, they bought early, getting rid of their old cars and buying something new.
Other dealers say the program pushed many lifelong used-car buyers, who would have driven their rides until they could be driven no further, into the new car market for the first time.
Independent dealers say they are paying higher prices at used-car auctions. New dealers say their inventory of used cars is holding strong. Some dealers have refilled their lots with new vehicles, while other dealerships are waiting for factories to increase production. And a seller of lower-end used cars said he can’t keep up with demand.
“A dealer with normal demand, stationed in a normal metro area, should be able to give you normal market value (for your used car), because he is in need,” said Juan Flores, director of valuation at Kelly Blue Book. “Right now, as a customer, you might have a leg to stand on. You might be able to negotiate.”
Bottom line, said Paul Taylor, chief economist for the National Automobile Dealers Association: “There are currently about 5 million fewer used cars (coming) into dealerships on a yearly basis.”
The confluence of events has driven up the price of late-model used cars in each of the first eight months of the year, Taylor said in an e-mail to The Daily Sentinel.
Kenneth Simon, general sales manager for Western Slope Ford, Lincoln, Mercury, Toyota, 2264 U.S. Highway 6&50, said during the height of Cash for Clunkers there was a shortage of late-model used cars, but the market has corrected itself. And the manufacturers who supply new vehicles for his dealership have been able to maintain his inventory, he said.
The story is different at Grand Junction Chrysler Jeep Dodge, 2578 U.S. Highway 6&50. Chrysler shut down its factories for two months and is taking another month and a half to ramp up production, said Mike Edwards, general manager.
Edwards said the dealership would average 35 to 45 sales a month, but with vehicles going out the door and no new stock coming in, he’s down to 32 vehicles. Edwards said he expects 132 new vehicles during the next two months. When they arrive, his lot will be fuller than it has been in months.
Edwards said late-model used cars are holding their value, but Ron Bubar, owner of Grand Junction Subaru, 2496 U.S. Highway 6&50, said those used-car prices are now either leveling off or declining, compared with two months ago after Cash for Clunkers ended. Incidentally, Bubar said, during Cash for Clunkers the dealership sold 42 vehicles. It was the best month it ever had, he said.
Bubar said he is not paying a lot for used trades because he doesn’t want to be stuck with cars sitting on the lot for months that he cannot sell.
“We want inventory to turn quick,” he said.
On the new-car side there are some shortages. Bubar said he has been in communication with his district manager four times this week, pressuring him for more inventory because of consumer demand. Subaru has increased its light-vehicle sales in the past 10 months by 13 percent, according to a report released Nov. 3 by Automotive News.
“It’s a good problem to have,” Bubar said.
The dealers that are suffering from increased used-car prices are the smaller independent used-car dealers, said Mike Alano, sales manager for Modern Classic Motors, 975 Independent Ave.
Alano said he is having to pay more for used vehicles at auction because dealerships that were dropped by downsizing manufacturers are now restocking depleted inventories through those same used-car auctions.
“Now I’ve got to compete with them,” Alano said. “Getting a nice used car right now is very difficult.”
Looking for a new used car for her son, Denise Huffines, from the Roaring Fork Valley, is learning the problem is not finding the car, but finding the right car at the right price.
“I never buy new,” she said while looking at a used Toyota in the lot at Grand Junction Subaru. For the $6,000 she is willing to spend on a used car, she is finding that a decade-old ride is going to cost in the neighborhood of $6,000, which she said was about right.
“I think they are pretty reasonably priced,” she said.
Meanwhile, Kay and Pier Maraschin, from Grand Junction, were shopping for a new Toyota Prius hybrid at Western Slope Toyota. They already own a 2006 model of the same car but want the latest features.
Kay said she won’t be trading in the Prius but is working hard on her husband to part with an old pickup. A trade-in could offset their biggest gripe about the car: It costs $4,000 more than they want to spend.
Until drivers decide they want new cars, those vehicles will sit on dealer lots.
Bob Belcastro, manager of Belcastro Motors, 841 N. First St., knows all about cars sitting for too long on his sales lot. He said sales are way down, and if no one is buying, no dealer wants to load up on used cars.
“No sense having 2 1/2 million (cars) sitting here if you only talk to 10 customers a month,” he said. “We’re not moving that much product. I don’t know who is.”
Jim Wilcox, owner of A Pawn Shop, 353 Pitkin Ave., said he is. His vehicles are, for the most part, around a decade old and sell for a few thousand dollars.
Compared to last year, Wilcox said he has twice as many people bringing in vehicles for loans, and half as many are returning to pay off their loan. Also, compared to a year ago, he is not shopping for inventory. Instead, people are bringing in more vehicles than he can sell.
“I am turning down cars that I normally would buy, and I’m selling the hell out of them, and it really surprises me,” he said. “I’m giving less for cars now and selling for less ... and doubling sales.”
What do American used cars, government incentives, and China have in common? They each get credit for a rebound in Japanese auto makers' fortunes.
But only one of those -- China's hunger for cars -- is something the companies can count on to continue.
Expected to post a second-quarter loss Thursday, Toyota Motor instead reported a $242 million profit. With substantial cost cuts ongoing, it joined rivals Nissan Motor and Honda Motor in upgrading earnings forecasts for the year ending in March.
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The rebounding value of used cars in the U.S. played a big role in this. Lower reserves for cars on lease and loan-losses contributed $810 million in operating profit at Toyota, and $817 million at Nissan. Both items were financial drains last year.
No doubt, the U.S. cash-for-clunkers program helped, as did similar incentives in Japan. Toyota topped the sales list under the U.S. program.
Neither of these is sustainable -- the clunker program, of course, has already ended. Sales growth in China, on the other hand, will continue.
Nissan's been a real beneficiary lately thanks to its small cars and a distribution network that reaches further inland than its rivals. Its sales in China are up 19.3% in the six months through September, but dropped in every other market. By the March year-end, China will have displaced Japan as Nissan's No. 2 market by volume.
Admittedly, a key driver of sales growth has been a tax cut that Beijing may or may not extend into next year. Some consumers, fearing its end, may have brought forward car purchases, which means sales will undoubtedly slow from their current heady pace.
But an improving economy, demand from second-and third-tier cities and increasing use of financing will keep growth going. Sales of Japanese cars in China, J.D. Power & Associates projects, will grow at 6% to 9% per year in the coming few years -- faster than the overall market.
The companies don't yet break out China profits, which pass through joint ventures. But the "other" category into which Nissan lumps Chinese earnings generated $314 million in operating profit in the first half of the year -- almost a third of the total.
There are risks in heavily depending on a single market for sales growth. With China, though, the greater folly would be not being there at all.
Independent dealers say the prices they pay for used cars are rising. And customers are facing diminishing selection and higher sticker prices.
When sales of new cars were up, the dealers say, new-car dealerships had stock they were willing to sell at a price the used-car lots could afford. Now the new-car dealers are holding on to more of the trade-ins they receive because their sales volume is down.
In Terrebonne Parish, tax records show new-car sales were down by 26 percent in September when compared with the same month in 2008. Lafourche does not break down sales tax by type.
Melissa Wyman, owner of Melissa's Auto Sales on
“We used to be able to buy them. There were a lot of them out there to go get,” she said, referring to used cars meeting the grade she is comfortable offering to her customers. “I've been in business 20 years and never seen it like this.”
Wyman has had as many as 35 vehicles for sale on her lot at one time. Right now she's down to eight.
Kevin Rembert, a former
“There will be a smaller selection for you to pick from,” he said. “You may not get exactly what you want sometimes and you may end up having to pay a little more for them.”
Rembert described the issue as “a little bit of a shortage” largely caused by people not trading in as many cars.
“Consequently there are less new cars on the market. New car sales are down, so since they are selling less new cars they are trading less … It's a snowball effect,” Rembert said.
Cars are also lasting longer, Rembert said, and people are holding onto them longer.
At N&N Auto Sales on
“We're getting them, but it's few and far between,” he said of the inventory that helps him make a living.
The federal government's “Cash-for-Clunkers” program made a dent in the market too, some dealers said. Cars that were traded in under the program can't legally be resold. And one person's “clunker” could be another's dream car or truck. Arceneaux said big Ford pickups, for example, are all the rage among buyers locally and he's having trouble keeping them in stock.
New car dealers who also have used cars on their lots reported fewer difficulties than those whose stock is entirely used.
Used dealers did express hope that the shortage will be temporary, and improve as the economy recovers.
“I think after the first of the year it might get a little bit better,” Melissa Wyman said.
Ford Motor Chief Executive Alan Mulally loves to wax lyrical about the car company's slate of new trucks and cars. But he can thank sales of used vehicles for playing a big part in Ford's surprise third-quarter profit.
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Out of pretax profit of $1.1 billion, excluding special items, $661 million came from financial services. Many analysts expected a profit of perhaps $100 million to $200 million, or even a loss, from Ford Motor Credit.
The big swing factor was a sharp increase in the value of used vehicles sold at auction. The Manheim Used Vehicle Value Index has risen for nine consecutive months since December 2008's low point, hitting an all-time peak in September. Higher used-car prices reduce losses on vehicles that come back to Ford after their leases expire, which it then sells. Pricing of used trucks and sport utility vehicles has risen particularly strongly.
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Ford monster truck crushing clunkers at the Sawgrass Ford dealership in Sunrise, Fla.
Is it sustainable? Manheim, at least, suspects used-vehicle prices are reaching a plateau, with prices weakening noticeably in the last week of September. The dislocation in Detroit this year and efforts by the likes of Ford to sharply reduce bloated inventories have helped curb supply. That discipline will need to be maintained.
On the new-vehicle front, it remains to be seen how well sales hold up as government "clunker" programs end. Ford does boast one of the strongest new-product pipelines in the industry. But while Ford raised its guidance for 2011, it will be next quarter before it issues an updated outlook for 2010. And its decision to raise another $3 billion from investors speaks to the need to fix its balance sheet. Like any other auto maker, it needs a consumer-led recovery that isn't dependent on government steroids to really come into its own.
A third-quarter profit at Ford (F) gave a big push to that Ford bandwagon I wrote about here recently, even though Ford itself sounded some cautionary notes in its third-quarter presentation.
For instance, repossessions as a percentage of Ford Credit’s total portfolio remain high, relatively speaking, at more than 3 percent. Ford Credit’s average loss per repossession is down, but that’s probably a function of improving used-car values, rather than a positive reflection on consumers. Improved used-car values mean higher values for repossessed cars and trucks. Ford Credit auctions them off to dealers.
At the same time, delinquencies over 60 days old are trending down at Ford Credit. That could mean consumers are having an easier time keeping up with payments, but it could also reflect higher standards at Ford Credit for who gets a loan in the first place.
Meanwhile, Standard & Poor’s upgraded Ford to “Buy” from “Hold” yesterday on the strength of a nearly $1 billion quarterly profit for Ford, versus the rating agency’s earlier prediction of a loss, plus Ford’s forecast that it will achieve profitability for a full year sooner than expected, in 2011.
Interestingly, even though Ford upgraded its 2011 forecast yesterday, the company continues to soft-pedal the short-term outlook for the rest of 2009 and 2010.
Media coverage of Ford’s results emphasized the “surprise” aspect of the net profit, although there had been some hints beforehand that Ford had good news in store.
Fox Business News, for instance, did a mostly admiring interview with Ford President and CEO Alan Mulally. Interviewer Liz Claman did get in a couple of pointed questions, although she kicked off the interview by saying, “Talk about how you did it, Mr. Mulally!” She later added, “They’re never going to let you retire, Alan.”
The pointed questions were whether Ford could sustain a profit without the help of Cash for Clunkers, which helped third-quarter results. Mulally hedged and reiterated Ford’s earlier guidance that it will achieve positive cash flow in the fourth quarter. That’s a good thing, but short of a promise that Ford will achieve a fourth-quarter net profit.
Claman also asked what Mulally planned to do, to address Ford’s “angry” UAW workers in the United States, who rejected Ford’s latest proposed concessions. Separately, the same question came up earlier in the day, in Ford’s conference call with reporters and analysts.
Characteristically, Mulally ducked the question whether the union workers are angry and resorted to a Mom-and-apple-pie statement about “providing opportunities” and “competitiveness.” That may be bland, but Mulally is smart to avoid providing the UAW with locker-room quotations that can be used against him. The Ford bandwagon is rolling anyway, without a lot of grandstanding.
