Financing Your New Car in a Difficult Economy

Are car loans hard to get because the economy is bad? 

Or is the economy bad because car loans are hard to get? 

Even top economists can’t agree on the answer, but the fact is a lot of people are shying away from buying a car these days because they think car loans are difficult to get and expensive to pay for. But because the auto market has taken a huge dive in the last 18 months, auto manufacturers are more eager than ever to sell vehicles, and that means good deals abound. So where do you find a loan?

Comparison Shop Till You Drop
Luckily, our economic system has given us a way to take care of ourselves when it comes to auto financing issues, even in these hard times. The key procedure: Shop around. Comparison shopping is the best way to determine whether securing your financing through the selling dealer is the wisest choice.

“Our customers frequently finance through the dealership and receive excellent finance rates,” said the executive of a company that helps shoppers with the car-buying process. “Consumers can easily take control of the financing process by researching finance rates and shopping around. By exploring loans available through outside institutions, a consumer can use those financing rates to negotiate a lower rate from a dealership.”

Deal or No Dealer?
It’s no secret that dealers would rather car buyers purchase their financing through them. It’s an honest profit opportunity: When consumers finance through dealerships,  the dealers makes money on the financing. So, when consumers are ready to buy and tell the dealer that they have been approved for a certain percentage rate, like 4.9 percent, the dealer might offer 3.9 percent to get the customer to finance through the dealership.

Many consumers opt for dealer financing because it’s convenient, but the bigger reasons right now are the scores of hot manufacturer-sponsored financing deals. For example, the manufacturer might be offering a 0 percent rate just to drum up business.

As a car buyer, you are not obligated to obtain your financing through the dealership, but there’s no reason in the world not to find out what they have to offer. If you come to the dealer armed with knowledge of current interest rates and terms, which are easy to come by in this Internet age, you can quickly figure out if the dealer's financing offer is right for you. 

The important lesson here: Do your homework on financing before you walk into a dealership to buy a car. Those minutes you spend researching finance costs could save you thousands of dollars. That’s likely more than you’ll save by negotiating the price of the car.

Making a Memorable Spot

Three guys are driving like hell in a pickup truck, and that pickup truck has an unusual fourth passenger: a killer whale.

The driver sweats behind the wheel as his front-seat passenger ministers to the whale, which is obviously not all that comfortable out of water. When the pickup reaches a pier stretching into the Pacific Ocean, the driver gases it, and as the edge of the pier nears, he stands on the brakes: The tires catch, and the truck does a long arc that -- beautifully -- deposits the whale into the water.

The whale leaps for joy, and the driver remarks it was one heck of a bachelor party.

A Whale and a Bachelor Party
What was the killer whale doing at the bachelor party? No, not the backstroke for sure, but we don’t know exactly what else. One thing we do know, though, is that the whale spot and the other Bridgestone spot, which aired later in the Super Bowl, were memorable, well-produced and part of a carefully conceived campaign. A look behind the scenes at that campaign gives us insight on how savvy marketers spend their ad money these days. We recently got the chance to talk with Bridgestone America’s chief marketing executive, Phil Pasci, who made it clear that advertising on the Super Bowl is more than ponying up a few million dollars.

“What we’re looking for is a way to increase our brand awareness and to get people to understand that Bridgestone is a tire manufacturer that makes unique tires,” Pasci told us. “Football is really in everybody’s DNA. With the NFL, football isn’t just a fall sport; it actually starts in the early spring with the new prospects going to the combine, then you go for the draft, go into a training camp, and finally, the season begins. So football is essentially year-round.”

Two Ads and a Half-time Show
Because of the prevalence of football, three years ago Bridgestone decided to increase its profile by running ads in the Super Bowl and sponsoring the Super Bowl half-time show. As Pasci told us, most people watch the Super Bowl for three reasons: Commercials are No. 1, half-time entertainment is No. 2, and then of course, there’s the actual football game. Running ads and sponsoring the high-profile half-time show is a multimillion dollar expense, so Bridgestone approaches it methodically.

“They certainly are big decisions, and we have a very good agency that we work with in The Richards Group, in Dallas,” says Pasci. “They give us a lot of insight, but we have a very core management team at Bridgestone that works on the Super Bowl programming and advertising. I believe in the past three years we have refined the process.”

Staying Ahead of the Game
For Bridgestone, the countdown to yesterday’s Super Bowl began in July. Of course, its ad agency began refining ad concepts well before that. And in 2009, more than 100 concepts were created before the agency narrowed it down to 12 for presentation to Bridgestone execs. Bridgestone then winnowed that list down to three. When the lengthy TV shoots were over, The Richards Group delivered exactly on what they had promised, says Pasci. But being memorable isn’t enough for Bridgestone.

“That’s the other key point,” says Pasci. “We’re a tire company -- we're not a soft goods company, we're not a soft drink company. The consumer product we have is not really high-interest category. In the Super Bowl, we want to get our message across that Bridgestone tires are different. We want to showcase the performance of our tires in any spot, so a pretty big challenge for the agency is to create something that hasn't been done before that’s different, that's funny, and to showcase the performance of the tires.”

Proof in the Pudding?
Actually, no. The proof is in the day-after audience reaction, which is already running very heavily in favor of the killer whale spot as well as the futuristic “Your tires or Your Life” spot (which plays off an old joke in a very 22nd-century way). Seeing both and getting an insight into the behind-the-scenes ruminations that went into them leaves no doubt that Bridgestone is getting great bang for its buck, even on a challenging environment like the Super Bowl.

Volvo Goes Electric

Because Volvo is so imbued with a green, people-friendly ethic, it is hard for some to believe that the brand doesn’t offer an electric car. Giving consumers the choice of an emissions-free vehicle seems utterly in keeping with what most people think about Volvo. Happily, the lack of a Volvo-built battery-electric is about to change. 

At last fall’s Frankfurt motor show, Volvo showed off a concept version of what will be its first battery electric car, and then it added some new thinking to the concept before unveiling it again at the recent Detroit motor show. Enhancing a previously introduced concept vehicle and showing it again at another major motor show is not a typical scenario, but Volvo is not a typical car company, so it is not surprising that the Swedish company has continued to refine the electric vehicle concept with the intent that it will become a production vehicle available from your local showroom.

The latest (Detroit show) iteration of the simply named Volvo C30 BEV -- BEV for battery electric vehicle -- offers significant changes over the Frankfurt show car. And the changes to both the interior and the drivetrain indicate how serious Volvo is about making a production version of the vehicle. The most visible new feature on the upgraded C30 BEV is the innovative, electric-car-only instrument panel that puts EV-specific graphics front and center and reminds us again that EVs and hybrids now feature the most graphically interesting instrument panels in the industry.

The other major change is in the battery pack design. Where it was one unit in the Frankfurt version of the car, the lithium-ion battery pack has now been divided into two modules installed carefully into what is typically the driveshaft tunnel and the spot formerly occupied by the fuel tank. This is designed to improve passenger safety, overall vehicle balance and packaging efficiency. What it does not do is increase the car’s expected range. That remains at a predicted 94 miles -- not very far by U.S. standards but perhaps plenty far enough for an urban-oriented commuter car. 

The 82-kilowatt, 111-horsepower electric motor is expected to accelerate the chic four-seater from 0 to 60 mph in about 10.5 seconds, making it one of the less sprightly EVs planned for future introduction. Perhaps a more important time is the eight hours it will take to recharge the battery pack fully using a 230-volt/16-amp circuit -- similar to one that might be powering your electric dryer should you not be using a much cheaper-to-operate gas dryer.

Top speed for the BEV is expected to be right around 80 mph, but Volvo insists that the C30 BEV will offer the fun-to-drive personality of the gasoline-powered version of the car. Next step for the BEV is a series of test vehicles that will go into real-world usage for a period of two years. If all that goes well, we expect a somewhat revised version of the C30 BEV -- perhaps with freshened exterior styling -- to arrive in Volvo showrooms in the U.S. and Europe in 2013.   

Will 2010 be a Better Year to Buy a Car?

One thing auto industry veterans will tell you is they never saw a year like 2009 … and they never want to see another one like it. The year included the seemingly unthinkable: bankruptcy for General Motors. And as an added fillip, Chrysler went bankrupt too and was rescued by the unlikely combination of the Obama administration and Fiat, the Italian carmaker that was so disrespected by American car buyers that it fled the U.S. market decades ago.

The Cold, Hard Numbers
In the process, thousands of car dealers were jettisoned by GM and Chrysler, and the dreadful economy doomed hundreds more. Industry sales in 2009 fell 21 percent, to 10.4 million vehicles. That is the smallest number since 1982 -- and a huge drop from the 13.2 million vehicle sales in the United States in 2008. The 21 percent drop is tremendous in anybody’s book, but that number vastly understates the extent of the decline, because the last four months of 2008 were also disastrous for the auto industry as the recession crashed over it. For the first seven years of the decade, the sales level was nearly 17 million per year, so a 10.4-million-unit sales year amounted to the quick onset of a depression in auto sales.

Aftermath and the Big 3
The carnage had significant fallout. Due largely to consumer concerns over their bankruptcy and to consumer backlash over unpopular government support of the two fallen U.S. companies, General Motors and Chrysler each lost significant amounts of market share in 2008. In the process of conceiving a post-bankruptcy recovery plan, GM decided to ditch the Saturn, Saab, Pontiac and HUMMER brands, sending sales of those brands reeling. Chrysler didn’t drop any brands -- having ditched Plymouth prior to falling on hard times in 2008 -- but the company hemorrhaged market share nonetheless. For the year 2009, GM’s U.S. market share dropped to 19.9 percent from 22.3 percent, while Ford Motor Co., the only American company that didn’t accept government bailout money, took up most of the slack. Its share of the U.S. market rose from 15 percent in 2008 to 16.1 percent in 2009. 

All of this has resulted in a significant alteration of the top companies in the U.S. market. Despite its historic drop to less than 20 percent market share, General Motors still retained its title as 2009 U.S. sales leader, but Toyota Motor Sales USA, which enjoyed relative success in ’09 despite being dogged by some safety-related issues, moved to within striking distance of the top spot, with a 17 percent market share. Ford, America’s traditional No. 2 automaker, finished 2009 in the No. 3 position, and American Honda blew past Chrysler to capture the fourth spot. Chrysler languished into the fifth position. So much for the “American Big 3,” the traditional industry parlance for GM, Ford and Chrysler.

Translation, Please!
What does all this mean to you, the prospective car buyer? Well, if you waited to buy a new car because the deals weren’t good enough, they will probably never be better than in the first quarter of this year. Consumer credit is loosening somewhat, interest rates are low and manufacturers and dealers are hungry to sell cars. All this amounts to a buyers’ market with significant bargains at most every turn.

But will the economy pick up enough to ease your mind about buying now? That’s where some questions remain. Unemployment is still high, and some shrinkage is still expected in the retail and manufacturing industries, so the first half of 2010 is expected to be a continuation of the tough times we endured in 2009. This might give you pause as a buyer, but it also might present an opportunity to get a better deal than you otherwise might if you act while others are hesitating. Of this there is no doubt: 2010 will be a pivotal year for the American auto industry.

Getting a Better Deal on Your Insurance

The dawning of a new year prompts many people to take a fresh look at their annual budget, and what they’ll find is that auto insurance costs are substantial.  Even after that revelation many people just grin and bear it, but a larger number of people are now spending more time searching for better insurance rates -- with good results. One very useful tool is the Internet, which makes discovering better rates much easier.

Yet even with a computer at their fingertips, most people don’t spend half as much time researching auto insurance companies as they do researching the cars they will purchase. This means a lot of us are paying far too much for our auto insurance.

“People tend to stay with the same company for years without researching what other deals are out there,” said Ken Hanson of Insurance Quotes. “Sometimes changing a company every couple of years could result in better savings. If you're sick of paying too much for your current insurance company, why not spend an hour or so finding something better?”

If you spend that time it might pay big dividends.  You might find that you can save hundreds of dollars per year with no reduction in coverage or service.  The people at InsuranceQuotes offer the following advice to save money on your auto insurance going into the new year:

1. Revisit your driving record.
You should make sure your driving record is clean and up to date. Become familiar with what's on your record and be able to explain certain situations if need be. An ounce of explanation might save you a pound of money.

2. Get discounts.
Some occupations (hearse driver, for example) are low-risk and some professional organizations might qualify you for discounts.  If you have a family, look at the availability of combined coverage for multiple drivers in the household.  Auto clubs such as AAA and other affinity groups and organizations can help get you discounts as well. You should check with each insurance company to see what it offers for belonging to groups and organizations.

3. Know your options.
The Internet is a great way to research different companies to compare rates and see your options easily and quickly. Remember annual and monthly rates will vary, and as you are doing your comparisons make sure to keep coverage limits the same so that you can make the proper judgments.

4. Count complaints.
As you narrow your choices, you should check each insurance company's consumer complaint ratio by logging onto your state’s department of insurance Web site. This information is public information, and it can be invaluable in making a decision of an insurance carrier.

5. Choose wisely.
Choosing a higher deductible is another great way to save money in the long run. A high deductible means that additional money will come from your pocket with each claim, but it often is more than worth it based on the savings you will realize in the annual rate.  You'll pay all the minor bumps and dings, but the insurance company will cover the big stuff that could have a more catastrophic effect on your finances.

6. Weigh your wheels … and your wallet.
Lastly, think about the car you drive. More expensive high-performance cars generally command the highest premiums, so decide if you need the supposed prestige such a car will bring you. Owning a lower-profile car will keep money in your bank account, and that’s the kind of high performance many of us seek these days.