Making a Problem Vehicle Disappear

Let’s say for the sake of argument that you have a big, gas-guzzling, late-model SUV sitting in your driveway. Then, let’s say that the company where you work has cut back your hours by 25 percent and that your spouse has job worries, too. As the final straw, let’s say that your still-shiny SUV is worth several thousand dollars less than you owe on the auto loan you pay every month. With all this rolling around in your mind, is it any wonder that you might say to yourself, “Hey, I’d be better off if somebody stole this thing.” Of course, you can’t send for a thief, but many cash-strapped consumers are essentially doing it themselves by ditching their car in locales where they might be stolen, damaged or just “disappear.” Some are even trying to seal the deal by setting fire to their former pride and joy. 

The practice has become so widespread that many states are on the lookout for this criminal activity. For example, the Alabama Department of Revenue just launched its Abandoned Vehicle Information Service, which allows subscribers to locate Alabama title and registration information on abandoned vehicles that are becoming ever more prevalent. The information can be used to contact the title holder of the vehicle to inform them of their automobile’s location. (It should be noted here that with a financed vehicle, the titleholder is not the driver but instead the financial institution that holds “the paper” on the loan.) The new database also includes current and pending lien holder information as well as any pending title applications.

“This new service will save time and money,” said Lynn Hurst, the president of the Alabama Towing and Recovery Association and owner of Hurst Towing and Recovery in Birmingham, Ala. “A traditional abandoned vehicle request could take 14 to 20 days, where the new online application produces instant results, allowing users to get the proper information to the public faster.”

The abandoned vehicle trend is, of course, not limited to Alabama. Across the country, with the current economic fortunes tumbling, consumers are resorting to desperate measures in an attempt to find some economic peace of mind. What they might find instead is a jail sentence. Many of these incidents amount to insurance fraud, and both law enforcement and private insurance investigators are quick to pounce.

A recent article by James Quiggle, director of communications for the Coalition Against Insurance Fraud, noted that “vehicle giveups” -- as these incidents are termed in the insurance industry -- are growing across the country, generally in response to bad times. The efforts to ditch their unwanted cars or trucks are as varied as murder plots in which one spouse attempts to exchange the life of the other for cash and/or valuable prizes. For instance, as Hurricane Gustav roared in on Mississippi in late August of last year, dozens of vehicles were “suspiciously abandoned” at beaches, piers and other low-lying areas close to its path. In Fresno County, Calif., police uncovered a ring that allegedly stole and torched vehicles for hire. And a vehicle was recently found at the bottom of Lake Erie with a rock tied to its accelerator. Hmmmm.

The list goes on and on, but the takeaway on “giveups” should be that it is illegal, your insurance company will immediately become suspicious, and the price you pay for committing this crime will be far higher than the amount of money you have left on a loan. Here’s some simple but good advice: If you can’t make your car payment, go to your lender and seek relief. There is a good chance they’d prefer that you keep your car on an adjusted payment schedule rather than they get it back. Even if you take a financial bath, it’s better than going to the big house, where you might be afraid to pick up the soap.

Can Bankruptcy Save GM, Chrysler?

As a parting shot, the Bush administration tossed the Obama administration a hot potato; namely, what to do about the American-based car manufacturers who are teetering on the brink. The new President has found that an entire bevy of “experts” aren’t shy about making recommendations, and many of those recommendations have been to require General Motors Corp. and Chrysler Corp. to enter Chapter 11 bankruptcy followed by restructuring and reconstitution of the companies. The experts suggest that by entering Chapter 11, the ailing companies could get relief from their pressing problems. They can tear up or substantially modify their union contracts, ash-can some of their under-performing brands, close plants and “right-size” their operations. Most of all, Chapter 11 would alleviate their most immediate challenge -- cash to pay their bills -- since it would put bill paying on hold. 

Those who suggest bankruptcy as a remedy in this unprecedented situation cite the experience of several airlines that entered Chapter 11 bankruptcy and emerged from it rejuvenated. But does bankruptcy for GM and Chrysler have any hope of success? Or, instead, is it likely to make a bad situation that much worse?

Let’s take a closer look at what a bankruptcy would do to the individual car companies and the economy as a whole. First, there is the issue of consumer confidence. The Conference Board Consumer Confidence Index, which had decreased only moderately in January, had a much more precipitous drop in February, reaching yet another all-time low. The index dropped to 25 (in 1985, it was at 100), down from 37.4 in January. Let’s face it, consumer confidence is already in the toilet, so you can imagine the devastating effect on overall consumer confidence a bankruptcy of GM or Chrysler would have. Then think of what this drop in confidence would do to the sales of General Motors and Chrysler vehicles. While not much has been made of it in the general press, GM and Chrysler sales have gone off the cliff in the past few months, and at least some of that can be attributed to the bankruptcy talk swirling around those two car companies. Should a bankruptcy be announced, it would have much more injurious effects on their sales -- and would very likely persuade so many people to avoid their vehicles, that their future survival would be very much in doubt.

If this isn’t reason enough to reconsider bankruptcy as an option, there is the issue of the supplier base, which would be devastated, perhaps irreparably, by a GM or Chrysler Chapter 11 filing. This factor makes the current situation very different from the scenarios faced by the once-ailing airlines or steel manufacturers. Many GM and Chrysler vendors have operated for years on razor-thin margins and are heavily dependent on the business and the cash flow from the automakers. If that cash flow ceases for even a relatively short period of time it could well send many of those suppliers into bankruptcy and force others to simply close their doors. The rebound effect of this is that the already ailing carmakers would find it difficult and costly to obtain the parts and services required to build vehicles on an ongoing basis. Further, the disruption and failure of supplier companies would have a ripple effect through the entire American vehicle manufacturing industry, causing hardships for the healthier companies as well. There is little doubt that this would only make the recession worse, and it could turn the recession in a depression.

So while some casually toss out the idea of a Chapter 11 bankruptcy as the answer for GM and Chrysler, what it might be in reality is the end of the line. And this is certainly a prospect the Obama administration can’t afford just as it begins its run in Washington.

Keeping Your Warranty Coverage Alive

Many people continue to have their vehicle serviced at their new-car dealer because they think that if they don’t, their factory warranty will be null and void. But those folks might be spending more than they need to, on a mistaken assumption. It’s the law of the land that independent repair shops can provide the services to maintain your new-car warranty.

“It’s a common misconception that only car dealers can perform the maintenance services on a newer vehicle that is under warranty,” said Rich White, executive director, Car Care Council. “Consumers can have maintenance services done by their local independent service shop without affecting their warranty, even though dealers and manufacturers often suggest the opposite.”

According to the Council, consumers are protected by the Magnuson-Moss Warranty Act and the general principles of the Federal Trade Commission, which prohibit a manufacturer from voiding the vehicle warranty because service was done by a non-dealer. Prohibiting independent shops from participating in the maintenance of vehicles under warranty would represent an illegal restraint of trade and be anticompetitive.

Specifically, the legal language states: “No warrantor of a consumer product may condition his written or implied warranty of such product on the consumer's using, in connection with such product, any article or service (other than article or service provided without charge under the terms of the warranty) which is identified by brand, trade or corporate name; except that the prohibition of this subsection may be waived by the commission if -- (1) the warrantor satisfies the commission that the warranted product will function properly only if the article or service so identified is used in connection with the warranted product, and (2) the commission finds that such a waiver is in the public interest.”

So you can have an independent shop perform repairs and maintenance without voiding your warranty, and that can be a money saver, but you should take some precautions. When using a non-dealer, independent aftermarket shop to maintain your vehicle, the Car Care Council strongly recommends adhering to scheduled maintenance requirements and keeping records and receipts for all maintenance that is done to the vehicle. If a warranty claim arises, these records will provide proof that maintenance has been done in accordance with the manufacturer’s recommendations and requirements, which is absolutely key to maintaining warranty coverage.

One way to locate a non-dealer, independent vehicle repair and maintenance facility is by visiting the Car Care Council’s Web site, which has a searchable list of about 70,000 independent repair facilities, auto parts retailers, body shops and engine installers and rebuilders. Many independent repair centers also have Web sites that include information about their services and credentials. Automotive aftermarket trade associations, the Better Business Bureau and AAA are also resources to use to locate a repair facility. Independent repair shops often charge a lower hourly rate than new-car dealerships, and they frequently have all the equipment needed to perform proper maintenance and repairs. Keep your car well maintained, hold onto those records, and you’ll be money ahead.

Insurance Costs up With Economy Down

The last thing that consumers entwined in a recessionary economy need is an increase in insurance rates, but that’s just what they were confronted with in 2008. According to RateWatch, 2008 marked the biggest jump in car insurance rates in five years, with an annual increase of 8 percent over 2007. Overall, car insurance rates rose from an average of $1,810 annually at the end of 2007 to $1,954 in 2008. RateWatch is based on real-time auto insurance quotes from more than a dozen insurance businesses at Insurance.com.

“The rate increases throughout 2008 were ill-timed for consumers, who are struggling to pay bills or are facing serious financial difficulties,” said Sam Belden, vice president of strategic alliances at Insurance.com. “We’ve seen an alarming number of customers seeking to reinstate policies that had lapsed due to financial hardships.”

Belden fears that we are at the beginning of a worrisome cycle when it comes to auto insurance, as declining credit scores and bankruptcy filings make it much more expensive for drivers to get coverage and harder to find an insurer willing to cover them. Many insurers use credit information to determine a driver’s insurance risk score, which is used to help set insurance rates. Consumers with a history of being late on credit card bills or of opening and closing bank or credit accounts are more likely to pay higher insurance premiums. Consumers facing personal bankruptcy will face a significant impact on their credit rating and may be considered high-risk for future insurance coverage.

What should you do to keep your car insurance rates down? First, protect your credit. While one late payment won’t cause big problems, a pattern of missed payments will change your insurance risk score as well as your ability to get credit in the future. If you are having trouble paying the minimum amount due on a credit card bill, car loan, mortgage payment or student loan, call your lender before the due date to explain the situation. Most lenders will work with you to explore payment options. Being proactive will help you protect and preserve your credit rating.

While it might seem tempting in times of financial crisis, don’t let your car insurance lapse. Driving without insurance is against the law, and not only can it result in costly fines, it also can end up costing drivers with lapsed policies thousands of dollars when they go to get car insurance again. Having a lapsed policy -- caused by not paying a bill on time or allowing a gap between a current policy and a new policy -- can be a red flag for insurance companies. Call your carrier to explore monthly installment options and to make sure you’re getting all of the discounts you’re entitled to.

Finally, if your current insurance is too expensive for you, shop for a new policy. Compare several companies to make sure you get the coverage you need at the right price because the potential for savings is significant. According to an Insurance.com study, customers saved an average of $595 when they shopped on its site and switched carriers.

GM, Ford Seek to Prove Their Future

At most auto shows, car companies try to persuade buyers that they have new vehicles worthy of consideration. At the recent North American International Auto Show in Detroit, General Motors Corp. and Ford Motor Co. had to prove to consumers, Congress and the incoming administration that they have a future worth saving. In their attempt to move from red ink to black, the two companies showed vehicles that relied on their companies’ traditional strengths rather than a supposed high-mileage future.

GM is unabashed in saying that a great deal of its future rides with one of its “core brands,” Cadillac. So it showed a new version of a previous Cadillac crossover model that seems much more on target. The current Cadillac SRX crossover offers good driving dynamics and a handsome interior, but its exterior styling leaves you guessing whether it is an SUV. Now the guessing is over. The upcoming Cadillac SRX revels in its crossover status, and it has a beautiful new body that we think will gain converts in that very hot segment. 

In other segments, Cadillac has scored with its dramatic, cutting-edge styling, and the new SRX takes that path. Nothing subtle about it. Instead, the SRX makes a bold statement, starting with its striking multipiece shield grille combined with its now-emblematic vertical headlamps. And these aren’t just any headlamps. They feature light-pipe technology and adaptive forward lighting. Compared to the theatrics of the front end, the remainder of the SRX’s exterior design is more conventional, but the expected power liftgate has an unexpected adjustable height setting, too.

Inside the new SRX, hand-cut-and-sewn coverings on the instrument panel contribute to a club room feel. Like a phoenix, the navigation screen rises dramatically from the instrument panel when its help is summoned. In the rear, dual entertainment screens are well-integrated into the backs of the front seats. 

The SRX is a Cadillac, but don’t look for a V8 in the engine compartment. Instead, the new crossover will offer a choice of a direct-inject or a turbocharged V6. The new V-6 engine will boost the vehicle’s standard horsepower by 5, while achieving an estimated 10-percent to 15-percent fuel economy improvement.

At the same time GM was beefing up its Cadillac line, Ford was adding oomph to its fabled Mustang. In these trying economic times, not everyone is looking for 540 horsepower, but Ford’s Special Vehicle Team is betting some people are. So it has pulled out the stops to make the upcoming 2010 Shelby GT500 more powerful than ever. The top version of the iconic Mustang will deliver a staggering 510 foot-pounds of torque, while downforce has been increased and drag reduced, meaning it’s a muscle car of muscle cars.

In the interest of sanity, new gearbox enhancements and a new rear axle ratio mean the 2010 Shelby GT500 will provide better highway fuel efficiency, but at the same time, deliver improved acceleration performance. Largely because of the improved transmission, the 2010 model is expected to offer customers improved straight-line acceleration, plus fuel savings when cruising on the highway in the top gears.

This model also offers aggressive new exterior design features with new functional details, such as the hood extractor to remove heat from the engine and a so-called “Gurney Flap" spoiler to tune rear downforce. The lower-drag rear spoiler is raked back aggressively to minimize drag, while the integrated Gurney Flap provides the downforce.

Inside, the Shelby GT500 is high-luxe yet in keeping with the fact that it’s a Mustang. The interior offers genuine materials, such as real leather in all seats, real aluminum on the instrument panel, and Alcantara inserts on the seats and steering wheel. The aluminum finish panels have a dimensional dimpled texture pattern that Ford says is inspired by clutch plates. But the big news is: It’s fast! 

So while the politicians might be saying the domestic carmakers need to build hybrids and electrics to survive, GM and Ford are not turning their backs on their traditional strengths, and that makes good business sense. Whether it plays on the Potomac is another matter.