Will You Be Able to Lease Tomorrow?

The words sent shockwaves through the car industry. Chrysler LLC and its “captive” finance company, Chrysler Financial, recently decided to drop leasing from their portfolio of finance options, potentially turning their back on 20 percent of the car-buying public, which currently leases its vehicles. Is it an anomaly or a trend?

Time will tell on that score, but it wouldn’t surprise industry observers if the Chrysler move signals a pattern that other car manufacturers -- notably the beleaguered domestics General Motors and Ford Motor Company -- may soon follow. Why? Because in the current market, credit is tight and expensive, and residuals are unpredictable. It is the latter of these two issues that has really prompted Chrysler’s move away from leasing. Predicting the residual value of a vehicle -- essentially its resale value -- two, three or four years hence has always been a tricky business. In the hands of captive finance companies owned by major manufacturers it is even trickier because their corporate cultures might influence their analysts to be more liberal about residual values than they should be.

Here’s the reason why: By predicting strong residual values, financial institutions can make monthly payments lower, given the same interest rates, and this in terms spurs more leases to be written and more cars and trucks to be sold. It all works just fine in an environment in which used-car values meet or exceed those predicted residuals. The car company sells more vehicles; the financial institution makes money on its leases; and the consumer comes out well, too. But it all goes south in a big way in the kind of car and truck market we’ve experienced lately.

The recent quick run-up in gasoline prices sent values of used trucks, sport utilities and other large vehicles tumbling into the sewer. Vehicles coming off lease and going into the hands of financial institutions, like Chrysler Financial, are possibly worth thousands of dollars less than the value that was predicted for them. This means losses -- potentially very heavy losses -- for the financial institutions that own those cars. So perhaps it is natural for companies like Chrysler to desire to exit that business altogether. Multimillion-dollar losses can do that to you.

This does not mean that you won’t be able to lease a Chrysler, Dodge or Jeep brand vehicle from one of those brands’ respective dealers. It does mean that those leases will be backed by financial institutions other than Chrysler Financial. The sad news for consumers is twofold. First, those leases that are written in the future will probably be structured with more conservative estimates of the vehicles’ residual values. This means higher monthly payments, all other things being equal. And, just as important, it also likely means the end of factory-subsidized leases from the Chrysler brands, which are the kinds of lease deals that are often heavily advertised because their eye-poppingly low monthly payments spark sales.

If you are currently leasing a vehicle from one of the Chrysler-owned brands, there is no reason to worry. Your contract won’t be rescinded. Chrysler Financial has assured all that it will continue to support and service current Chrysler, Jeep and Dodge lease holders. But as the pendulum swings back in favor of purchasing and financing, there are some pitfalls to look out for. The end of leasing might spur the introduction of some nonconventional financing deals that will offer the same level of low payments that leases do now. The major difference is that these new financing instruments will seek to limit the financial institution’s risk based on future value of the vehicle and put it directly on the shoulders of the consumer. Be wary of a loan that calls for low monthly payments over the course of, say, 36 months, but then requires a “balloon payment.” While the sale of the vehicle might be enough to fund that balloon payment, it also might not, and you might be looking at a substantial dollar outlay that you didn’t bargain on.

So the Chrysler Financial move away from leasing signals the end of an era. Just make certain the new era doesn’t have negative financial consequences for you. As always, only looking at the monthly payment is a very nearsighted way to view a vehicle acquisition deal.

Hitting the Road on a Quarter-tank of Gas

The soaring cost of gasoline might have put a few bullets in the traditional family driving vacation, but it is not dead yet. Millions of Americans are taking to the road this summer in search of diversion, education and relaxation, but in these difficult times, many are setting their sights a bit lower than in previous years. Instead of tossing aside the beach towel and sunglasses altogether, you might consider hopping in your car, discovering your city or region and making family memories together. And you should be aware you can do it all on a quarter-tank of gas or less.

“So often if we can't fly or drive somewhere exotic for a vacation, we end up doing home improvements or working from home,” said Doug Speck, president and chief executive officer for Volvo Cars of North America, whose company is a proponent of near-home vacations. "Families need quality vacations. What better way to spend them than discovering more about your own area?"

While lolling on a beach in Hawaii or Tahiti might be a better way, in the current economic and fuel price environment, there is a lot to be said for discovering the wonders of close-by destinations. So with the weather warming up, get ready to send post cards, eat out and have an amazing “staycation” together with your family using these six money-saving and gas-saving suggestions:

  • Stay at a nearby hotel for a night Use the money you're saving by forgoing airfare to treat the family to a night or two in a local hotel. Look for hotels with attractions you can drive to during the day such as water parks, pools, malls or golf courses.

  • Create your own historic tour Pack up your car with some bag lunches and discover local history. Contact your local historical society or chamber of commerce and sign up for a historical tour or chart out your own self-driven tour of regional landmarks.

  • Get lost in a museum Instead of getting lost on the Interstate this summer, drive to a local museum and wander through at your own pace. Take time you might not normally spend to explore your city's treasures within a 30-minute driving radius. It's a great way to learn about your kids' interests, too.

  • Enjoy nature at a park Whether doing a day-hike or a weeklong camping trip, some of the best family memories are made on the trail of a county, state or national park. Get an atlas or state map and drive out to the nearest park.

  • Try new restaurants Just as you would if you were visiting a new city or country, test out restaurants and types of food you've never experienced before. Some of the best vacation memories are spent while sampling new and exciting cuisine. You might just discover your next favorite dining spot close to home.

  • Set up camp It never quite feels like a family vacation when waking up in your own home. Finish off your drive around the city by teaching your kids camping basics. Try finding a campground near your city and take the kids camping for a night or two. Or, set up a tent in the backyard and tell ghost stories, eat marshmallows and stargaze.

Of course, these tips might be a bit stale for some, so here are a few other suggestions for “staycations” that get you out of your normal rut:

  • Use alternative forms of transportation Sure, driving your car is expensive, so why not jump on your bike, unicycle or pogo stick. Many local destinations can be reached simply by hopping on one foot, and you can improve your cardio fitness at the same time.
  • Pretend you’re somewhere cool Maybe it is just the local Wal-Mart, but if you approach the experience from another angle -- like pretending it is a Maharajah’s castle or a museum of exotic items -- you can make a visit to a local mass merchandiser an interesting sojourn. Pretending the pond in your local park is the Pacific Ocean can have a similar effect.

  • Rob a local bank  Yes, there are obvious downsides -- it’s illegal, it’s immoral and you could get yourself shot -- but it can be thrilling, profitable and, most important of all, nearby. We recommend that you wear a disguise if you rob the branch you regularly patronize -- and be sure not to write the note demanding money on one of your personal deposit slips.

  • Sleep a lot You know what Shakespeare said about sleep? Well, we don’t quite remember either but we know he was for it. The good news is it costs nothing to go to dreamland, and when you’re there you can drive to your heart’s content without ever worrying about paying for gas.

Will Diesels Hit the High Road?

In this day and age of truly outrageous gasoline prices, surely the development of a technology that would deliver 20- to 50-percent better fuel economy than the gasoline engines we currently use would be hailed as a breakthrough and perhaps even a miracle. If that technology would further enable us to use the fuel delivery infrastructure that is already open for business, that miracle would be all the greater. Well, that miracle is here, and it stands ready to be enjoyed by all. The big question is: Does anybody care?

Are you kidding me? More than 20-percent better fuel economy?! Who wouldn’t care?!  Well, here is the issue: The breakthrough we talk about isn’t exactly new. In fact, it dates to the predawn of the automobile age, and it lacks a catchy, high-tech acronym.  Instead, it is named after the man who developed it: Rudolph Diesel. And we ask if anybody cares, because sales in the marketplace and market research studies demonstrate that the American car-buying public doesn’t seem to have much interest in diesel-powered vehicles. Hybrids, and even the pie-in-the-sky of hydrogen fuel cell vehicles, rate higher than diesels in one widely reported recent consumer study. In the technology sweepstakes, diesels are an also-ran right now.

That is a shame, but the current state of affairs seems undeniable. Diesel brings with it a hundred years’ worth of baggage. And you could probably repeat the typical consumer’s litany on diesels yourself: “They're smelly, they're dirty, they're noisy and they're slow.” While many Europeans swear by the economy and reliability of their diesels, Americans entertained only a brief flirtation with diesel-powered cars during the fuel crisis of the early 1980s, and that romance turned disastrous. American manufacturers converted some of their gasoline engines to diesel, and those engines failed right and left, leaving a bitter taste with many consumers.

In the face of this negativity, the promise of excellent fuel economy from diesel engines is one of the obvious facts demonstrated by recent government and automaker research. The Diesel Technology Forum claims diesels can reduce fuel consumption by 30 to 60 percent in some automotive models. Further, those kinds of reductions can be accomplished with environmentally clean engines fitted with advanced exhaust emissions controls and after-treatment technology. While the combustion within a diesel engine might never be quite as clean as that in an internal combustion engine burning gasoline, catalysts and filters can make the exhaust emissions virtually as pure. The keys to clean diesel’s low emissions are in both the combustion process itself, which can be made more precise and complete using computerized controls and sensors, and in the treatment and capture of exhaust emissions after the combustion process.

Critics might argue that diesel fuel is derived from petroleum, and because of that and its skyrocketing current price level, it doesn’t represent much of an advantage over gasoline. But that point of view fails to take into account that a diesel engine can burn a wide variety of fuels including crude oil, vegetable oils, animal fats and even coal dust. It is frankly none too particular about what it burns, and it brings to the party high efficiency. By using a higher compression ratio than a conventional gasoline engine, the diesel engine is able to extract more power from the same amount of fuel. In addition, diesel fuel offers more power by 15 percent or so than does gasoline. The combination results in more bang for your buck. There is some disagreement as to just how much more efficient diesels are than gasoline engines, but the general consensus is that they are at the very least 20, and perhaps as much as 50, percent more efficient in typical applications.

So while the diesel engine carries with it some serious baggage, its many virtues speak loudly that it should gain more consideration in the marketplace. Will American car-buyers finally develop a love affair for diesels? Time will tell, but if we were shopping, we’d look long and hard at diesels before making our decision.

White Is Right for Cars

With gasoline prices making consumers blue, maybe it is poetic justice that more and more of them are considering the color for their own vehicle. Although white, silver and black continue to dominate the global mass auto market, car enthusiasts around the world are leaning toward various treatments of blue, according to leading auto industry designers and a global team of DuPont color designers.

For the last 55 years, the DuPont Global Automotive Color Popularity Report has provided a year-end, data-based snapshot of mass market car color preference, since DuPont is one of the world’s largest global suppliers of paints and coatings to the industry.

“This year, we thought it would be interesting to ask car and color designers in midyear about automobile buyers’ color preferences,” said Karen Surcina, color marketing and technology manager, DuPont Automotive Systems.

Emily Hung, DuPont color designer for the Asia Pacific region, says dark blue metallic is popular and is being fine-tuned for that region. Candy whites and tri-coat pearl finishes are also extremely popular, confirming the 2007 DuPont Global survey finding that white had overtaken silver as the most popular color in Asia and North America. Luxury car buyers in Asia-Pacific countries continue to favor black and midtone metallic grays, while champagne is favored over light silver in medium-size cars.

Blue is the most important chromatic color in Europe, with 12 percent of the market, reports Elke Dirks, DuPont color designer for Europe. Chromatic colors are those with hue, unlike white, grey and black.

“Black, which overtook silver in popularity in Europe last year, is seen as a trendy newcomer there and could double in volume,” Dirks said.  

Wolstano Marin, DuPont color designer for Venezuela, Colombia and Ecuador, says the “achromatic range,” including white, silver, gray and black, dominates consumer preference in that area of Latin America. While green led the chromatic colors for several years, blue now seems to be the most popular in that family, he said.  

Blue also plays a role in American tastes, says Nancy Lockhart, DuPont color designer for North America. She sees lighter blues emerging with a reddish accent as a clean, fresh trend. Medium and dark shades of blue are more greenish, evoking a modern feel. White tri-coats such as pearls are chosen by buyers for their luxurious, yet unpretentious, presentation. Interestingly, she says oranges and golds are also important and reddish gold is an emerging influence.

“While current economic conditions in North America are not being felt in car color choices, people are clearly being influenced by the ‘green’ movement, with natural versions of bold colors taking hold,” Lockhart said. “For example, copper seems to be replacing flashier gold finishes, and royal blues will give way to lighter, cleaner and more water-like blues. Even white will change, with ultra whites and yellowish whites giving way to cleaner versions.”

Economic uncertainty in North America seems to be influencing people to return to basics such as white and red, according to Mollie Engel, senior color designer for Kia Design Center America, but they are new versions of these common colors. While Engel doesn’t see car buyers moving toward blue, she sees a growing importance of “olive greens” as well as earth tones such as dark grey, bronze and dark browns as “part of this new, classically modern palette.”

Christopher Webb, lead color and trend designer, interior and exterior, of General Motors, says customers are embracing color again, with brown, orange and blue selling well. GM takes consumer input seriously. Several years ago, Webb polled Corvette Car Club members to find out which color they would most like to see on their vehicles. Their request for orange came at a time when an “orange trend” was developing in other areas of product design. The result was a color, developed with DuPont, called “Atomic Orange.”

“Blue will continue to be strong in the marketplace, along with a growing trend in natural and authentic colors,” said Jim Parker, senior manager, color and trim design, of Chrysler LLC. “The 2009 Dodge Ram will be offered in several new colors like Deep Water Blue Pearl and Austin Tan Pearl, which will accentuate its distinctive, bold design and reflect these color trends.”

Although he has not yet seen any economy-related trends in consumer color choices, consumer-buying tends to lean toward more conservative choices during economic downturns. Regardless of the economy, says Parker, Chrysler, Dodge and Jeep offer a wide variety of color choices, allowing consumers to express their own personalities. And expressing personality is what car colors are all about.

Getting Personal Help

Would you like to avoid aggressive auto dealership sales tactics? Are you concerned about your ability to go toe-to-toe with a salesperson who might negotiate five deals a day? Do you think it would be valuable to have a support company handle all the details and paperwork involved in the lease or purchase of a late model vehicle? If so, you might be interested in a new wrinkle on the decades-old “auto broker,” the “personal shopper.”

One such service is Russell Auto Buying, a five-year-old enterprise that prides itself on its white-glove service. It boasts customers from Maine to Florida.

“We are essentially a concierge service for prospective car buyers of mid-priced [$35,000] and higher cars,” said Russell Levine, president of Russell Auto Buying. “Plus, we offer ultracompetitive prices. For example, we typically save customers $25 to $75 per month on leases.”

Personal attention to the car buyers’ needs is a personal shopper’s calling card.  Typically shoppers draw upon their expertise in the dealer community and in auto financing to help customers select the most suitable make and model. They then obtain the vehicle for the buyer at a price many claim is below what a dealer would charge, handle the purchase red tape and deliver it personally to their doorstep.

“Many of our clientele know exactly which car they want. Others rely on us to make recommendations,” said Levine. “They come to Russell Auto Buying because they are fed up with high-pressure sales tactics and prefer an independent company that will put their satisfaction above all else. What they get is the car they really want and need at a price not offered by dealerships, which is why the great majority of our customers have always been repeat buyers.”

Once a purchase price or lease agreement is established, personal shoppers like Russell Auto Buying handle all the paperwork. Very often the personal shopper delivers the car to the buyer wherever they might be in the United States. Some potential customers might be concerned about getting their vehicles serviced after the sale, but all vehicles purchased in this manner can be serviced at any dealership representing the brand. 

What are the downsides of using a personal shopper? One potential pitfall is that, like auto brokers, personal shoppers need and deserve to be paid for their efforts. That means if you have hard-nosed negotiating skills and some time to devote to the vehicle purchase process, you might be able to find a better deal than the personal shopper will make for you. So don’t simply put yourself in a personal shopper’s hands and expect to get the deal of a lifetime. Do some homework to make certain the deal the personal shopper is offering you is a good one.

If you’re busy or just don’t want to go through the time and hassle of buying a vehicle from a dealership, you might find a personal shopper to be valuable, even if you have to pay a little more for the service. And many personal shoppers/auto brokers have connections that can indeed save you money. But as always, look before you leap.