Auto Financing Revolution

In those long-ago days (you know, before Eminem and the Internet), most car buyers who financed their new vehicle purchases did so through the dealership. This one-stop shopping was convenient, and, if it cost consumers more than they would have paid if they had obtained financing from another source before walking into the showroom, they either didn't know or didn't care.

Today, though, the Web has changed all that. Not only are car buyers more savvy about researching their upcoming purchases -- everything from vehicle specs, reviews, and "dealer invoice" pricing -- but they are also cannier about the associated costs that accompany a vehicle purchase. As I noted in my book, The Complete Idiot's Guide to Buying or Leasing a Car, a typical vehicle purchase involves at least four transactions. You buy a new car; you sell your old car (perhaps by trading it in); you buy auto insurance (perhaps including an extended warranty, which is, in essence a form of insurance called a service contract); and, finally, you buy financing. While simply taking the dealer's deal was by far the most popular option in the financing game before the web, now consumers' eyes have been opened to the fact they could save hundreds or even thousands of dollars by comparison-shopping financing sources.

According to Kelley Blue Book's latest "New Vehicle Buyer Attitude Study" on vehicle finance options, seven out of 10 new car shoppers now plan to research financing online and 54 percent plan to obtain financing prior to visiting the dealer. The study found that 46 percent of respondents still indicate that they intend to finance their purchase at the dealership, but 10 years ago that figure would have been much, much higher.

Why go to the trouble of doing research? Simple -- there is money to be saved. According to the Kelley Blue Book study, the top reason consumers plan to obtain financing prior to purchasing is because they feel they can secure a lower interest rate than at the dealer (43 percent). Of course, in this era of low-rate financing subsidized by the auto manufacturers, the deal at the showroom might actually be the best deal in town, so consumers who plan to finance through the dealership also say they plan to do so because they feel they can secure a lower interest rate (52 percent). But these consumers would never have known that if they hadn't done prior research, and the fact is the Web makes comparison shopping of auto loan rates, an onerous task in the pre-Net days, extremely easy.

In addition to doing pre-purchase car loan research on the Internet, a substantial number of buyers now plan to obtain financing online. While as recently as a year ago Jupiter Research reported that online financing represented only one percent of the vehicle financing market, that trend appears to be shifting as consumers are researching alternative online options. The Kelley Blue Book study shows that 13 percent of total car buyers anticipate financing their next loan online, eight percent via bank or credit union Web sites, and five percent via online financing companies.

"The results from the Kelley Blue Book survey confirm a consumer trend we are seeing in the marketplace," said Brian Reed, Internet director for Capital One Auto Finance, the nation's largest direct-to-consumer vehicle lender. "Consumers who do their research before going to the dealership are empowered to negotiate the best interest rate possible."

Of course, when you're in buying mode, shifting power your way is exactly what you want. You will likely find that a half hour used to research loan rates and sources before you buy your next vehicle will be time well-spent. Unless you don't care about money, that is.

A noted car-purchase expert,Driving Today Managing Editor Jack R. Nerad has spoken on the subject on NBC's "The Today Show," CBS' "The Early Show, CNN and scores of local newscasts.

Get Ready, Winter Is Coming

Winter weather has the same effect on your car as it has on your body. It adds additional stress and strain, and that, in turn, means that small problems often become big ones before you know it. The key to avoiding mechanical woes that could leave you stranded in the freezing cold is preventive maintenance, and while most people like performing preventive maintenance about as much as they like flossing, which is to say not at all, it does have its rewards. Just picture yourself standing beside your stalled car as snowflakes blow past your unprotected head and you'll begin to grasp how valuable preventive maintenance can be.

Now, with that picture in your mind, making certain the following maintenance items get attended to won't be too onerous a task. The following are some pre-winter tips recommended by Jeff Ogden, president of AAA Minnesota/Iowa, and Judell Anderson, executive director of the Alliance of Automotive Service Professionals, two people who know their stuff:

Most pre-winter checks start with the battery. Make sure the terminals are tight and clean. If your lights seem dim or your vehicle starts are sluggish, have the electrical system, including the battery, checked by a technician, preferably an automotive technician.

While most people don't associate radiator boil-over with frigid winter temperatures, the fact is that winter puts extra stress on a vehicle's cooling system. Check the coolant strength with a hydrometer so you are certain to have enough anti-freeze protection to avoid an expensive repair, and remember the recommended protection level in the lower 48 (states) is -36 degrees. Wait for the car to cool off before you perform the radiator check, too.

Just like a radiator problem, worn belts and hoses can lead to a mid-winter problem that will get you all too well acquainted with the side of the road. Unless you're eager to start a new career gathering up discarded cans and bottles, check the belts for cracks or fraying and check the hoses for leaks, bulges, or cracks. While you're at it, make sure the clamps are secure and free of corrosion.

Like to see where you're going? If so, a check of the windshield washer/wipers is in order. Make sure the reservoir is filled with washer solvent, not plain water, and replace your wiper blades if needed.

Ah, those other fluids are important, too. So check oil, brake, transmission, and power steering fluid levels to make sure they're up to factory recommendations. It isn't a difficult process but if you're unsure, follow your owner's manual directions.

Just like a lack of fluids, a lowly air filter can really ruin your day if it's filthy dirty. One way to see if it needs to be replaced is by simply holding it up to a light. If you cannot see light through it, replace it. (If you see a small squirrel inside, you have another problem.)

In winter weather, with uncertain traction, your tires are more important than ever, so inspect the wear on your tires and check the pressure with a gauge when the tires are cold. Refer to your owner's manual for the recommended air pressure and tread depth specifications.

In the dark nights of winter your lights and signals help other drivers see you before it is too late, so activate them in the driveway while a friend, acquaintance (or even your spouse!) watch to ensure they all work.

While a mildly skilled do-it-yourselfer can perform all of these checks by herself or himself, if you feel you can't complete this list, then take a few minutes to have a trusted local service technician perform them for you. Remember that picture of the snow whipping past your face, and you'll immediately grasp why spending that short amount of time is a good idea.

Jack R. Nerad is Managing Editor of Driving Today. His automotive advice is heard weekly on his syndicated radio program "America on the Road."

Beating High Insurance Costs

There is no getting around it. As we told you in our last feature, the rising costs of medical care, vehicle repair, jury awards, automobile theft, and fraud are expected to drive up auto insurance rates by six percent in 2004, according to an analysis by the Insurance Information Institute (III). This comes on top of an 8.5 percent rise in insurance costs in 2003. The average driver will pay just under $900 for auto insurance next year, and that high figure has left many people wondering if there are ways to save money on auto coverage.

The good news is, there are, but first it is helpful to understand the factors that go into determining your individual car insurance rate. One thing is certain: car insurance isn't a one-size-fits-all purchase. Instead, what individual drivers actually pay varies by state, by insurance company, and by motorist.

Underwriting factors that influence the cost of coverage often include such obvious items as type of car and specific safety features, the number of miles driven and type of driving; driving record, including speeding tickets; and the age, sex and experience of the driver. But frequently such non-obvious factors as the claim records of all the members of your family, including the number and severity of accidents, plus your credit score also figure in prominently.

What can you do to lower your overall cost while maintaining reasonable amounts of coverage? Here are some methods you should think about, according to the III:
  • Raise your deductible. Higher deductibles on your auto could produce savings of 15-30 percent or more, although should you be involved in a collision you will be required to pay that higher deductible out of your own pocket before insurance payments come into effect. These days, though, a low deductible like, say, $500 could end up costing you much more than it is worth.

  • Reduce coverage on older cars. Consider dropping collision and/or comprehensive coverages on older cars, because when you analyze it, it is rarely cost-effective to continue to buy these coverages on cars worth less than 10 times the amount you would pay for the coverage.

  • Buy home and auto policies from the same insurer. Some companies that sell homeowners, auto, and liability coverage will take five to 15 percent off your premium if you buy two or more policies from them. That can result in serious savings with no loss in coverage amounts.

  • Maintain good credit. While this seems irrelevant, insurers are increasingly using credit-based insurance scores to determine auto coverage premiums. Why? Because they have found statistically that people with good credit tend to file fewer claims. All else being equal, a person with a good insurance score will pay much less for insurance than someone with a poor score.

  • Shop around. This only stands to reason but when it comes to car insurance many people don't do it. Before you fall in that trap, you should know prices vary from company to company, so it could well pay to surf the Net or make a few phone calls. Your state insurance department may also provide comparisons of prices charged by major insurers. To do a thorough job, get at least three price quotes so you'll know where you stand.

Finally, compare insurance costs before buying a car. As with shopping around for insurance itself, this is a step many don't take, but it can pay great dividends. Your premium is based in part on the car's sticker price, the cost to repair it, its overall safety record and the likelihood of theft. Because several factors are involved, two vehicles that are similar in price might cost widely different amounts to insure. Many insurers also offer discounts for features that reduce the risk of injuries or theft -- things like air bags, anti-lock brakes, daytime running lights and anti-theft devices. At the same time, cars that are favorite targets for thieves cost more to insure. To help with this determination, you can access information from the Insurance Institute for Highway Safety Web site.

So while auto insurance continues to get more expensive, you do have some weapons in your arsenal to help mitigate the increase and keep more money in your pocket. For additional information on auto insurance, visit the III Web site.

Auto journalist Luigi Fraschini pays more than he'd like in automobile insurance... but he's convinced it's worth it.

Insurance Rates Up Again

Hold onto your checkbook; another round of car insurance price increases is expected. Rising costs of medical care, vehicle repair, jury awards, automobile theft, and fraud are expected to drive up auto insurance rates by six percent in 2004, according to an analysis by the Insurance Information Institute (III).

While this probably won't make you feel any better, the projected increase represents a slight moderation from 2003 when auto insurance costs are estimated to rise 8.5 percent. The average cost for auto insurance nationwide for 2004 is estimated to be $898 -- an increase of $51 per vehicle from this year.

"Rising claims costs continue to fuel increases in auto insurance nationally," said Robert Hartwig, senior vice president and chief economist of the III. "It costs more to repair cars, particularly following accidents involving sport utility vehicles. This year insurers will pay between $15 and $20 billion in medical claims. Higher costs for hospitalization and pharmaceuticals, and state regulations that permit abuse of medical treatments and associated legal costs are also to blame."

When it comes to auto insurance rates, medical costs continue to play an important factor. Each year there are more than two million car accidents involving injuries. Typical costs for treating an auto accident victim range from $6,000 to $9,000, but those costs can easily run into the tens of thousands of dollars. The cost of auto injury claims is rising by as much as 20 percent in some states.

Higher repair costs are another significant driver of increased costs. Average repair cost has risen two to three times the overall rate of inflation in a number of states. One reason for this is the suspension of the use of "generic" parts in the repair of damaged vehicles in favor of "genuine" manufacturer parts. This is a factor that could ultimately add $4 to $5 billion annually to the cost of auto insurance, according the III, because name brand parts often cost 30 percent to 70 percent more than their generic equivalent, even though generic parts are of like kind and quality. (Car manufacturers heartily dispute the "like kind and quality" claim.)

We can also lay some blame on the courts. Sharply higher jury awards in vehicular liability cases are putting additional upward pressure on auto insurance rates. The average jury award in auto liability cases rose from $187,000 in 1994 to $323,000 in 2001 -- an increase of 73 percent, according to the most recent available data from Jury Verdict Research.

Finally, there is the old devil: crime. Auto theft is another significant factor that affects rates. According to preliminary data from the Federal Bureau of Investigation's Uniform Crime Report, the number of auto thefts rose by 1.2 percent in 2002, after increases of 5.7 percent in 2001 and 0.7 percent in 2000. An estimated 1.2 million auto thefts were reported in 2001, averaging $6,646 per vehicle or $8.2 billion.

"Auto liability issues are much more important than people realize," noted Hartwig. "About 60 percent of auto premiums paid in 2002 -- more than $80 billion -- were for liability coverage. As we look at 2003 and into 2004, we see this trend continuing."

Fraud and abuse are major problems in some states, such as New York, Florida and Massachusetts. Loopholes in New York's no-fault insurance statutes, for example, will cost the state's drivers an estimated $432 million in 2003 or nearly $1.2 million per day. While the average driver will pay $898 in 2004, according to the III analysis, what individual drivers actually pay varies by state, by insurance company, and by motorist.

Hey, we feel your pain. Next week we will tell you what you can do to limit your own auto insurance costs.

Cleveland-based auto journalist Luigi Fraschini pays car insurance premiums on a highly eclectic variety of vehicles, much to his wife's consternation.

Trailers Get Hip

Over the years trailers have developed a dubious reputation. Certainly there are fine, upstanding, God-fearing folk who love their trailers, but the derisive term "trailer trash" has struck a resonant if somewhat mean-spirited tone in the country lately. These days though, a whole new psychographic group is turning to trailers not because they have to, but as a wise investment.

Nancy Brown considers herself the ultimate "urban person." Born and raised in Boston, the 53-year-old schoolteacher has spent her entire life in the Massachusetts capital. And, for many years, Brown and her husband, Michael, a federal employee, have taken trips to Wells Beach in the summertime. But like many resort areas across the country, real estate in southern Maine has become quite expensive, and the Browns have come to terms with the fact that it could cost them at least a couple hundred thousand dollars to purchase a weekend retreat cottage by the coast.

Then Brown's sister recently suggested they consider purchasing what manufacturers are referring to these days as a "recreational park trailer."

A trailer? You've got to be kidding.

"I would never stay in a trailer," Brown remembers thinking, adding that she had never camped in her life. But Brown had never seen a recreational park trailer before. And when she visited Seacoast RV's Inc. in Saco, Maine, she quickly realized why record numbers of working professionals and retirees are driving up trailer sales in many areas across the Northeast. Seacoast RV's has experienced some of the strongest growth, with year-to-date sales up 235 percent compared with last year's figures.

"They're not just for retirees, as some people would think they are," said Linda Mailhot, owner of Seacoast RV's. "Professionals use them for a weekend getaway."

Unlike mobile homes, which are a form of low-cost, permanent housing (at least until the tornado comes through), recreational park trailers are movable resort cottages that are designed exclusively for part-time recreational use. Typically upscale in appearance, they often include bay windows and lofts as well as walnut, oak, or maple cabinetry.

"They're really lovely," Brown said of her unit, a Kropf Industries model that includes a 20-foot sunroom and deck. "They're furnished very nicely and they're easy to maintain."

And the private campgrounds that provide seasonal sites for park trailers -- in Brown's case, Meadowledge RV Resort at Wells Beach -- are high quality parks.

"We liked the park because it's very well kept, very well maintained. It's like this lovely little neighborhood. Everybody's piece of property is landscaped beautifully. We have this whole wooded area that's never going to be developed."

The recreational park trailer lifestyle is available at a fraction of the price of a condo or site-built vacation cottage. While condos by the coast can easily cost several hundred thousand dollars, recreational park trailers cost under $50,000, with the average price being in the $33,000 range. Campsites, meanwhile, typically cost just under $3,000 per season. That includes about six months of the summer use and six months of winter storage.

"Do the math and you'll see why more and more people are discovering the merits of recreational park trailers," said William Garpow, executive director of the Newnan, Georgia-based Recreational Park Trailer Industry Association (RPTIA).

While most recreational park trailer buyers are experienced RVers who discover the units when they visit a resort campground that leases or sells seasonal campsites to recreational park trailer owners, more and more people from outside the RV industry are discovering the product.

"We're even seeing more and more families with children buy into the recreational park trailer lifestyle, particularly since 9/11," Garpow said. "People often purchase recreational park trailers not because they can't afford anything else, but because they share similar interests with other outdoor recreation enthusiasts and enjoy the safe and secure lifestyle that high-quality destination campgrounds and RV parks provide."

Richard Denman, owner of Pleasant Acres Farm Campground Inc., one of New Jersey's first park trailer dealers, attributes rising demand to both economic and social factors.

"The decline in the stock market has increased investors' interest in real estate and in income properties, which translates into increased prices," he said.

As a result, many people are finding that the getaway condo is becoming too expensive. At the same time, he said, 9/11 has prompted many people to place a higher priority on quality family time, and campgrounds provide attractive, secure retreat venues that are close to home.

Looking to the future, Garpow of RPTIA sees growing demand for recreational park trailers, particularly in resort locations in the Northeast and the Midwest that are about an hour or two away from major cities. Brown, meanwhile, considers herself fortunate to have taken the time to find out what recreational park trailers are all about.

"We get so much enjoyment from this little trailer," she said. "It's lovely inside. And I have the beach for the summer and I'm not spending thousands and thousands and thousands of dollars."

For more information about recreational park trailers, including regional and national shipment statistics, contact Garpow, visit the RPTIA (Recreational Park Trailer Industry Association) Web site.

Luigi Fraschini, an auto journalist based in Cleveland, is considering the purchase of a recreational park trailer.