Industry News

NADA Concerned about Affordability in Proposed Fuel Economy Standards

In response to the Obama administration’s announcement on setting new fuel economy mandates for the 2017-2025 Model Year, the National Automobile Dealers Association (NADA) issued the following statement regarding its concern for vehicle affordability in light of the new proposed standards. “America’s franchised auto dealers have long supported fuel economy improvements.  Less than five months ago, the administration issued the most expensive fuel economy mandates ever, estimated to cost the automotive industry and consumers over $50 billion. Now, before the ink has barely dried on those as yet unimplemented rules, the U.S. Department of Transportation, the Environmental Protection Agency, and the State of California have decided to launch a new and far more costly set of fuel economy mandates that would require light-duty cars and trucks to achieve up to 62 miles per gallon (MPG) on average by 2025.

“For many Americans, the prospect of being priced out of the car market means being driven out of the job market, so a primary concern for our members is the affordability of basic transportation for Americans. Preventing further job loss, preserving consumer choice and affordability, and improving safety should be primary factors in setting any fuel economy standard.”  The Consumer Federation of America (CFA) released findings of a recent national survey that shows most Americans support adoption of a 60 MPG standard. CFA’s report says that nearly three-fifths (59 percent) agreed that the federal government should require all automobile companies to increase the fuel economy of their motor vehicle fleets to an average of 60 MPG by 2025. Three-quarters (75 percent) said they would be prepared to pay more for a new, more fuel-efficient car if they recovered the additional expense through lower fuel costs within one year. More than three-fifths (62 percent) said they would pay more if they recovered this additional cost within five years. Source: NADA Front Page

How High is Up for Used-Car Prices?

Used-car sales could get a boost from an unusual quarter, which the market hasn’t seen in a while. Used-car prices are so high, they’re starting to bump heads with new-car prices. That may motivate some used-car shoppers to make the jump to new-cars, since the price difference has shrunk. That’s according to Tom Kontos, Executive Vice President, Customer Strategies and Analytics for used-car auction firm ADESA. “Strong new vehicle sales in September support the thesis that some car shoppers are gravitating towards new vehicles when faced with a choice of paying relatively high prices for used-cars versus affordable new vehicles, as long as financing and available inventory are not prohibitive factors,” he said. According to ADESA, used-car prices are down a bit from record highs in April, but they’re still higher than a year ago. A seasonal decline is to be expected this time of year, in part because the fall is the strongest season for new-car sales.

The drop in new-car sales in 2008 and 2009 means fewer low-mileage used-cars today, and therefore a lower supply. At the same time, demand is slowly recovering as the U.S. economy recovers. Lower supply and higher demand spell higher used-car prices. There’s also an upper limit on used-car prices, and that’s the point where relatively new used-cars start competing with discounted new-cars. ADESA reported that the average wholesale price for a used vehicle in September was $9,830. That was down 1.7 percent from August 2010, but one percent higher than September 2009. In the latest cycle, used vehicle prices bottomed out at an average of $8,628 in October 2008. Values fell the most for used-trucks, since on top of the recession, gas prices had spiked. Today, used-truck prices are up percentage-wise more than used-cars. Source: The Associated Press

Deals Abound When Credit is Good

As the auto industry claws its way back from the dark days of the recession, financing rates continue to fall for new-cars, making them competitive against used-cars, and leasing deals are returning.  Consumers with good credit histories are most likely to benefit as the model year flips to 2011. Some lenders are again making loans to those with less than stellar credit, said Melinda Zabritski, Director of Automotive Credit at Experian. “But the experience of a consumer will be different today than it was two years ago,” she said. Some lenders will no longer finance 100 percent or more of the value of the car and they have sharply reduced the length of loans to 60 months or less. That means, even with lower rates, monthly payments are rising. Consumers need to be able to afford the vehicle and as a result, are looking at more economy models or holding on to their old cars longer.

With low interest rates and a pool of used-cars that have retained their value, many have found that deals on some new-cars are so generous, they actually make a new-car less expensive than both a one-year-old used and a certified preowned version of the same model.  More consumers are choosing leases for those new-cars. Edmunds.com reports that 20 percent of all new-car sales so far this year are from lease deals, up from 12.1 percent a year earlier. Two years ago, it was hard to secure a lease as lending dried up for the Big Three automakers. Now, manufacturer lease incentives can be found from automakers like Nissan, Scion, Subaru, Kia, and Volkswagen. Bankrate.com is tracking new-car loan rates as low as three percent and used-car rates below 3.5 percent. To put it into context, the national average for new-car rates is 6.6 percent, and for used cars, 7.5 percent. Those who qualify and shop around can do better than average. Source: The New York Times

Cars Born to Run with Smartphone Apps

Most auto dealers will tell you that more buyers ask about how to connect an iPhone to a car or about the latest collision avoidance systems than they do about how quickly a car goes from zero to 60. So automakers are pumping up the technology.  The most prevalent trend this season involves Smartphone’s and apps. More important, automakers have discovered the potential of Smartphone-based apps. Mazda offers a roadside assistance app, for example, with the free assistance provided under the warranty period. The program automatically tells the tow truck where you are and estimates when help will arrive. The idea is to be able to offer continually updated services and features by relying on the smarts of Smartphone’s rather than on in-dash computers, which may be obsolete before they roll off the assembly line. The first apps that work with Sync are Open Beak (a Twitter reader), Pandora (a music service), and Stitcher (a podcast news and information service). 

They plan to introduce these features gradually, starting this fall and extending over the next year.  Many car manufacturers offer collision warning systems that use radar to detect an imminent crash and then chime and flash lights at the driver. But the most ambitious, and impressive, automotive safety technology introduced this year is Volvo’s pedestrian detection system. Using a combination of radar and video camera sensors, the detection system can pick out people (and cyclists) near the moving car. If it believes that a pedestrian is about to step in front of the car, it will warn the driver. Better still, if a pedestrian does suddenly appear in the car’s path and the inattentive driver does nothing, the car sounds a series of warnings and then brakes the car to a complete stop. It works at speeds up to 22 miles per hour; at higher speeds, it will slow down but will not be able to prevent an impact.  Source: Reuters