Grant's Auto Rants

You are what you drive.

In the hypercompetitive automotive industry, a certain degree of vehicle product technology has come to be expected or even assumed by the consumer. The playing field may not be level across all countries and climates due to social, political or financial reasons, however, when you take a new car home today, you can rest assured that it will have an awful lot in common with most of the other makes and models out there.

While we are at a time when there are over 300 different vehicles currently available for sale in North America with another 50 or so on deck this year, companies are trying to explore as many niche areas as possible. At the end of the day, however, much of the hardware (and certainly function) of the average vehicle is very similar across the board. Globalization and continued maturity in the industry mean that many OEMs may even use the same suppliers as their competitors or share platforms and other components to the point where badge engineering crosses multiple (otherwise unrelated) brands.

Case in point, the Dr. Jekyll and Dr. Jekyll combination that is the Toyota Matrix/Pontiac Vibe.

This is not to say that there aren't differences, there certainly are. Compare for a moment the Mazda Miata MX5 with a full-sized Chevy Silverado and it is painfully obvious that different categories exist. But when you look closer, even at these two vehicles, the operation, design, and "industry standard" equipment (safety and otherwise) is remarkably similar. Things like ABS braking, airbags, traction control, power steering, while on a different scale, are still closely related. Were these two vehicles used in similar environments, in the same (generally) manner, over the same amount of miles, they will probably both last about as long and provide the same useful life as one another as well.

The point is that manufacturers cater to (and consumers pay for) the smaller differences between vehicles that give it some sort of unique distinguishing characteristic. There is a Hyundai advertisement currently running comparing the new Santa Fe to a Land Rover LR3 that speaks to this very notion. The ad touts how similar the cars are in most basic respects, but then concludes by illustrating the significant price difference (and number of cupholders). Why should the LR3 cost nearly twice as much? Well, at LR they will tell you about the superior heritage, materials, off-road capabilities, fancy suspension, etc... How important are these things to you? It is really our job as car shoppers to figure out what we really need, and compare that to want we really want (as our budget permits).

As we have learned from places like the former East Germany , having everyone driving around in the exact same vehicle whether a Trabant or BMW, just isn’t that exciting.

As manufacturers continue to exploit these minor differences, research sites have to add more and more tools simply to help people compare available vehicles to their lifestyle in the hopes of finding the most proper fit.

The concepts of image and prestige are so ingrained in our society and displayed by our personal choice of vehicle that industry comparisons must be made over fractions of a second in acceleration times or other completely arbitrary (real world) figures like lateral acceleration.

Much more relevant factors, however, are items like true ownership costs over time (maintenance and repair, insurance, etc…), actual fuel economy observed, actual reliability found and customer service (dealerships) and these are being more regularly addressed by the auto media.

At the end of the day, for many of us, the vehicle is very special place. Often, it isn’t just another tool or appliance used to get us to point A to point B, but rather an actual extension of our personalities and in some cases even considered an adopted member of the family.

Stand the former President Clinton next to the former President Bush for a moment. They both have two arms, two legs, a pair of eyes, ears, lungs, they both walk, talk, eat, and even share the same title and work on the same humanitarian causes. By all accounts, these are two similar “makes.” Consider the subtle differences, however, and you couldn’t have more different “models.” Apparently it is the minor things that make life interesting.

No, I am afraid that skipping the VW and springing for a Porsche in and of itself isn’t going to magically transform your commute from the stop and go furor of the typical commute to a nice breeze along the Autobahn. Perception is reality though, and this will change the way you feel about it, which is really all that matters. Isn't it?

Green Clean

With more than 260 million vehicles on the road in North America, car washing is big business. It is estimated that there are some 75,000 car washing locations, not including your own driveway. Whether they are automatic, self-service, coin-operated, touch-less, or served by a group of bikini-clad beauties, the traditional car wash has not exactly represented the pillar of environmentally friendly practices. And while washing the car isn't likely to get the Sierra Club stamp of approval anytime sooner than say, mowing the lawn or burning tires, eco-minded procedures and regulation have reached this dirty corner of the auto industry.

For many years the primary cleaning agent employed at the local Super Suds was hydrofluoric acid with a toxic rap sheet rivaling that of spent plutonium. Mix this with a continual flood of phosphorus, sodium hydroxide, and diluted oil & grease and you have a contaminant cocktail worthy of Jersey run-off and as potent as anything DuPont or GE could come up with.

And when you consider that millions upon millions of gallons of this stuff were directed into common storm drains and sewers for decades, it is a wonder we aren't all running around with two left feet (which admittedly would make for some very effective heel-toe footwork).

Racing-friendly anatomical anomalies aside, it is a very good thing that the car wash continues to clean up its act as polluted groundwater has been found to be the host of multiple health, nature and socio-economic problems. Today, many facilities are governed by tighter state control and adhere to industry guidelines including the use of less harsh cleaning agents. Additionally, in many areas car washes are required to recycle and/or treat their wastewater before it enters public drainage.

This means that cleaning your own car at home is actually the worst offender in terms of waste and disposal. Short of using a bio-soap and washing your car with a downpour, your best bet may be to go to a local wash.

Wash owners and operators can now go one step further however, according to PC&D Magazine. For anyone not in the know, that would be Professional Carwashing & Detailing, which can be found at www.carwash.com. The article describes how used motor oil can be used in a specialized furnace to heat water, physical plants and in helping to power a car wash, auto dealer, lube shop, etc…

This idea makes especially good sense for the independent garage that is required by law to collect used motor oil anyway. For those who must procure the oil from a shop, just ask anyone with a converted diesel VW for tips on going around to local businesses to find fuel oil.

It is very promising to see additional parts of the industry go green from recycled tires, to automotive fluids, to the vehicles themselves. And while it is unlikely that practice of moving people around in their independent vehicles will ever be environmentally neutral, with a little effort we can do far more than we ever have before.

To see a description of the different types of car washes and their evolution, click here.
To see an article about used motor oil as a furnace fuel, click here.

The Hybrid Hot Potato

The Supreme Court recently judged that the Environmental Protection Agency (EPA) is, in essence, responsible for all conditions associated with global warming under the Clean Air Act. The Act was first signed in 1970 and was then amended in 1990. And while people are still running around claiming that the sky is falling and that this will bankrupt what remains of the "domestic" auto industry over night, NYU professor, David Schoenbrod, also of the Cato Institute, has already described how this decision has been seen before.

The issue of global warming, or environmentalism in general, is a concern to a host of different players in a less than orchestrated dance, including: the general public, the president, the EPA, Congress, big business, and apparently the Supreme Court among others. By tagging the EPA with this responsibility (you're it!), the court is essentially helping to pass the buck and give Congress a free pass.

Everyone involved in the climate shuffle wants to take credit as part of the solution, but when actual dollars and cents are attached to measures (taxes) to address the situation, they vanish quicker than that new car smell. The dance resembles more a game of musical chairs with the EPA left standing alone, who will now assume the role of whipping boy when things don't get better and voters come calling. And while the EPA should be the lead agency in setting enviro-policy, the simply don't have legs or stomach (or any other parts for that matter) to actually make change. It is a bit like a corporate CEO tasking the mailroom to enforce Sarbanes-Oxley compliance.

How does the president fit in? Well, he actually plays a similar role, though as we have seen, he is clearly taking sides by leaving the automakers out on their own. It will be interesting to see if this filters down to any other parts of big business be fore he takes his leave. He too at least wants to appear to be part of the solution, though because he is just one person, he can move a bit faster around the duck-duck-goose circle.

It took the EPA (and Clean Air Act) numerous administrations, more than 25 years and one amendment to achieve any appreciable results. Let's hope the public doesn't let the global warming charade to follow the path.

To read Professor Schoenbrod's article on What's next for Global Warming? click here.

What do you really pay?

Even though for many the financial transaction that is the automotive purchase is one of the largest they may ever make, it's actually fairly straightforward when you boil down all the rebates, financing, tax, title, registration and any other intangible fees that may trip you up. Whether you lease, purchase, or choose some other specialized arrangement, auto dealers often create complexity to some degree per their advantage.

Once a customer has made the emotional commitment to purchase a vehicle, the salesperson/sales manager combo has at their disposal many different ways to design the transaction with their own profit in mind. By capitalizing on even one or two popular customer misconceptions, they can ensure that "the house always wins."

Makes a pretty good argument to both do your homework and make a dealer a friend of the family.

For example, you will see in the paper and online ads for vehicles on sale for $299 or $339 per month. But what does that tell you about the nature of the deal? Absolutely nothing. Because there are several dimensions to an auto deal, any vehicle -- at any price -- can produce almost any monthly payment the sales manager wants. It doesn’t matter if it's a $15,000 Toyota or a $50,000 BMW. You can rest assured that if you're getting a discount on the down payment, you'll make it up somewhere else, whether it be in the rate, the duration of loan, the residual value, the dealers fees, the acquisition fee, the lease termination fee, or the security deposit.

Even if you have a good handle on all of these terms, it is in their orchestrated combination where profit and loss lies. This is by no means a criticism or indictment of all dealers, as there are plenty of honest ones out there. It's just that this is how the game is played.

With all of the information available to consumers these days, the average per vehicle profit has diminished, meaning dealers have to make the money when they can. It's up to you to make sure you're on the right side of the equation.

Beyond the Buy

Also, the payment/price issue is hardly limited to just the auto purchase. Sure, it's easy enough to find out how much it will cost to get an oil change, rotate your tires, and get that rattling ashtray fixed. But do you have any idea what you spend on automotive service and maintenance over the life of your vehicle?

Considering a single service would be a bit like focusing on the monthly payment. It really doesn’t tell you much. And let’s be honest, other than thinking, "Gee, I wonder how much the service will be for this," we don't often think about maintenance costs. Now, auto service costs don’t generally vary as much as car payments do, but they certainly differ depending on the vehicle you choose.

Another area in which you might find some confusion is when you go to look at your insurance invoice. Why can’t insurance companies just come right out and tell you what the premium is? For one thing, that would make it to easy to compare it to other rates.

So instead, expect to get a whole lot of , "This is your premium for 6 months, if you pay it monthly, but we are giving you a month free, so it is really five charges, spread over six months," and so on.

The reason the auto industry continues to operate this way can be summed up by one word: Emotion. Unless you're buying something strictly for your business or are the type of person who generally doesn’t give a hoot what takes them from point A to point B, (in which case, you really are visiting the wrong site here), then emotion creeps into even the most disciplined of shoppers. And the rest of the people who work in the industry -- whether they make the car, sell the car, fix the car, insure the car, or even steal the car -- depend on it.

Pay Up

Ernest Hemingway once said that pheasant shooting was worth whatever you had to pay to do it, a sentiment that Automotive Writer and Editor, David E. Davis also used to describe the privilege of driving a Lamborghini. And while the same can’t quite be said about driving your "spec" econobox, we are certainly willing to pay for our rides. How much? More than you might think.

AAA recently came out with its annual cost average to drive a vehicle. Here are the figures for 2007:

Medium Sedan, Average Cost to Drive* $9,641/yr

*Costs based on: (Fuel - $2.25/gal, average EPA fuel economy ratings, 60% highway – 40% city driving, 20,000 miles/yr, Maintenance – based on standard service & repair as recommended by manufacturer, Insurance – based on 47 year old male, low mileage, good record standard 100/300K, $500 deductible, Tires – cost for one set of replacement tires, Depreciation – 1 year of five depreciation, Finance – based on 5 year loan, 6% interest, with 10% down payment, plus average License, Registration and Tax fees. See: AAA Driving Cost Guide, 2007

For argument’s sake, consider that the average car loan, according to Experian (2004) is about $23,000 and the average payment is $383.00/mo. When a sales tax of 6% is added, you get a loan payment of $405.98/mo or $4,871.76/yr. The Cost to Drive calculation already includes a $743 (average) finance charge, so the total annual Cost to Own (loan) would be $4,178.22/yr.

Medium Sedan, Average Cost to Drive $9,642.00/yr

Medium Sedan, Average Cost to Own** $4,178.22/yr

Medium Sedan, “Total” Cost    $13,770.72/yr

Broken down to a cost per mile basis (20,000 miles) you get:

Medium Sedan, “Total” Cost:   68.85 cents/mi

For reference, at today’s rates, the 566 mile round trip from Birmingham, MI to Union Station in Chicago on Amtrak will cost $69 (12.1 cents/mi) vs. $389.69 (68.85 cents/mi) by car, or roughly 5.5 times as much. Taking to the air paints a similar picture, with the average cost per air mile flown for an average 2,000 mile airline flight costing $258 (2005) or 12.9 cents/mi.

Now, of course, you can interpret these numbers in a lot of different ways, and it's a bit like comparing apples to banana peels, but at the end of the day we really don’t know what it's actually costing us to drive. And this doesn’t take into account other intangibles like convenience, environment impact, and safety.

Studies by the US Department of Labor Statistics and other online resources are showing a trend in what they consider vehicle overspending. They say consumer spending on transportation has increased by 12% over the 1999 to 2005 period -- this at a time when median income essentially didn’t rise at all. Also, the average car loan has grown in length to well over five years in 2006 from four and seven months on average in 1990. A full 80% are now at least four years long.

One of the major contributors to the spiraling automotive costs is the practice of rolling debt into a new car purchase, something that further distorts the actual price. From a purely financial standpoint, even buying a car (a depreciating asset) at all makes little sense, especially when you have to borrow (and pay interest) to do it. This quickly brings people to the "upside down" scenario, where a car is worth less than the balance of its loan.

When consumers get antsy to get into another new vehicle, dealers will do their best to bury the debt leftover from the previous car in the new vehicle’s payments. Some people simply don’t realize it (some just ignore it), but you're still paying for the rest of the first car on top of what you negotiate for the new one. The new (stretched) loan will flip over financially even quicker than the first, and so begins the automotive death spiral. At the end of 2006, the average trade-in contained $4,000 of previous debt that was going toward the purchase of a new car.

Now consider that you are in the spiral and you have to deal with all of those other ownership costs including maintenance and repair. Here is a very general scenario for your basic Medium Sedan driven 20,000 mi/yr.

Year 1   –  Oil Change (2x)  $150 ($75 each)

  Minor Maintenance  $300

Year 2   –  Oil Change (2x)  $150

  Minor Maintenance  $300

Year 3   –  Oil Change (2x)  $150

  Major Maintenance  $600

Year 4  –  Oil Change (2x)  $150

  Minor Maintenance  $300

Year 5  –  Oil Change (2x)  $150

  Major Maintenance  $600

  Other repairs  $600

  (brakes, wipers, etc.)

Service and Maintenance during loan period  $3,450

These necessary expenses equal roughly the equivalent of an extra nine car payments (three quarters of the year’s amount) for one Medium Sedan. Add a second vehicle -- or worse, an SUV --- and the prices climb even further.

For those of you who would like a better idea of what you really are spending for the freedom of driving your car, you can see the AAA site and follow an online form (just don’t forget to add your actual loan payments).

Also, to look up what the average fees & taxes cost for a particular vehicle or to see the average by state, click here or here respectively. By the way, the cheapest state is Oregon and the most expensive for taxes & fees is Nevada.

Makes you think twice about the Sale!! $189/mo. offers you see so often.