Archive | May, 2007

Huge Rebate on Lincoln Town Car – As Usual

By on May 13, 2007 in Features

By Brendan Moore

05.13.2007

Ford announced last week that the $7000 rebate in effect in April on new Lincoln Town Cars will continue for the Month of May, or basically, until further notice.

Ford/Lincoln does this every year with the Town Car, leading one to ask, “Why don’t they just lower the retail price to the amount they usually sell the cars for, and be done with it?” In between the heavy consumer rebates and the huge fleet discounts provided on the Lincoln Town Car, the MSRP is a joke. And this situation is not unique to this year; it happens every year.

The antediluvian Town Car was supposed to get axed last year, but somehow survived, getting by on its core customer base of 70-something consumers and commercial livery customers. Since Lincoln has been producing essentially the same car for a couple of decades, development costs are nil, the tooling is all paid for, and Ford says, hey, what’s not to like? Well, sure, as long as you have customers, but how about some more realistic pricing? At this point, the window sticker is pure theatre.

Depending on what options you get the basic MSRP on the Town Car runs anywhere from $42,175 to $50,645. Then there’s approximately $3100 to $4000 profit between invoice and MSRP. Then the rebate. Then the dealer holdback. Then, if you’re a fleet buyer, more discounting.

When I asked a Lincoln dealer why Lincoln just doesn’t adjust the MSRP downward to the actual price most people pay to drive a new Town Car away, he replied, “Well, there are still some people who see the Town Car as an excellent value at a small discount, or even no discount from dealer sticker. It’s up to the dealer to determine actual selling price”. Let me translate: “occasionally we get a customer in here (usually an elderly guy) that is unaware of just how heavily we discount the Town Car, the brand name still carries some cachet with him, and we can hit a home run off that guy in terms of purchase price”.

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Cerberus Now Rumored to Be First in Line for Chrysler

By on May 13, 2007 in News

Will this deal ever get done?

By Brendan Moore

05.12.2007

In what is described as a very fluid situation by those close to the matter, the deal for future ownership of Chrysler is now potentially changing again. The private-equity group Cerberus Capital Management is reported by The Wall Street Journal to be the new front-runner in the contest to acquire Chrysler.

The previous leader of the pack, Magna International, Inc. is still a strong contender to buy Chrysler, but is losing ground to the offer being pushed by Cerberus, which is buttressed by the strength of its financial resources, its ability to make Chrysler Financial even stronger by its 51% ownership of GMAC, which is also looking to expand its historical base of business, and finally, the fact that they have hired Wolfgang Bernhard as their advisor. Chrysler senior management is very enamored of Bernhard, regards him as a brilliant hands-on manager, and would like to work with him in any new ownership arrangement with Daimler, since Daimler intends to keep a minority ownership stake in the new Chrysler.

The fly in this viscous ointment is that the UAW does not want Cerberus to be the new owner of Chrysler. Cerberus was the lead in the group of private-equity investors that just recently did the deal to acquire the parts-maker Delphi, and the first thing that happened after the ink dried on that deal was that the new owners wanted wage and benefit cuts from the UAW.

The UAW wants Magna to acquire Chrysler since Magna has a history of good relations with the union, and, is seen as an owner in for the long haul, as opposed to a private-equity group, who the union sees as a temporary (and mercenary) steward of Chrysler.

And since the approval of the UAW is important in any potential deal, the preference of the union could be critical to Daimler’s decision.

Will Magna regroup with an improved offer before Cerberus can get the deal done with Daimler? Or, conversely, is the rumor of Cerberus now being the lead dog just that, a rumor? Hard to say, but there has been a lot of chatter (always from unidentified sources) for the last three days, both in Detroit and Germany, that Magna was not going to be the buyer, that Chrysler had decided to keep Chrysler after all. Maybe this was what was really was going on – a shift in the deal. It’s anyone’s guess at this point. We’ll keep you posted.

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Smart Car Update

By on May 10, 2007 in News

They’ll be happy to make more…

By Brendan Moore

05.10.2007

It looks like the Smart car is going to make a splashy debut in the U.S. market.

United Auto Group (Roger Penske’s mega-dealer group) is importing the cars for DaimlerChrysler and already has cash deposits on more than 12,000 Smart Cars, which they started taking only a month ago. The cars do not even go on sale in the United States until January 1, 2008.

UAG had plans of selling 16,000 Smarts in all of calendar year 2008, so it is pretty likely that all of the vehicles could actually sell out in advance of a single Smart Car hitting the blacktop. Smart (Mercedes) says if they make their U.S. numbers and achieve their other now-scaled-back regional sales goals in the rest of the world, that Smart will actually be profitable.

Even as recently as 60 days ago, there were plenty of auto industry analysts and journalists that were saying that the Smart car was going to fall flat on its cute little face in the United States.

Their reasoning was that there were not enough buyers in the U.S. for a car like Smart – even when you combined all the urban hipsters, Europhiles, and fuel-economy freaks together, Smart still wouldn’t make their 16,000 units.

We predicted 6 months ago that Smart would not only make their numbers, but exceed them in the first couple of years, and it looks like this is now going to happen – Smart’s timing for entry into the U.S. seems to be pretty good. We’re glad to see it as more choice in new cars is always good, and who knows, maybe it will provide a nudge to other automakers who are considering bringing in cars that fit into the mini or super-mini class.

In the same vein, everyone who was anyone also said you couldn’t sell an upscale hatchback in the U.S., but the Audi A3 and the BMW Mini have put that notion to rest.

Maybe we’ll see some more great small cars soon – those that exist now, and those that some manufacturers are considering for production.

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Please NOTE: Used Car Lists Still Available

By on May 10, 2007 in Editorials

Used Car Prices and Opinion and Used Car Bargains

05.10.2007

We are receiving emails asking “Why did you stop the used car lists?”

We didn’t – we just had to move the lists because they were getting so large that both lists were becoming unwieldy in the blog format we work with here on the site. Just look to your right and you will see the headers for both lists in the right-hand column, and in the text, links to the lists, which now reside on our used cars page. You may have to scroll up or down, depending on where this post is in relation to the stack on the homepage.

We apologize for the inconvenience of having to follow the link, but can assure you it’s worth it – both lists are not only current, but bigger and better.

For new readers, the Used Car Reviews is a list of used cars that we reviewed (as used cars) with guideline pricing – both wholesale (loan) and retail.

Used Car Bargains are used car models, that, for a variety of reasons, are typically bargains as used cars – lots of value for less money than other cars in the same segment, and not a bad car in the bunch. All the cars on the list are at least good cars and some of them are great cars, and all of them come in at a good price/value ratio.

Check it out!

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Obama’s Legacy Cost/Fuel Economy Proposal

By on May 8, 2007 in News

Some sugar with the auto industry’s proposed medicine

By Chris Haak

05.08.2007

On Monday, Democratic presidential candidate Barack Obama spoke to an audience at a sold-out Detroit Economic Club about the auto industry and its legacy cost (pension and retiree healthcare) problems, as well as fuel economy issues. He told his audience that domestic automakers did not adequately invest in fuel economy technology over the years, and that it’s one of the reasons they are now struggling in the marketplace relative to their Asian competition.

Obama’s plan (which he first proposed in his second book, The Audacity of Hope (2006), calls for helping the industry with its enormous legacy cost burden by paying 10% of it, or about $7 billion. The industry would then be required to invest at least half of those savings (or about $3.5 billion) into technology to produce more fuel efficient cars. He’s still calling for increases in CAFE standards similar to the aggressive ones that the Bush Administration has proposed. However, the Bush Administration’s CAFE proposals have included no incentives or other assistance to the Detroit Three. True, this would increase government spending, but would still be only a fraction of what is spent on the Iraq war. I don’t understand why any supporters of the domestic auto industry would be opposed to this proposal – it’s the same requirement, but at least helping them to meet the goals.

CAFE itself is another topic – it may be one of the most shameful examples of the law of unintended consequences, since its fuel economy mandates were probably the biggest factor in moving American consumers out of their big, thirsty cars into big, thirsty SUVs and pickups instead. Large SUVs like Suburbans and Expeditions get worse fuel economy than large cars such as Lincoln Town Cars and Ford Crown Victorias, even though the SUVs are now equipped with six-speed automatic transmissions and other fuel saving technology, while the cars soldier on with old-fashioned four-speed automatics and old-tech engines. But if CAFE must continue to survive, the government should partner with industry to make it happen rather than just dictating the way it will happen from within the Beltway.

Obama’s idea may not be the answer – but I give him a lot of credit for being the first prominent politician to actually propose a solution – and in the form of a partnership, not a mandate.

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Renault Logan: How to Build a Successful Cheap Car

By on May 8, 2007 in Editorials

Renault Logan, Dacia Logan and Nissan Aprio – it’s all good for Renault-Nissan

By Chris Haak

05.07.2007

We’ve previously mentioned the Renault Logan on this site (most recently here, in reference to a story that they will be sold as a Nissan in Mexico in the near future). Some have asked for more information about this car, so let’s get into it.

The Logan is built by Renault’s Dacia subsidiary in Romania and sold as a Dacia in most parts of the world where Renault has a presence, but as a Renault in Russia, China, and Venezuela. And, of course, in the very near future, as a Nissan Aprio (new name announced last week) in Mexico.

With the Logan, Renault has basically taken a page out of Henry Ford’s old playbook for the Model T – the key drivers are simplicity, reliability, and a price easily affordable to its target audience – originally car buyers in developing markets. Its simplicity and relatively high ground clearance make it both easy for the owner to repair himself and suitable for unpaved roads without damaging the car.

The Logan is regarded as a decent small car – it has a minimal amount of electronics (no ABS or stability control, for example) and an adequate if not overpowered engine (the base engine is a 1.4 liter 75-horsepower four cylinder). Its platform was developed from an existing Renault/Nissan small car platform, but was re-engineered to reduce its part count by 50%. The windshield is a flat piece of glass, which cuts down on costs and the likelihood of defects, and makes it easier to assemble. The dashboard is one large piece of injection molded plastic; the car’s exterior mirrors are the same part on the right or left side to reduce costs. The Dacia factory in Romania that assembles the Logan does not use any robots because labor is so inexpensive and the car is simple to build.

So, with all of the cost-reducing measures described above, how much does a new Logan cost? In developing countries, it’s sold for the equivalent of €5,000 (about $6,000). When buyers in Western Europe heard about the cheap new car that Renault was selling in the former Eastern Bloc, they clamored to have the car sold in their countries too, so it was eventually offered in Germany, France, and Spain. Buyers had to be put onto waiting lists just for the chance to buy a Logan (which was moderately upgraded for “developed” markets by adding a passenger airbag and three-year warranty and some other equipment, raising its price to about $9,300 – about half the price of a similarly sized Ford Focus or Volkswagen Golf. Almost nothing is standard, including air conditioning, power windows, radio, and more, to keep the price down.

Production of the Logan began in 2004, and to date, more than 300,000 have been sold, with sales ramping up rapidly each of the past three years. Other manufacturers have certainly taken interest in the success story that the Logan has become; Volkswagen has considered building even a cheaper new car for the Chinese market, for example.

Would the Logan do well in the US? It’s hard to say – many folks are nostalgic for the days when a mechanic did not need a master’s degree in electrical engineering in order to tune up an engine, and modern cars get heavier, more powerful, and more feature-laden with each successive generation. The Logan is a step back from all of those trends, but unless someone absolutely HAS to have a new car, a buyer in the US would probably be better off studying the Autosavant used car recommendations and getting a larger, more comfortable, slightly-used car. There still may be folks who want to make a statement by not making a statement with their cars, and the Logan might be exactly what those folks need.

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VW Has Big Plans for U.S. Sales

By on May 6, 2007 in News

Their long-term sales projections require VW to almost double their sales in the U.S. by 2011

By Brendan Moore

05.06.2007

Volkswagen has ambitious goals for increased sales worldwide, and the U.S. market is part of those global plans. VW plans to increase its sales in the States to 400,000 units annually by 2011. Considering that Volkswagen sold only 235,140 units in the United States in calendar year 2006, and, that 2007 is widely predicted to be a flat year for sales in the U.S. for just about every automaker, 400,000 sales in 2011 looks to be problematic. Add in the fact that the U.S. new-car market is more fiercely competitive than it’s ever been (which is saying a lot) and the fact that everyone else is predicting healthy sales growth in an overall market that is forecasted to grow only slightly in the next five years, and suddenly the claim of 400,000 units looks a bit fantastic. It is impossible for every manufacturer to grow in this projected market climate and so any growth must come at the expense of another car company’s shrinking sales.

But, to their credit, VW is nothing if not confident that they will reach their goal of 400,000 units. In interviews with several publications, Adrian Hallmark, EVP at Volkswagen and the brand head for VW in the U.S. has recently stated that VW occupies an enviable space for a volume-production car company; above the mass-market giants like the domestics and the Japanese, and right below the many luxury nameplates sold in the U.S. VW intends to exploit this “sweet spot” in the market as much as possible within the next five years, and in doing so, extract as many sales as possible from this unique market position.

2008 VW Tiguan
VW is not foolish enough to count on market positioning as their main driver for sales growth in the United States, but instead, points to the launch of several additional new models in 2008 and more new models in years subsequent that will propel the company towards their lofty sales goals. In 2008, VW will launch a minivan, the Tiguan small crossover, the CC Project ( a Passat-based 4-dr coupe that will surely get another name), and clean diesel TDI versions of the Golf, Jetta, and Jetta Wagon. The new Scirocco may also show up in 2008, after first being rejected by VW in the U.S a few weeks ago, and now, as of a few days ago, penciled into the U.S. lineup. There are also two new mystery models in the pipe that are scheduled to appear in the next five years. Whether these are low-end or top-end cars is unknown, but VW promises that both vehicles will be exciting additions to their respective segments. Lastly, there is a contentious internal debate regarding whether all VW models should be offered with either the TDI engine or 4-Motion (VW’s all-wheel-drive system) as an option. There is a large faction that wants both options offered on every vehicle Volkswagen sells in the United States. If this happens, it effectively creates more models within the primary models, as the usage preferences (and therefore buying preferences) of TDI and 4-Motion buyers tend to differ from regular buyers.

What VW said they were going to bring out – the VW Microbus concept from a few years ago.

Just as an aside, if you’re holding your breath waiting for the updated version of the Microbus, you can exhale now. Volkswagen says it is definitely not happening and the only thing in the VW line resembling the beloved Microbus is the new minivan which was jointly developed with Chrysler and will be built in a joint venture with Chrysler. Bad decision from this writer’s point of view, but I’m sure there is a PowerPoint somewhere at Wolfsburg that illustrates the genius of rolling out a VW-badged Chrysler minivan in a market where other manufacturers have abandoned the minivan completely.

So, will this sales goal for 2011 be met?

Boy, that’s a tough one. It’s not as if the other car companies are going to be standing around with their hands in their pockets in the U.S. while VW is trying to get all of this done. They’re going to be trying just as hard as Volkswagen to improve their sales and their market position in the U.S. From a profit perspective, VW says it can charge anywhere from 5% to 10% more than Toyota, Nissan and Honda, etc. in the same segment because prospective buyers value the German heritage of VW higher than what the Japanese cars bring to the table, but VW’s production cost differentials on most of their models are higher than 10% compared to their Japanese competition. To offset this, VW can build more of their U.S. market cars in Mexico, where VW has tremendous unused capacity, but then the rationale for that price premium starts to ebb away with some buyers.

But Volkswagen’s biggest problem in terms of making their numbers may not be the Japanese car companies. Instead, the wildcard in this calculus may be what the domestic auto manufacturers do in the next five years. GM is not the pushover it was in passenger cars, and Ford looks as if it is going to be a much tougher market force in cars as well in their near future.

To wit, General Motors is bringing over Opels (undiluted) as Saturns in model year 2008. Opel and VW fight it out like pit bulls in Germany, and Opel has been winning a lot of those battles lately. It is not unreasonable to believe that some prospective VW buyers will get their heads turned by the excellent Opel/Saturn models for sale here in the States. These are very good German cars. GM is also bringing over the Holden Commodore from Australia, which will be sold here as a Pontiac, and has gotten excellent reviews in the rest of the world. It will be priced like an expensive Jetta or an inexpensive Passat, take your pick. And, finally, GM’s new Saturn Aura and forthcoming Chevrolet Malibu should give the Jetta and Passat lineup some fits as well.

Ford is going to bring over the wonderful Focus S-Max and the Mondeo from Europe, and possibly the new Ford Falcon from Australia in the next three years. All three are vehicles that post healthy sales and garner great reviews on the global stage.

And Chrysler? Who can say what Chrysler will do in the next five years under its new, as-yet-unknown owner? They are the wildest of the wild cards.

And then, of course, there are the Koreans. And the Chinese. And the other European brands poaching VW’s turf, like Volvo with the C30 hatchback, BMW with the 1-Series, Saab with the new 9-3 and 9-5, and maybe Alfa Romeo shows up with their attractive small cars.

I think VW has a big hill to climb in terms of their 2011 sales goals. It can be done, certainly, but everything would have to go right for them. They cannot put a foot down wrong anywhere.

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Auto Leasing Shows Steady Growth

By on May 4, 2007 in News

By Brendan Moore

05.04.2007

Vehicle leasing is continuing to rise steadily in the U.S. as a means of consumer auto finance despite the misgivings of some of the large auto finance providers. Leasing now accounts for a little under 23% of all new-vehicle deliveries, up from approximately 16% just four years ago. Of course, leasing penetration is still nowhere close to the all-time high of over 30% reached in 1999.

Vehicle lessors suffered huge losses in the years subsequent to 1999 as a result of inflated residual values, and that pushed a lot of lessors out of the leasing business, as well as forcing residuals up much higher. The combination of higher residuals and a smaller number of lessors chilled what was a red-hot consumer auto leasing market for years after this big shake-out. Memories of that crash in the business are what is making some of the current lessors a little nervous. It wasn’t that long ago, so the pain is still pretty fresh. Now, not all auto finance companies are nervous about the steady march upward in leasing; indeed, some are actively seeking to increase their leasing business. These lessors feel that the drivers of the irrational residuals on lease vehicles that existed before the last leasing debacle are no longer present in today’s leasing market. And if they’re a captive (GMAC, NMAC, DaimlerChrysler Financial, etc.) leasing company, they also like the fact that a consumer that leases a car is back for another new car in about 32 or 33 months, while the consumer that finances a new vehicle through an installment auto loan doesn’t show back up on the lot for almost 60 months. That is a huge difference, and you better believe the captives have taken note of that disparity.

Regardless of how the lessors feel about the risks of increased leasing, consumers are embracing leasing as a way to get the vehicle they want despite the recent rises in interest rates and new-car prices. As we commented on in an article titled Maybe You Should Lease Your Next Car last year (sill available in November 2006 Archives), there are many, many consumers that really should take a look at leasing their next new vehicle as opposed to financing that vehicle through a long-term installment loan, as many consumers are doing now (see Long-Term Auto Loans Continue to Rise in last month’s archives). It is simply a better deal for them financially. It is apparent that an increasing number of savvy consumers are figuring this out on their own, and I would expect further increases in leasing over the next few years. My forecast is that leasing will account for around 30% of new-car financing again by 2010.

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Toyota’s Expensive Auris Launch in Germany Pays Off

By on May 3, 2007 in News

By Brendan Moore

05.04.2007

Toyota has a replacement for the Corolla in Europe called the Auris, and has pulled out all of the stops in order to ensure a successful launch on the Continent. Ground Zero for the Auris launch is Germany, which is giving VW, Ford and Opel nervous palpitations.

Corolla sales in Germany last year totaled 43,465 units, according to both JATO and ACEA, which, coincidentally, is rumored to have accepted Toyota as a member yesterday (ACEA has the 13 largest vehicle manufacturers in Europe in its organization and has previously rejected Toyota’s application for membership year after year). Sales of the Toyota Auris in Germany during the remainder of 2007 are expected to easily match the 2006 Corolla total and surpass 60,000 units in 2008. Corolla sales in Germany acoount for almost 30% of combined Toyota/Lexus sales in Germany, so any increase in this segment for Toyota really increases their overall sales.

Toyota spent over 2.5 million euros a day starting in late February by buying up space on every placard and billboard in every major city in Germany. It was Germany’s all-time largest billboard campaign. And it paid off: Toyota spokespeople say that since late February until the end of the campaign recently, over 300,000 car shoppers showed up at Toyota dealers in Germany looking for a new Auris. Toyota is calling the Auris launch the most successful launch of a Toyota vehicle ever in Germany.

2007 Toyota Auris 5-door

None of this is bound to make the market leaders in Germany feel very good. It looks as if the Toyota steamroller has fully arrived in Deutschland.

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Lexus LS600h: Save Your Money, buy the LS460

By on May 2, 2007 in Editorials

In the general sense of the word, the LS600h is a bloody rip-off.

By Bruce McCulloch

05.20.2007

*Sigh*

A Toyota fanatic (such as myself), couldn’t ask for anything more than a LS600h? Am I right?

Well, it should be the perfect variant of the Lexus LS, but sadly, I do not feel that is. You wouldn’t believe how much I wanted to love the LS600h, you wouldn’t believe how much I wanted to say “Ha, take that Germany!”

However, I cannot say I share the enthusiasm around the LS600h that fellow Lexus fanatics have, because I feel Lexus has let me down. Now don’t get me wrong, I’m not insinuating the LS600h is a bad car by any means, but when the lesser LS460 offers comparable options and equal performance for far less money, I see an issue.

You’re probably thinking that none of that matters anyways because the 600h is aimed at a demographic which will not care for any of that anyways. Sadly, I think you’d be right. I think the average LS600h buyer will not be focusing on these particular aspects and that in my opinion, is a shame. You see, as far as I care, the LS600h offers no real advantage over its counterpart.

Gas mileage? Ha, please! I highly doubt the demographic of people buying vehicles with price tags creeping over $100k USD are going to care about fuel economy. After all, they never have before, so then why are they going to start now? I suppose there is always going to be that one person that does in fact care about the fuel economy, but remember, in order to have that piece of mind you’ll need to be prepared to shell out an extra $35,000. All for what, exclusivity? The right to say you have the world’s first saloon with a hybrid 8 cylinder engine?

In the general sense of the word, the LS600h is a bloody rip-off.

Now to be fair, when compared to BMW’s executive saloon, the 760i, the 600h does look like a great deal. It offers all of the comparative toys and lap luxury with an identical 438 horsepower figure – all for around 15k less. Now I suppose the next question could be how does the V8-powered LS600h compare to the V8-powered BMW 750i? Well, not that well, really. An extra $29,000 (MSRP) does indeed get you more power, but nearly the same technological specifications and performance figures.

Although arguably, when comparing either the 8-cylinder BMW or the 8-cylinder Lexus, the 760i does offer that crucial ingredient any true luxury car should have, that is, a 12 cylinder motor. Ahh, is that the true Achilles heel of the LS600h? The lack of a true 12 cylinder, like its rivals from Stuttgart and Munich? Should Lexus have just shoved a V12 in the new LS, proclaimed victory, and done the hybrid in a smaller car? Time will tell.

However the more one digs deeper into the comparison of the two LS variants, the worse it looks for the new flagship.

For starters, the hybrid system is going to cost you lot more than just money, it’s going to cost you space. The fitment of the hybrid drive train and battery system has compromised luggage space within the trunk by 6.3 cubic feet (11.7 complete cubes compared to 18 on the 460)

For that fact alone, would one not just consider buying another upscale luxury car? I can view this as potentially being an issue for “Mr. Executive” who might buy an LS600h. “Sorry sir, there’s no room in the trunk for your suitcase. You’ll have to enjoy its company in the backseat as I chauffeur you around New York City”. Is that overly dramatic? You be the judge.

Yet it doesn’t stop there. As I mentioned above, the LS460 has equal performance to the LS600h. Figures from both vehicles vary around the five and a half mark when it comes to the sixty mph, but how could that be? Especially with that the Hybrid motor churning out an extra 50bhp. Well quite simply, the addition of the hybrid technology, as well as a mostly-superfluous AWD drivetrain, makes the Lexus 600h a ridiculous 887 lbs heavier than the 460.

Further to that, everything available on the 600h, save for the hybrid V8, can be found on the LS460. So then, I let you be the judge. Does the 600h really offer any true advantage over the lesser LS460?

Personally, I don’t think so, but then do any of the other flagship models (from BMW, Audi, etc) that have engines with more than eight cylinders honestly offer any advantage over the base 8 cylinder models? For the most part, I’d say no.

However, to further muddy the waters, this is where I believe Mercedes and their S-Class are a step above the competition in this segment. While the extra $54,000 (MSRP) premium over the S550 doesn’t necessarily get you any more technical toys, it does offer a clear power advantage of 128bhp. Not to mention, performance that is clearly a step above not only the competition, but above the base model.

Back to the Lexus LS460 and the Lexus LS600h: the summing up is that there is not enough extra value for the extra money the LS600h costs. Get the LS460.

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