Next victim of mortgage mess: Auto sales

Rising concern about home values and mortgage payments is causing more buyers to slam the brakes on new car purchases.

Already-battered U.S. auto sales could be the next victim of the problems with mortgages, declining home and stock prices as potential car buyers delay purchases due to uncertainty.

Industrywide U.S. auto sales in August could be off 10 percent from a year ago, according to an early read from sales tracker Edmunds.com. That follows July sales that were 19 percent below year-earlier levels

Jesse Toprak, executive director of industry analysis for Edmunds.com, said that the downturn in home values and credit issues that were seen in the July numbers could be an even bigger factor this month.

"I think the issue is becoming more pronounced," he said.

Sales weren't just weak at domestic automakers, such as General Motors, Ford Motor and Chrysler Group. Year-over-year sales fell in July at Toyota Motor and Honda Motor as well. Many forecasters are cutting full-year auto sales targets in the face of these weak summer sales. And some experts say the turmoil in housing could throw even more dirt in the gears.

CNW Research, which specializes in surveys of car buyers, found in its latest reading that 13.6 percent of the potential market's customers were canceling or postponing plans to make a new-vehicle acquisition any time soon, up from 10.1 percent last year.

And of those postponing or canceling plans, home-related issues jumped to the No. 1 reason, cited by 17.6 percent of those staying away from dealers' showrooms, with nearly 11 percent of that group citing a decline in their home equity and another 6 percent citing an increase in their monthly home payment.

Of those postponing purchases, 10.7 percent cited problems with credit scores, as some sources of car loans are tightening lending standards. Gas prices are a distant third, cited by less than 5 percent of those delaying purchases.

"We're probably going to see some pretty bad [auto sales] numbers for the rest of the year," said Art Spinella, president of CNW. "To put it simply, housing is now the major hurdle to new car purchases. The next three to four months are not going to be much better if it's better at all. People are not interested in buying a new vehicle."

Only two years ago, the CNW survey found just 2.3 percent citing home-related issues as a reason to postpone a car purchase, while 5 percent cited credit score problems and about 3 percent cited gas prices.

Automakers, led by GM, are upping cash-back offers and other inducements to try to breathe life into sales in the face of headlines about home foreclosures and market meltdowns.

GM spokesman John McDonald said that GM isn't seeing any sharp drop-off in sales it can trace to the current mortgage and housing slowdown.

"It is one of a number of headwinds," he said. "There's fuel prices, there's interest rates and there's housing prices. But we're not seeing anything new that we've not been talking about for more than a year."

But one auto industry executive, who spoke on condition that his name not be used, said that the higher incentive spending by automakers, particularly on GM pickups, may mask some of the bite that housing is putting on sales.

"The home was not only a source of financing for some car purchases, it contributes to a positive feeling psychologically," said the executive. "That led to a confident outlook, a view that 'I can go ahead and spend from paycheck to paycheck and buy new cars when I want to because the value of my home and portfolio have gone up.'

"It's silliness to say the credit crunch doesn't matter," said the executive. "If the final sales numbers for August have any strength, it will be because of incentives."

Current Auto Rates
36 month new: 6.82%
48 month new: 6.94%
60 month new: 6.94%
72 month new: 7.01%
36 month used: 7.40%

Experts in the field say that car purchases are one of the first items that consumers can and will put off if they are nervous about their own financial outlook, long before they'll cut back on eating out or other discretionary purchases.

Bob Schnorbus, chief economist for auto research firm J.D. Power & Associates, said that the August sales probably won't tell the full story about the drag that the housing turmoil is causing for auto sales.

"I wouldn't expect it to have that quick impact; I would expect it to be more of a drag throughout the rest of this year than a plummet in August," he said.

And Schnorbus said that while consumers may keep making other types of purchases, even as they pull back from buying new cars and trucks, the slowdown could spread to other types of spending in the future if the market does not improve.

"A new car is one of the more postponable purchases that people make," said Schnorbus. "That new vehicle purchase could be a good leading indicator if consumers are going to cut back. Over the next few months, we could be getting some very interesting signals."
(C)CNN

Auto Leasing: Pros and Cons

If you are considering leasing, you need to do your homework. Here is some advice on how to get the best deal.

Aside from having a new car every few years, a major attraction to leasing is that "you get more car for the same monthly payments," says Robert Haber, a New York City art dealer who is leasing his Lexus RX 330 SUV.


These pluses will seem convincing to many new car shoppers, but to lease successfully, you need to understand the transaction. The concept is simple, but the execution is often highly complicated. When you lease, you pay, in effect, for the loss in value of a vehicle for the three or four years you are leasing it, plus interest on that amount.

Dealers will want to talk only about monthly payments, but to lower those payments you need to understand all the moving parts.

How Leases Work
Leasing comes with its own jargon. The most important factor in determining payments is the difference between the starting cost, known as the capitalized cost, and the estimated value at the end of the lease, called residual value. Auto brands that have high resale value, such as Mercedes-Benz, are good candidates for leasing.

Usually the best available lease deal will be the one offered by the manufacturer's captive finance subsidiary (see definition below). They often offer subvented, or manufacturer subsidized, leases, a promotional effort designed to help move certain vehicles. These deals are most common for luxury brands, and typically the residual value will be fixed, as will the interest rate. Thus your only weapon to lower payments is to negotiate down the capitalized cost — just as you would try to lower the purchase price if you were buying the car instead.

Leasing has its pitfalls, as well.

Do’s and Don’ts

Don't sign a lease longer than the warranty on the car. You don't want to be paying for repairs on a car you don't even own. On Ford, General Motors and DaimlerChrysler cars, three-year warranties would call for no longer than three-year leases.

Don't sign a lease with mileage limitations that are unrealistically low for your driving habits. Excess mileage costs at the end of the lease can be very expensive. You will likely save money by negotiating up front for a limit higher than the typical 12,000 miles a year, if you think you will need it.

Do protect yourself against theft or serious collision loss early in the lease. If the vehicle is stolen or totaled, your insurance will pay only the depreciated market value of the car at that time, which may be less than the total you owe on your lease. So-called "gap insurance" will pay you the difference between your insurance settlement and the total amount you still owe on the lease. Most leasing companies offer this coverage, and it is one of the few add-ons that makes sense to accept. Gap insurance as part of the lease usually won't cost you any more than getting it from your insurance agent, and is more convenient.

Do brush up on leasing jargon, so you can be a savvy negotiator.

Leasing Terms to Know

Capitalized Cost: The lease transaction's equivalent of the selling price. Payments are determined largely by the difference between the capitalized cost and the residual value (see below).

Capitalized Cost Reduction: Jargon for down payment in a lease transaction. You can use it as a way to reduce payments if, say, you have the proceeds from selling your old car, or if you are trading in your old car.

Excess Mileage Charge: A penalty for driving more than the mileage allowance in the lease — typically around 12,000 miles a year. To avoid this penalty, make sure your lease has a mileage allowance matching your driving habits.

Captive Finance Companies: These subsidiaries of major auto companies, such as Ford Motor Credit and General Motors Acceptance Corp., make auto loans on the companies' brands. Often they have better rates than those offered by the dealership itself.

Subvented Leases: Subsidized by the manufacturer, these leases are generally designed as promotional efforts to help move vehicles. Often, these can be one of the best deals for the consumer considering leasing as an option.

Residual Value: What the vehicle will be worth at the end of the lease. It may or may not match true estimates of the used car value at that point. When a manufacturer wants to promote leasing of a certain model, it will lower payments by artificially boosting the residual value.

When Does it Make Sense to Lease Instead of Buy?

A choice to lease or buy with a loan is largely one of personal preference and driving habits. If you typically trade for a new car every four years or less, drive less than 12,000 miles a year and keep your vehicle in good condition, you may be a good leasing candidate.

Especially among luxury brands, the best deals are often ones from the company's own finance arm. Because they prefer promotional leases to giving rebates, companies such as BMW, Lexus and Mercedes-Benz often offer leases that have low interest rates, above-market residual values or both. The result is lower monthly payments.
(C)Forbes

Chrysler hires Lexus executive to revive marketing

Chrysler has hired Deborah Wahl Meyer as the vice president and chief marketing officer of Chrysler.

Meyer spent the past six years with Toyota and was recently vice president of marketing for Lexus. Meyer, 44, will report to Steven Landry who is the executive vice president of North American sales.

“She’s young, she’s hip and she’s a fast-tracker from Toyota,” said Jack Nerad, editorial director for the auto-buying guide Kelley Blue Book.

Meyer was not directly recruited by Chrysler’s CEO, Nardelli, although he did meet with her after he was hired on August 5th. “Bob really encouraged Deborah to be a part of his team at the new Chrysler,” Chrysler spokesman Jason Vines said.

Meyer will officially join Chrysler starting August 28th. Robert Nardelli, ex Home Depot CEO, was hired on August 5th.
(C)CarTech

BMW Mini Colorado - in talks to create Mini SUV

Auto-parts supplier and German automaker would assemble 65,000 of a vehicle called Mini Colorado at a plant in Graz, Austria, a newspaper reports.

Magna International is in talks with BMW AG to build a larger version of the upscale German automaker's trendy Mini cars, Canada's Globe and Mail newspaper reported Thursday.

The sport utility vehicle would be called the Mini Colorado, with 65,000 to be assembled annually at Magna's Steyr plant in Graz, Austria, the newspaper said, citing unnamed sources.

Tracy Fuerst, a spokeswoman for Aurora, Ontario-based Magna told Reuters that the "reports of potential future BMW and Volkswagen assembly programs are speculative and, as a matter of policy, we will not comment on them".

"As a Tier 1 automotive supplier, we are constantly engaged in confidential discussions with [original equipment manufacturers] regarding potential future business," she said.

The Canadian auto-parts maker is also rumored to be in talks with Volkswagen AG about assembling 20,000 roadsters annually for VW at the Steyr plant, the Globe said.

"It would be positive news for Magna because, as is well known, it is facing the loss of pretty significant volumes," said David Tyerman, an analyst at Scotia Capital.

The reports came on the same day that DaimlerChrysler's Chrysler Group announced it was shifting full-sized car production from Magna's Steyr plant to its own Brampton, Ontario, plant, where it will invest $1.2 billion for upgrades of the Chrysler 300, Dodge Magnum and Dodge Charger models.

BMW said in May it planned to pull production of its X3 mid-sized SUV from the Steyr plant and transfer it to its own plant in South Carolina. The X3 represented about 45 percent of total vehicles assembled at Steyr.

"So its assembly facility in Graz, Austria, would be significantly under-utilized and obviously these new programs would help a lot in filling that production hole," Tyerman said.

Magna shares were little changed in late-session trading on the New York Stock Exchange.
(C)Reuters

Chrysler scraps luxury car plans

Chrysler throws out plans for Imperial luxury sedan touted by actress Longoria as Cerberus Capital readies take-over.

Chrysler Group has scrapped plans for a luxury sedan that would have represented a bigger, heavier and less-fuel-efficient version of its Chrysler 300C, citing high gasoline prices and tougher fuel economy standards.

Chrysler said on Wednesday that it was dropping production plans for the Imperial, a high-riding luxury sedan that prompted comparisons with the Rolls-Royce Phantom.

The decision to scrap the Chrysler Imperial marked the first step in a sweeping review of future rear-wheel drive vehicles as Cerberus Capital Management prepares to take over the loss-making automaker, two people familiar with the process said.

Chrysler had introduced a concept version of the Imperial with a splashy display featuring actress Eva Longoria at the 2006 Detroit auto show, reviving a nameplate that had represented the top of the automaker's line for decades.

The Canadian Auto Workers union had been told that the Imperial was slated to go into production at Chrysler's Brampton, Ontario, plant in 2009 for release in 2010.

Earlier this month, union officials in Canada were briefed on the company's decision to drop the plan, a Chrysler spokesman said.

"It would have been irresponsible for us to move forward with the business plan for the Imperial," Chrysler spokesman Dave Elshoff said.

Cerberus is acquiring 80.1 percent of Chrysler from its German parent DaimlerChrysler AG in a $7.4-billion deal expected to close as soon as this month.

The Imperial would have been built on a rear-wheel-drive platform shared with Daimler's Mercedes. It would also have added a gas-guzzling sedan to Chrysler's line-up at a time when it is looking to respond to consumer demands for improved fuel efficiency and facing tougher U.S. government regulations.

In preparation for taking over Chrysler, Cerberus has begun lobbying against the higher fleet-wide fuel economy standards passed by the U.S. Senate.

Cerberus Chairman John Snow told an audience in Detroit last week that Senate legislation to require new autos to average 35 miles per gallon by 2020 would risk the survival of the U.S. auto industry. Snow also said Cerberus would be reviewing Chrysler's business plans on an ongoing basis.

"There's going to be a continuing exchange of ideas and looking at what can be done better, what can be improved," he said.

As part of that process, development work on future rear-wheel drive sedans for 2010 and beyond is expected to be suspended for several months while the plans are reviewed with Cerberus representatives, including former Chrysler executive Wolfgang Bernhard, two people familiar with the matter said.

"This is exactly what Daimler did when they took over Chrysler, and Cerberus is going to do the same," a person briefed on the Imperial decision said.

Chrysler spokesman Elshoff said he could not comment, but he said the company has committed to improving fuel economy across its line-up.

Erich Merkle, an analyst at IRN Inc., said he expects that Chrysler under Cerberus will opt to retain rear-wheel drive vehicles, a performance-ready configuration shared by the 300C and upcoming Dodge Challenger.

But he said the new Chrysler could press to incorporate technologies such as cylinder deactivation and direct injection to boost fuel economy of future models. "You don't have to kill rear-wheel drive in order to keep fuel efficiency," he said.

Chrysler, which competes with U.S. automakers like General Motors and Ford Motor Company, relies on sales of trucks and SUVs, such as the Dodge Durango SUV and RAM pickup truck, for almost 70 percent of its total sales at a time when U.S. consumers are increasingly demanding lighter and more fuel-efficient vehicles.

Chrysler, which does not expect to return to profitability before 2008, is investing $3 billion in new plants in Wisconsin, Michigan, Indiana and Mexico intended to produce a family of more fuel-efficient V-6 engines and components.
(C)Reuters

Big 3 dragging heels on fuel economy

Car companies not reacting quickly enough to increasing fuel prices and consumer demand, Consumer Federation says.

Despite losing sales to Japanese car companies, auto manufacturers, particularly U.S.-based manufacturers, have been slow to respond consumer demands for better fuel economy, according to a report released Tuesday by the Consumer Federation of America.

The report, citing data on sales and on new model introductions over the past several years, concludes that more stringent average fuel economy regulations are needed to push General Motors, Ford and Chrysler competitiveness in the burgeoning small-car market.

"During the past ten years, as gas prices have gone up, the number of models (trims) with 30 mpg or higher has gone down," the report says.

The CFA report counts 61 models available with mpg's greater than 30 in 1998 compared to 46 in 2007. That represents a shift from 8 percent of available models in 1998 to 4 percent today.

Meanwhile, according to the report, the number of models getting less than 30 mpg has gone up from 746 in 1998 to 1083 in 2007. That represents a change from 92 percent of available vehicles in 1998 to 96 percent today.

As gas prices increased between 2000 and 2005, Asian manufacturers improved the fuel economy of 68 percent of their most popular models while Detroit-based manufactures improved the fuel economy of only 48 percent of theirs. Meanwhile, fuel economy actually got worse for 52 percent of the most popular domestic models, while it declined for only 32 percent of the most popular Asian imports, according to the release.

U.S.-based auto manufacturers have also suffered a decline in sales over the past three years that, according to the CFA's analysis, can be tied directly to the increasing popularity of more fuel-efficient compact and small SUVs while Detroit manufacturers have continued to emphasize large trucks and SUVs.

"By passing a strong [Corporate Average Fuel Economy] requirement, without loopholes, Congress will be providing a blueprint to help the 'Big 3' become competitive again by building the vehicles that the American consumer really wants."

There is currently a proposal in Congress to increase the required average fuel economy for all passenger vehicles to 35 miles per gallon by 2020.

Rather than waiting for car manufacturers to respond to market pressures, congress should force them to act, said Jack Gillis, a spokesman for the CFA.

"If we don't make them change soon, they're probably going to kill themselves," said Gillis, "and we don't want that to happen."

General Motors counters that the CFA's analysis favors the Japanese manufacturers, such as Toyota and Honda, by focusing on percentage of available models.

"It just so happens the Detroit manufacturers are happy to be full-line manufacturers," said Greg Martin, a GM spokesman. "unlike Honda which is content with a very specific segment of the market."

A "full-line manufacturer" is one that competes in all market segments from small cars to large trucks and SUVs.

General Motors sells 24 models that get 30 miles per gallon or better, said Martin, compared to 12 for Toyota and six for Honda.

"They should be embarrassed," Martin said of the CFA. "The report is bereft of any intellectual or academic rigor."
(C)CNN

Hot-Selling Cars in 2007

The arrival of several new convertibles, such as this Volkswagen Eos, is boosting convertible sales, which are likely to reach a record this year. Convertibles, small cars and hybrids are in while big pickup trucks and Hummers aren't as popular as they used to be.

As sales of large trucks and brutish, truck-based SUVs decline this year, more car shoppers than ever before are taking home new, fuel-thrifty, gasoline-electric hybrids like the Toyota Prius and Honda Civic Hybrid.
In fact, the Prius and Civic Hybrid are on track to set U.S. sales records in calendar 2007.

The Prius alone could break the 200,000 sales barrier by Dec. 31, which would be a first for a hybrid in the U.S. That means more new Priuses are sold than Ford Mustangs or Honda Odyssey minivans.

See which vehicles are the Bestsellers So Far in 2007

Small Cars Are "Big"
Also big on shoppers' lists today: small cars—especially the newer ones such as subcompacts—with small price tags, accommodating interiors and, of course, good gas mileage.

Toyota's smallest and lowest-priced car, the Yaris, is on pace to double its sales in 2007 over 2006. This could mean sales of the little Yaris could approach a respectable 100,000 this year, which is on par with the better-known, long-running Volkswagen Jetta.

What's the appeal? Introduced in calendar 2006 and with a starting price of less than $12,000, the five-seat Yaris has promised Toyota quality and is rated at 34 miles a gallon in city driving and 40 mpg on the highway as a 2007 model.

Sales also are on track to double this year for Honda's smallest car, the Fit, which starts at less than $14,000 and features government fuel mileage ratings as high as 33/38 mpg for 2007.

"Small is big right now," said Dick Colliver, executive vice president at American Honda Motor Co. "Smaller vehicles have become more attractive."

The Best-Selling SUV?
In another dramatic shift among car buyers, this year's top-selling SUV doesn't come with a gas-guzzling V8 or even a V6, and it's not from Detroit. It's the Honda CR-V with a 2.4-liter four-cylinder engine developing half the horsepower—166—that a V8 might.

With a moderate size, commendable 2007 government fuel economy rating of 23 miles a gallon in city driving and 30 mpg on the highway and a starting retail price around $22,000, the CR-V appeals to both mileage- and budget-conscious buyers.

The second most popular SUV in 2007 is another smaller-sized model without a V8, the Ford Escape. In fact, a hybrid version of the Escape qualifies as the top SUV in gas mileage. The Ford Escape Hybrid has a 2007 rating of 41/32 mpg. The higher city mileage stems from the fact that city driving allows for more usage of the onboard, supplemental electric motor.

Maybe the appearance of these smaller, fuel-thrifty SUVs as top sellers begs the question: Should Americans really call SUVs "big, bad gas guzzlers" anymore?

A Bevy of Convertibles
Americans can't seem to resist open-air cars, and with at least five new convertibles introduced over the past couple years, convertible sales are likely to hit a new high in 2007.

Pontiac's Solstice, with two seats and a starting price of less than $22,000, leads Volkswagen's Eos hardtop convertible, starting at just over $28,000, among the newest models in 2007 sales. Saturn's first-ever convertible, the Sky roadster, is coming on strongly, too. It's a sibling vehicle of the Solstice and starts around $25,000.

But don't count out the indefatigable Miata. Mazda's long-running and popular MX-5 Miata continued to outsell each of these newcomers in early 2007.

The Miata is lower-priced than the others, with a starting retail price under $21,000. It's also the only one of the bunch in the Guinness Book of World Records as the world's top-selling roadster.

Noteworthy Disparities
Not everything is predictable in car buyer trends, gleaned from U.S. sales reports released by automakers for the first six months of 2007.

Cadillac's big, blingy Escalade SUV has not only maintained its sales. It has increased them over calendar 2006's levels.

The Escalade, star of umpteen hip hop music videos, is a luxury ride with a starting price around $55,000. There is, as many Escalade fans attest, nothing else quite like it, especially when it's customized to the hilt with big wheels, alcantara upholstery and multiple video screens inside.

Mercedes-Benz is doing well, too, this year with its biggest SUV in America. The full-size Mercedes GL-Class—an Escalade competitor that's also priced over $50,000—posted sales gains in 2007. In fact, sales of the GL doubled in early 2007 over the same period in 2006.

More full-size Chevrolet Suburban SUVs were sold in early 2007 than in the same period last year. The Suburban has a reputation as a stalwart vehicle for hauling the family and towing trailers, boats and the like.

Ford's full-size F-Series pickup truck continues as America's top-selling vehicle, though sales have been declining for three straight years. Still, for every new Honda Civic sold in 2007, there are likely to be two Ford F-Series pickups sold.

Some Lowlights
Buick continues to sink. The venerable brand that used to be aspirational has only one vehicle—its newly introduced, 2008 Enclave SUV—that's boosting U.S. sales.

All other Buick vehicles—from the Lucerne sedan to Rainier SUV—are selling more slowly than they did last year. In fact, South Korean automaker Hyundai already has sold more vehicles in the U.S. —more than 236,000—than Buick is likely to sell here for the full year.

Environmentalists will hail this news: U.S. sales of all Hummers this year are down. The Hummer brand, known as the poster brand for gas guzzlers, is struggling with its obvious image problem plus newfound consumer interest in fuel economy. Company officials are keeping chipper, though, and hope sales stay even, overall, for the year.

Maybe the "retro" look is finally starting to wear thin for U.S. car buyers. Every one of the major retro-styled cars that debuted in recent years—the Volkswagen New Beetle, Chrysler PT Cruiser, Chevrolet HHR and Ford Mustang—posted notable sales declines in the first half of 2007.
(C)Ann Job, MSN

Top 10 Luxury Vehicles with the Lowest Resale Value

Watch for reliability and obsolete technology when car shopping with an eye toward resale values.

Poor reliability, aging designs and supply that exceeds demand are the main culprits for low resale values. The 10 luxury vehicles likely to shed the most value over time each have at least one of those qualities.

The top two value losers on our list, the Lincoln Town Car and Mercury Grand Marquis, which are based on the same Ford platform, have at least two counts against them. Both cars are sold in large numbers to various vehicle fleets, such as limo, taxi and rental agencies, and they use decades-old technology. At least their predicted reliability, as rated by Consumer Reports, has improved in recent years to “average.”

Larry Batton, president and founder of Auto Appraisal Group Inc., says that these two cars “are archaic and don’t fulfill the requirements of modern buyers." The average age of a Lincoln Town Car buyer in 2006 was 69; for a Mercury Grand Marquis buyer it was 67, according to a Ford spokesperson. "That plus the high supply due to heavy fleet use adds up naturally to dismal resale values,” Batton says. He’s referring to the fact that every year the market is flooded with vehicles retired from fleet use, which creates a huge supply that outstrips demand.

The Lincoln Town Car, our list’s top loser, is plagued by another problem: Starting at $45,000 and easily selling for well over $50,000 with options, it’s “dangerously in the price category of some really excellent cars,” Batton says — cars like the BMW 5 Series, Infiniti M35 and Lexus GS. “All are significantly more modern and more appropriate to a wider cross-section of buyers,” Batton says.

Other cars on this list have a similar issue: Their price is too high for the value they offer. The Mercedes-Benz E550 on the list is a good car but seems overpriced at more than $60,000, especially with reliability ratings much lower than those of a competing BMW 5 Series or Lexus ES. Plus, the six-cylinder-powered Mercedes E350 costs $8,500 less than the V8-powered E550. The E350 is a better deal and its residual values show it: Kelley Blue Book projects that the E350 will retain 37 percent of its value after five years and the E550 only 26 percent.

Reliability is Key

Reliability didn't play as great a role on our previous list of Top 10 Luxury Vehicles with the Highest Resale Value, but it figures prominently into the bottom 10. “Any reliability hiccups or predicted quality issues will likely show up once the car is used, after some wear and tear,” Batton says.

And this has significant implications for those who lease vehicles. “The lease is heavily determined by the residual value,” says Eric Ibara, director of market valuation at Kelley Blue Book. “You’re paying for the depreciation from when you purchase the car to when you return the vehicle. You’ll often get a great deal on vehicles that have a high resale value because the dealer will be able to sell it for more when used.” So vehicles with the lowest residual values are a double-edged sword: They offer the lowest potential return on resale for those who buy and require more money upfront to lease.

It’s important to note that this list isn’t comprised of a bunch of bad cars. Based on our test-drives, the Cadillac STS and Lincoln MKZ that made our value-losers ranking actually perform well. And others on this list are desirable image-wise. The question is, how much are you willing to pay for perceived prestige? For instance, the elegant Jaguar S-Type, with its fragrant leather interior, might instantly appeal to those who always dreamed of owning a Jag; same with the Mercedes-Benz E550.

“Buying a car is an emotional decision, and for some, a snap decision,” Ibara says. “Despite some potential red flags — overly high lease prices, lower quality ratings and bad resale value — people still buy them. But if you’re really interested in getting a good price for the used car, it’s worth it to take time and evaluate all the facts when buying — rather than just go with your gut.”

Graceless Aging

Another important aspect to keep in mind is that for mainstream vehicles, the longer they are on the market without getting significant updates or redesigns, the more likely residual values will suffer. "It's almost a given that cars near the end of their life cycle — unless they're cultural icons — are going to suffer in the residual value department, simply because they're lagging behind newer designs in technology, comfort and safety features, which in the auto industry are changing fast," says Auto Appraisal Group's Batton.

The Jaguar S-Type and X-Type on this list are good examples of this. The S-Type was first introduced for the 2000 model year and the X-Type for the 2002 model year. Neither vehicle has seen significant updates since their debut, while competing models have been revamped. "Consumers are going to gravitate toward newer, fresher choices.... No amount of 'freshening-up' during a life cycle can make up for a redesign," Batton says.

Our list of the Top 10 Luxury Vehicles with the Lowest Resale Value was compiled using Kelley Blue Book data for new vehicles with manufacturer suggested retail prices (MSRPs) of $30,000 and up, including specific trims of vehicles, not just base MSRPs. The residual values are expressed as a percent of the original MSRP five years into the future. We've put the vehicles in ascending order. Those that tied for a particular ranking are in alphabetical order.

Kelley Blue Book estimates future vehicle values based on a model’s past performance as well as new or notable features. “The best indicator of future performance is past performance,” Ibara says. For newly introduced models, Kelley Blue Book looks to past similar models from a given manufacturer.

10. Cadillac SRX V8
MSRP: $43,870
Residual Value After Five Years: 27 percent*

A "Poor" reliability rating from Consumer Reports sheds a negative light on this midsize SUV. In this extremely crowded and competitive segment, that can really hurt a vehicle's success.

The current-generation SRX is nearing the end of its life cycle and soon will be replaced by an all-new version. Despite Consumer Reports' poor reliability rating, we think the SRX's sporty performance and versatility are appealing.

9. Ford Expedition V8 4WD
MSRP: $32,895
Residual Value After Five Years: 27 percent

As we wrote in the Top 10 Luxury Vehicles with the Highest Resale Value feature, performance is a primary driver of used car values. The Ford Expedition makes this list largely because of sluggish performance compared to other big SUVs. It has a 300-hp V8, which sounds powerful, but really isn't for a vehicle that weighs well over three tons.

On top of being rather under-powered, the Expedition guzzles fuel. "It's just not at all ideal for what's going on right now in the world — namely, rising gas prices and increasing interest in 'green' vehicles," says Auto Appraisal Group's Larry Batton.

8. Cadillac DTS V8
MSRP: $41,990
Residual Value After Five Years: 26 percent*

The Cadillac DTS is another solid performer marred by low residual values. Part of the problem is that, like the Lincoln Town Car and Mercury Grand Marquis on this list, the DTS is sold to fleets for use as a limo, livery cab and the like. Lots of them get pumped into the used-car market once they're retired from fleets and throw off the supply-demand ratio.

Also working against the DTS is the fact that it competes with full-size sedans from Audi, BMW, Lexus and Mercedes-Benz. Those brands have more clout than Cadillac and are currently regarded as leading innovators. In the upper echelons of the luxury-sedan market, where "mine is better than yours" is a mantra, clout and innovation are key.

7. Cadillac STS V6
MSRP: $42,765
Residual Value After Five Years: 26 percent*

Like the larger DTS, the Cadillac STS is a solid performer and appealing in many ways. But, “American cars are having a tough moment,” says Auto Appraisal Group’s Larry Batton. General Motors, Ford and Chrysler are struggling to regain a competitive edge long lost to foreign manufacturers.

Just as the DTS competes in a heady field, so does the STS. It goes up against the Audi A6, BMW 5 Series, Infiniti M, Lexus ES and Mercedes-Benz E-Class, all of which have higher residual values; the Infiniti M even made our top 10 list for highest residual values. For the STS, power pays: the V8-powered model has a five-year residual value of 30 percent and the hot rod STS-V 39 percent.

6. Lincoln MKZ AWD
MSRP: $31,765
Residual Value After Five Years: 26 percent*

The Lincoln MKZ (formerly the Zephyr) is based on the Mazda 6 platform. The Mazda 6 is an excellent car and so is the MKZ, but the $5,000 to $10,000 price premium for the Lincoln makes it less appealing, despite its luxury features and respectable performance. In its favor, the MKZ gets an "Excellent" predicted-reliability rating from Consumer Reports.

Like with most luxury cars, the MKZ offers what auto analyst Ricky Beggs of Black Book Auto Research calls "fluff features." Some of these options, such as pricey navigation systems, quickly become obsolete and can drag down residual values.

5. Mercedes-Benz E550
MSRP: $59,775
Residual Value After Five Years: 26 percent*

Reliability of Mercedes-Benz vehicles has plummeted, says Larry Batton of Auto Appraisal Group. Poor reliability erodes resale value. Mercedes execs have unofficially admitted to us that adding too much new technology without enough time to fully test it was a downfall with the E-Class and caused many of the model's widely documented problems in recent years.

Compared to the V8-powered E550, the six-cylinder-powered E-Class sedans and wagons — E350 and E320 diesel — retain more value: 37 percent after five years, according to KBB. Likewise, the low-production, high-performance E63 AMG, with 41 percent of its value retained after five years. The E550 cranks out 114 hp more than the E350 but costs a whopping $8,500 more.

4. Jaguar S-Type V6
MSRP: $49,000
Residual Value After Five Years: 25 percent*

The current-generation S-Type debuted as a 2000 model and is near the end of its life cycle and will be replaced by an all-new sedan called the XF. Auto Appraisal Group's Batton says that residual values almost always suffer when vehicles are at the end of their life cycle as consumers gravitate to the latest and greatest offerings.

Besides being long in the tooth, the midsize Jaguar S-Type also suffers from poor reliability, according to Consumer Reports, a double-whammy for residual values. And its retro styling, though elegant, no longer stands out against jauntier competitors.

3. Jaguar X-Type Sedan and Wagon
MSRP: $34,995
Residual Value After Five Years: 25 percent*

The X-Type has struggled since its 2002 debut. It never quite mustered the appeal and performance of more-capable competitors such as the BMW 3 Series, Infiniti G35, Lexus IS and Mercedes-Benz C-Class.

Jaguar plans to quietly phase out the lame duck X-Type. Poor reliability, as rated by Consumer Reports, is only one knock among many. Auto industry insiders fault the X-Type for being little more than a dressed up Ford Mondeo.

2. Mercury Grand Marquis LS
MSRP: $30,320
Residual Value After Five Years: 23 percent*

The Mercury Grand Marquis is "a big, bulky vehicle that simply doesn't reflect trends in the current market," says Auto Appraisal Group's Larry Batton. Buyers of the Grand Marquis owners are 67 years old on average. "The market for this huge car is small and getting smaller," Batton says.

Even though the Grand Marquis is a good value for its sheer size and features, the fact that so many are sold to fleet operations such as cab services hurts resale values. "When cars are used heavily in fleets, supply goes up, and demand — and prices — go down," Batton says.

1. Lincoln Town Car
MSRP: $42,985
Residual Value After Five Years: 17 percent*

The Lincoln Town Car is archaic by today's automotive standards, much like the Mercury Grand Marquis that shares its platform. "It doesn't reflect the needs and wants of a modern consumer anymore — it's a niche vehicle," says Auto Appraisal Group's Batton. Not only that, but at nearly $45,000 to start and well over $50,000 with options, "it has dangerously entered the same price territory as significantly more sophisticated import luxury sedans," he says.

The average age of Town Car buyers is 69 — an indicator of the dwindling group of potential buyers for this vehicle. And like the Mercury Grand Marquis, the Lincoln Town Car is sold in large numbers to limo and other fleet services, which boosts the supply way past the demand once these vehicles hit the used-car market.

* Residual values are courtesy of Kelley Blue Book and expressed as a percentage of the original MSRP.
(C)Stephen Milioti, Forbes

Carmakers offered big June discounts

Big Three alone spent a combined $2.6B on sales incentives in the past month, according to industry tracking service.

Automakers deepened the discounts and rebates on offers to U.S. consumers in June from a month earlier, adding incentives to slow-selling minivans and trucks, industry tracking service Edmunds.com said Tuesday.

Edmunds estimated the three Detroit-based automakers spent a combined $2.6 billion on sales incentives in the past month, while Japanese automakers spent $823 million.

All of the six leading automakers offered bigger discounts in June than they had in May with the exception of General Motors Corp., Edmunds said.

In a significant departure from usual practice, the three leading Japanese automakers all stepped up their discounting in the face of slack demand, Edmunds said.

"The competitiveness of the marketplace seems to be catching up with the Japanese heavyweights," Edmunds analyst Jesse Toprak said in a statement.

Toyota Motor Corp. announced in mid-June that it had begun offering rebates of up to $3,500 or interest-free loans for five years on its all-new Tundra pickup truck.

Edmunds estimated that Toyota's average incentive was $1,308 per vehicle in June, up from $1,128 in May.

Chrysler, which has been offering deals for months to support sales of its aging minivan and truck line-ups, had the industry's highest incentives at $3,962 per vehicle in June, up from $3,831 in May, Edmunds said.

Auto sales incentives are widely tracked by analysts as an indication of the relative profitability of competing automakers and the pressure that they face to move inventory.

Automakers do not typically disclose how much they spend on incentives, which can include concessional financing, cash rebates or additional payments to dealers.

Both Ford Motor Co. and GM rolled out end-June summer sales campaigns featuring interest-free financing on a range of vehicles aimed at boosting sales results.

Edmunds estimated that Ford's average incentive spending rose to $3,187 in June from $2,942 in May.

Both GM and Ford headed into the year with a strategy of throttling back on incentive spending as part of a strategy to move away from the kind of blowout sales and volatile results that dogged their results earlier this decade.

Rounding out the six major automakers, Edmunds estimated that Honda Motor Co. had spent an average of $1,397 on incentives in June, from $1,300 in May.

It estimated average incentive spending for Nissan Motor Co. at $2,218, from $1,943 in May.

By segment, the biggest deals were on minivans, which carried an average discount of $3,900, and full-size trucks, which had an average incentive of $3,864, Edmunds said.
(C)CNN

2008 Jeep Grand Cherokee Preview

For the first time, the Jeep Grand Cherokee will have the optional 3.0-liter diesel engine, which Chrysler says can improve fuel economy by as much as 30 percent.

The 2008 Jeep Grand Cherokee comes with an all-new, 4.7-liter V8 engine, rated at 305 hp and 330 pound-feet of torque, among its five available engine choices. Others include a 3.0-liter diesel; a 3.7-liter V6; a 5.7-liter heavy V8; and for the high-performance Grand Cherokee SRT8, a 420-hp 6.1-liter V8.

Chrysler says the new 4.7-liter engine will boast a 5 percent improvement in fuel economy and is E85 flex-fuel capable (E85 is a blend of 85 percent ethanol and 15 percent gasoline).

For the first time, Grand Cherokee models will have the optional 3.0-liter diesel, which Chrysler says can improve fuel economy by as much as 30 percent and provide a driving range of approximately 450 miles with towing capability of up to 7,400 pounds.

Interior changes include a new center console, armrests, two-tone instrument panel and bright accents with soft-touch surfaces and updated styling.

“Sirius Backseat TV,” the first-ever in-vehicle streaming video technology, will be launched as an available feature on the Jeep Grand Cherokee and Chrysler minivans. The technology will also become available on 2008 Jeep Commanders, the Chrysler 300 and Dodge Chargers and Magnums. Exterior styling for the Grand Cherokee is unchanged for 2008.
(C)Forbes, Shane Kite

Luxury brands top best-liked cars list

Porsche tops the list, while Toyota's inexpensive Scion is the best-liked non-luxury car in survey.

People who pay more to buy an expensive luxury car really do like their cars better, according to a new ranking from J.D. Power and Associates.

The top 11 brands in the J.D. Power and Associates "Automotive Performance, Execution and Layout" (APEAL) survey are all high-priced luxury brands. The top performing non-luxury brand, Toyota Motor Company's Scion, finished 12th in the rankings. The poll ranked a total to 35 brands.

Porsche was the top ranked car brand, while BMW was second, followed by Mercedes-Benz, Jaguar and Lexus.

Car owners were surveyed during the first 90 days of ownership to see how well they liked their new cars. Only 2007 model year cars were included.

All three of DiamlerChrysler's U.S. based Chrysler Group brands finished in the bottom five. Jeep was the lowest-ranked brand of all, Dodge third-lowest and Chrysler fifth-lowest.

Japanese brands Subaru and Suzuki rounded out the bottom five.

Out of a possible 1,000 points, scores ranged from 849 for Porsche to 718 for Jeep. The average score for an overall car brand was 772.

While that range may seem small, it shows a big difference in statistical and practical terms, said Joe Ivers, executive director for J.D. Power.

"It translates to a huge difference in the range of delight, or, in this case, misery for Jeep customers," he said.

It also translates into negative word of mouth and lost sales, he said.

Of U.S.-base brands, only General Motors' Cadillac and Hummer brands, as well as Ford's Lincoln brand scored above average overall. (Several individual models from the Detroit brands finished at the top of their respective categories, however.)

In addition to ranking automotive brands, the J.D. Power survey also ranked individual vehicle models within their respective car classes

Honda had the most individual models finishing at the top of their respective categories. The Honda Fit tied with Toyota's Yaris for top compact car, while the Honda CR-V was the top compact SUV, the Honda Ridgeline was the top pickup, and Honda's Odyssey ranked as the best minivan.

Recently introduced or redesigned models tended to perform best in the survey. Cars that score high on J.D. Power's APEAL survey also tend to be more profitable, J.D. Power said in the announcement, since they require fewer incentives to sell.

"Whether due to fresh designs or innovative features, APEAL scores tend to be highest for models when they are first introduced," said Neal Oddes, director of product research and analysis at J.D. Power and Associates. "It's essential for manufacturers to get new-vehicle launches right, since vehicles with high appeal scores generally command a higher gross profit and sell more quickly."

Top scoring car models:

Subcompact car: Honda Fit/Toyota Yaris
Compact car: Volkswagen Jetta
Compact sporty car: Volkswagen Jetta
Compact premium sporty car: Porsche Cayman
Entry premium car: BMW 3-series
Midsized premium car: Mercedes-Benz E-class
Large premium car: Mercedes-Benz S-class
Premium sporty car: BMW 6-series
Midsize sporty car: Ford Mustang
Midsize car: Nissan Altima sedan
Large car: Hyundai Azera
Compact SUV: Honda CR-V
Midsize SUV: Ford Edge
Large SUV: Nissan Armada
Midsize premium SUV: BMW X5
Large premium SUV: Cadillac Escalade EXT/Mercedes-Benz GL-class
Large pickup: GMC Sierra
Midsize pickup: Honda Ridgeline
Van: Honda Odyssey
(C)CNN

Car Options Compare: Must Have / Maybe / Buy it Later

Electronic stability control - Must-have
Studies indicate that electronic stability control, shown helping a Chrysler Pacifica make a turn in heavy snow, can reduce the odds of a fatal crash by as much as a third. And it helps a lot in cars as well as SUVs.

This safety feature is so good it's already standard on half the cars sold in the U.S. today. By applying the brakes to individual wheels when sensors detect a loss of control, ESC helps keep your car from spinning into a guardrail (or worse).
On models where it's offered as an option, such as the Mazda 3 and Cadillac CTS, it'll run you an extra $500 or so.

ESC is quickly joining seat belts and ABS as part of the safety triumvirate that every car should have. In five years you won't have a choice: ESC has been slated to be mandatory by 2012.

The Verdict: The best $500 you can spend. If a car you're considering doesn't offer ESC, then reconsider that car.

Side airbags - Must-have
Side airbags, especially ones like these that include protection for occupants' heads, significantly reduce the risk of death and serious injury from side impacts. They are standard equipment on many cars, including the Volvo C30, for which a mock-up is shown here.

Front air bags get all the cool crash-test footage, but side air bags are no less important for occupant safety. There are two basic types of side air bags: ones that protect the head (side-curtain air bags) and ones that protect the chest (side-torso air bags). A car can have curtain air bags, torso air bags or a combination of the two.

According to the Insurance Institute for Highway Safety, side-curtain bags have reduced driver deaths in side collisions by 37 percent. Side-torso bags have reduced driver fatalities 26 percent. Since 1999 a voluntary standard has minimized any risk side air bags posed to children; go to safercar.gov to see if your model meets that standard.

Side air bags will add around $600 to your negotiated price but, really, is this an area of the car where you want to be cheap?

The Verdict: The more your car looks like it was attacked by the Stay Puft marshmallow man in the event of a crash, the better off you'll be. Spend the money.

Run-flat tires - Maybe
Nobody loves changing a flat tire, but some hate it more than others. If you fall into the latter camp, run-flats may be a good buy.
Offered on cars from the Mini Cooper to the Rolls-Royce Phantom, run-flat tires let you drive up to 100 miles at 50 mph even if a tire has lost all its air. There's no spare in the trunk (which can give you more space for your gear) and you'll never have to crouch on the side of a highway at 11:30 p.m.

Upscale versions of the Honda Odyssey minivan use the Michelin Pax run-flat system shown here.

That said, run-flats can cost as much as 50 percent more than regular tires (it's a roughly $400 option on most cars), not every tire shop is certified to handle maintenance and getting a run-flat patched after a blowout can cost upwards of $50 - twice the price of a standard patch job.

The Verdict: It comes down to how often you expect you'll change a tire and whether you'd pay around $400 to avoid it.

Bluetooth phone kit - Maybe
In many states it's now against the law to talk on a handheld phone while driving (cruising while eating a Big Mac, however, is totally legal everywhere). The Bluetooth option, available in cars such as the Chrysler 300C and Nissan Versa, means you can use a wireless connection and steering-wheel-mounted buttons to place and receive calls.

On factory-installed Bluetooth systems such as Audi's, your phone-book info is also downloaded to your car's in-dash display so you can scroll through a call list. Most systems incorporate voice-recognition technology, so initiating a call is simply a matter of saying "Call home."

A Bluetooth connection allows your car to instantly and wirelessly hook to devices like a cell phone or music player, as here in a Volvo C30. But it adds only a little to what most of today's cell phones can already do with a headset.

Of course many cell phones already have built-in (albeit tinny) speakerphones, and some offer voice recognition as well. And you can buy an earpiece for next to nothing.

Factory-installed Bluetooth systems can run around $300, while a regular phone with similar features may cost $50 - that's a pretty big spread.

The Verdict: If you're conducting a lot of business from the driver's seat and need a crystal-clear, full-featured hookup, your car's Bluetooth is the answer. If you're just calling the family to say you're heading home, a handset's speakerphone or an earpiece should do the trick.

Rearview camera - Maybe
Rearview cameras are immensely helpful - you get a wide-angle view of everything behind your rear bumper, whether it's another car or a tyke's Big Wheel.

So why isn't it a must-have? The problem is that rearview cameras are often packaged with other options that aren't nearly as useful. On the Infiniti M35, for example, a backup cam is part of the $2,950 "Technology Package," which includes in-dash navigation and an upgraded stereo. It's one thing to package some sybaritic luxuries together (if you want massaging seats and a backseat refrigerator, that's your business), but automakers shouldn't play cute with something that actually contributes to pedestrian safety.

Some rearview cameras, like the one on this Mercedes-Benz S-class, overlay lines onto the image to show where the car will go based on the current steering wheel position.

The Verdict: It's a genuine advance, but just try finding it a la carte. Unless you really like the other options included in the package, spend a little extra time looking behind you when you back up.

GPS navigation - Buy it later
GPS lets you find your way almost anywhere, and that's great when you're headed somewhere unfamiliar, but do car manufacturers really have to gouge you so much?
There are good aftermarket navigators that do everything factory-installed models do, if not more, and they cost a fraction of the price. Want navigation on your BMW 3 Series? Prepare to cough up an extra $2,100.

Navigation systems, like this one in a Cadillac STS, can help you find your way when lost, but most of us don't need one on a regular basis. A portable model will look less elegant, but will probably cost much less, and you can take it with you when you rent a car.

Meanwhile you can get Magellan's Maestro 4050 portable navigation unit for $700. The Maestro has voice recognition and live traffic updates and acts as a Bluetooth speakerphone for your mobile. It requires no installation (save a suction cup or sticker), so you can swap it between cars or lend it to friends and family. And the Maestro 4050 is a top-of-the-line model. You can get a perfectly decent unit (such as the TomTom One) for around $300.

The Verdict: Buy aftermarket. Blow the difference on a great road trip, knowing you won't get lost.

Rear-seat DVD systems - Buy it later
Let's say you're in the market for a Honda Odyssey minivan. It's an excellent choice for families, so long as you steer clear of the DVD option. Honda charges $1,300 for a ceiling-mounted movie player, a fold-down nine-inch screen and a pair of wireless headphones. All for the luxury of having the screen fold back up into the headliner once the brood is done watching Shrek 5.

A nine-inch portable DVD player bought at Best Buy costs about $180. Throw in two pairs of headphones and the price creeps up to $200. And like the portable GPS unit, you can take this handheld movie theater with you wherever you go.
The redesigned 2008 Chrysler Town & Country, shown here, will have two separate DVD screens, allowing second and third row occupants each to have their choice of entertainment.

The Verdict: Save the $1,000 and go for the portable. Then you can buy all the DVDs the kids want.
(C)CNN

Automakers new rules

Automakers scramble to catch up with changes in consumer behavior. Fortune's Alex Taylor reports how they're dealing with seismic shifts in the business.

In the auto business, where new cars take 36 months or more to move from a designer's inspiration to the dealer showroom, changes can take years to reveal themselves.

At least they used to. These days, seismic events seem to rock the industry on a daily basis. Take the impact of private equity. Now that Cerberus has taken over Chrysler, and financiers are sharpening their pencils for Jaguar and Land Rover, a few far-seeing analysts expect greater innovation and faster decision-making to ripple through the rest of the industry.

Equally big changes are shaping consumer behavior. Recent conversations with import automakers on the West Coast, as well as some surprising announcements by General Motors, suggest that some current business practices are rapidly becoming obsolete. Here are just a few of the new rules.

Toyota is tops. Now everybody pile on.
Long ago, Toyota brand passenger cars passed the Ford and Chevy nameplates to become the number one seller. Now Toyota is poised to become number one in car and truck sales combined. How does "baseball, hot dogs, apple pie and Toyota" roll off your tongue?

What's the price of leadership? People taking potshots at your backside. As soon as Toyota rolled out customer cash and zero percent financing on its new Tundra pickup, a competitor leaked the news to journalists.

Others tried a subtler approach. GM went public what it called "full-size pickup facts" that seemed carefully selected to portray its Chevy and GMC in the best light. So instead of talking about their sales this year, which have improved only modestly despite the rollout of new models, GM chose to herald big improvements from 2003 to 2007 in "Brand image" (up 17 percent) and from 2004 to 2007 in Average Transaction Price (up $2,600 per unit). That's like a baseball player ignoring his lousy batting average and bragging about his sacrifice bunts.

Automakers are radically reshaping the way they approach advertising.
Marketer Jim Farley, who recently took over as head of Lexus, made his name at the Scion division by eschewing print and television advertising in favor of the Internet and other less traditional methods that he hoped would build stronger relationships with potential consumers.

Now General Motors confesses that it is shifting more of its ad dollars into online advertising too. The reason, according to marketing boss Mark LaNeve, is that the Web is more effective in combating the lagging perceptions that continue to dog GM: poor fuel economy, bad quality and high prices.

LaNeve likes the way that digital ads can direct consumers to thousands of pages of information about products, prices and the competition. He sees an even bigger payoff from the potential of immediacy. Since consumers turn to the Web when they are getting serious about buying a new car, advertising there allows GM to get more involved in the shopping process.

The hybrid revolution gathers speed - and Toyota's Prius is way out front.
While Honda announced that it is discontinuing the gasoline-electric version of the Accord because of slow sales, the Toyota Prius continues to defy gravity. Once considered a novelty, the Prius is selling more strongly now than at any time in its seven-year history. Its volume is running at twice the rate of a year ago and Toyota now expects that Prius will outsell every single domestic passenger car nameplate except for the Chevy Impala.

Why the diverging fortunes? Honda was selling added performance in the Accord hybrid, which didn't resonate with consumers the way that better fuel economy does. Besides, the hybrid Accord looked like every other Accord, meaning consumers couldn't get credit for being "green" when they parked it in front of their homes. The Prius, by comparison, can't be confused with anything else.

Celebrities interfere with car sales
Those with long memories can remember Dinah Shore pitching Chevrolets in the 50s and Ricardo Montalban rhapsodizing about Corinthian leather in the Chrysler Cordoba of the 1970s.

Now GM has decided that Tiger Woods, one of the world's best known athletes - and best paid endorsers - is getting in the way of Buick sales. GM is nudging Woods away from pitching Buicks and getting him to appear in ads for OnStar, its telematic service, instead.

LaNeve says the presence of Woods "detracts from the product message." He adds: "We don't want a celebrity at the core of any brand." He didn't mention whether he blames Woods for the fact that that sales of Buick cars are down 21 percent this year.

I guess that means Paris Hilton won't be inking a deal to endorse Hummers anytime soon.
(C)By Alex Taylor III, Fortune senior editor

TOP-10 Great Vehicles for Road Trips

There's a car or truck suited for road trips of every type. Here we highlight 10 great road-trippers along with tips for optimum driving safety and enjoyment.

Skyrocketing fuel costs, be damned — vacationers are expected to open their maps and take to the road in record numbers in the weeks ahead, though many may scale back their spending in other ways to offset the budget-busting cost of a fill-up.

“High gas prices won’t deter Americans from traveling,” predicts Sandra Hughes, travel vice president for the American Automobile Association (AAA). “Families will travel closer to home, they will travel for fewer days and will save money by staying in less-expensive hotels and eating in cheaper restaurants. But they will continue to take vacations and plan getaways,” she says.


The AAA forecasts that 84 percent of all travelers will reach their destinations by car this summer, which is an increase of about 1.8 percent over 2006. Based on the association’s projections, more than 115 million Americans will hit the highways during the summer's three main holidays, Memorial Day, 4th of July and Labor Day.

Family Vacations: Toyota Sienna

A minivan is without question the ideal family-vacation vehicle. Among the current crop of seven-passenger people movers, we picked the Sienna by virtue of its wide range of available road-trip trappings, including several features its closest competitor, the Honda Odyssey, lacks. We think the 2008 Chrysler Town & Country holds promise, but have yet to test it and so we cannot recommend it here.


The Sienna can be fitted with a full-time all-wheel-drive system and run-flat tires for added safety, along with adaptive cruise control to conveniently maintain a set speed and distance from the traffic ahead. The Sienna also offers iPod audio-system connectivity so you — or the kids — can bring an entire library of tunes along for the ride.






Trip for Two: BMW 650i

Being an empty nester is all about personal indulgence. The kids have grown up and moved on, and it's time to ditch the SUV or minivan for something more expressive and entertaining to drive. The sensuous 650i coupe is ideal for a quick getaway to escape life's tensions and rekindle passions. Its generous size makes it comfortable for long trips.




Exploring the limits of the 650i's 360-hp 4.8-liter engine adds excitement to any trip. An Active Roll Stabilization system ensures optimum comfort over bumps and potholes while cruising in a straight-line, but tightens up the suspension through turns for exhilarating handling. A coddling interior includes supremely comfortable seats and a standard navigation system with real-time traffic information.





College Road Trip: Scion xB

The college years are all about exploration, and what better way to reach a divey roadhouse in search of that undiscovered band than in the 2008 xB? While it retains the prior generation's boxy profile, the eminently affordable and practical xB takes on a more-muscular and menacing appearance. It also has a longer wheelbase and larger wheels and tires for enhanced handling.



The newly redesigned xB includes a more-powerful engine (158 hp) than the outgoing model's that should still prove fuel-efficient. It can be mated to a new four-speed sequential-shift automatic. The xB has many safety features, a roomy interior and a generous assortment of standard equipment, including a premium audio system with full iPod integration.