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

Engine: Clean or Efficient?

From the outside, the dark blue Saturn Aura accelerating to a steady 50 miles an hour on the high-bank oval here at General Motors’ proving grounds looked altogether unremarkable.

In fact, it was not much to look at under the hood either, despite an experimental engine using a method of burning gasoline that may prove to be the next major advance in fuel economy and emissions control. Only a couple of stray electrical connectors hinted at the differences distinguishing this engineering prototype from thousands of other Auras on road.

From the driving position it’s another story. A laptop computer placed between me and a G.M. engineer, Jun Mo Kang, displays a graph that plots the car’s changing engine speed against the load on the engine, just colorful enough to draw my attention away from future cars and trucks in full disguises zipping by in the faster lanes of the track.

My time behind the wheel last month was the first test drive G.M. has given to a journalist of its prototype homogeneous-charge compression-ignition engine. An H.C.C.I. engine runs on a combustion process that researchers say holds the potential for significant gains in overall engine efficiency. G.M is one of several automakers developing H.C.C.I. technology.

In principle, the H.C.C.I. engine takes advantage of the best characteristics of gasoline engines — low emissions that can be controlled effectively with available technology — and diesel engines, which offer low fuel consumption.

As I press and release the Aura’s gas pedal, a small orange dot on the laptop screen darts in and out of a wedge-shaped area on the graph. The point of the wedge begins slightly above idle speed, at about 1,000 r.p.m., and ramps up to its widest point at 3,000 r.p.m.

“Don’t push the pedal too hard or fast,” counsels Mr. Kang. “Try to keep the dot within the zone. That’s where the engine is running in H.C.C.I. combustion.”

After less than a lap of practice on the immense track, I find it easy to feather the pedal so that the orange dot constantly floats in the sweet spot on the graph, earning a smile from Mr. Kang.

When H.C.C.I. is finally ready for the road — G.M. won’t say exactly when that might be — computers will take over the task of keeping the engine in its ideal operating range. And though much work to refine the engine’s operation lies ahead, experts say the technology is worth the investment.

“I believe H.C.C.I. represents the next great advance of the internal combustion engine,” said Chris Gerdes, associate professor of mechanical engineering at Stanford University, which is one of G.M.’s partners in H.C.C.I. research.

“With minimal changes to the engine hardware, H.C.C.I. gasoline engines should be able to produce diesel-like efficiencies while simultaneously lowering emissions,” he said.

Dennis Assanis, director of the Walter E. Lay Automotive Laboratory at the University of Michigan in Ann Arbor, says the H.C.C.I. combustion process offers potential for raising gasoline engine fuel efficiency by 15 percent to 20 percent while offering reductions in oxides of nitrogen, an important contributor to smog that is difficult to control.

The 2.2-liter engine in the test Aura is based on the G.M. Ecotec four-cylinder; a 2.4-liter version of this engine is available in the Aura for 2008. G.M. rates the H.C.C.I. engine at 180 horsepower and 170 pound-feet of torque of torque; by comparison, the ’08 Aura engine makes 164 horsepower and 159 pound-feet, and is rated at 22 miles a gallon in town and 30 on the highway.

G.M. would not give fuel economy figures for the H.C.C.I engine beyond the expectation of a 15 percent improvement in mileage.

The H.C.C.I. process is something of an answer to the long quest for so-called lean-burn engines, which use less fuel in relation to the volume of air ingested. Such engines present other problems, though, especially in terms of emissions control, because it is hard to ignite the air-fuel mixture evenly.

The H.C.C.I. gasoline engine aims to solve this by igniting an almost evenly distributed (hence the term homogeneous in its name) mixture of fuel, air and captured exhaust gas in the cylinders. Combustion is spontaneous, a result of heat in the cylinder rather than a spark plug, similar to the way a diesel engine operates.

Until recently, H.C.C.I. combustion was little more than a laboratory experiment. Engineers could coax the process to work successfully on special single-cylinder test engines running at a constant speed. But when applied to multicylinder engines operating under various loads, speeds and atmospheric conditions, H.C.C.I. refused to cooperate.

To get around the difficulty of making it idle smoothly and quietly under high loads, G.M. has, for now at least, limited its H.C.C.I. mode to the 1,000- to 3,000-r.p.m. zone used in the Aura test car, a range that covers most typical driving. Below and above that range the engine uses conventional spark ignition.

Making H.C.C.I. compatible with a broad range of fuels; reducing the faint rattling noise during the transition from compression ignition to spark ignition; and reducing emissions at low loads are other issues being addressed.

“H.C.C.I. relies on a very delicate balance of chemistry happening thousands of times per minute in the cylinder,” said Paul Najt, a manager in G.M.’s powertrain research laboratory who has been working on H.C.C.I. for more than 30 years.

“Controlling the chemistry is the difficult part to implement,” he said. “If the temperature and gas composition aren’t precisely correct, either nothing happens or something very bad happens.”

Bringing H.C.C.I. to production has become a top priority among the world’s major automakers. One sign that the technology is inching closer to production is that automakers are attaching brand names to their various H.C.C.I. programs.

At next month’s Frankfurt auto show, Mercedes-Benz will announce details of its Controlled Auto Ignition system, which it has named DiesOtto in homage to diesel and gasoline engine pioneers. Volkswagen’s Combined Combustion System is under development, and Honda’s H.C.C.I. system, originally conceived for racing motorcycles, is being tested in a four-cylinder auto engine.

China’s automakers and government-backed research institutes are also intensely interested in H.C.C.I. technology, judging by a survey of technical papers presented at last year’s congress of the Society of Automotive Engineers.

G.M.’s decision to move its H.C.C.I. program out of the laboratory and into what Mr. Najt calls the advanced engineering phase, as well as beginning road tests, signals the automaker’s steady progress in critical technology areas, said Matthias Alt, manager of the company’s global H.C.C.I. program.

“In the first half of 2007 we achieved significant gains in the system’s computer controls,” he said. “This moved the program ahead faster than even we ourselves expected.”

But while Mr. Alt and his team of engineers and scientists have made great progress, they acknowledge that many challenges remain before H.C.C.I. combustion is happily percolating inside new G.M. engines.

“As our development of the enablers and computer controls continues, we’ll extend the H.C.C.I. operating range up and down the load range,” Mr. Alt said. The optimism of Mr. Alt and his engineers suggests that the H.C.C.I. Aura won’t be stuck in the slow lanes of the test track much longer.
(C)NYT

What does "Hybrid" mean?

"Hybrid" doesn't mean just one thing. Cars and SUVs can be set up in different ways to meet different needs. Here's a look at the various systems.

The hybrid menu
Hybrid gasoline/electric vehicles are often lumped into one, all-inclusive catagory. People will say "I'm thinking of buying a hybrid" without thinking about which model or type.
The fact is, hybrid vehicles vary enormously. It's not just that some are SUVs and some are cars. Their hybrid powertrains, themselves, can differ greatly in their design and programming. (Computer software has a lot to do with how a hybrid works.)

Right now, Toyota is the unchallenged hybrid leader. The Toyota Prius is the best selling hybrid by far, accounting for more than half of all the vehicles sold.

Toyota's "full hybrid" system is also used in Nissan's Altima Hybrid, and it's the same technology used in the Ford Escape and Mercury Mariner Hybrid SUVs.

General Motors, long seen as a laggard in hybrid technology, now has three types of hybrid systems on tap.

One, commonly called a "mild hybrid" system, is on the market now. Another, the "two-mode" hybrid system, will be introduced in the fall. A third "series hybrid" plug-in electric vehicle, is on the path to production, but no specific timetable is set.

Full Hybrid
Toyota Prius - the vehicle that most readily comes to mind when someone says "hybrid" is the Prius. It's a good car in many respects: The Prius has the interior space of a midsized Camry in a smaller package.
It's a "full hybrid:" in that it can run on its electric motor alone for short distances at low speeds.

The Prius was designed, from the outset, to be a gasoline/electric hybrid vehicle. That enabled designers to create the body around the hybrid system rather than cramming batteries and an electric motor into a body designed to house just a gas tank and an engine. For that reason, the Prius has plenty of usable storage space.

With its unique body design, it's also instantly recognizable as a high-tech hybrid car, which only increases its appeal.

Mild hybrid
The Saturn Aura Green Line vehicles, the Aura sedan and Vue SUV, are "mild hybrids," in which the electric motor provides assistance to the gasoline engine but lacks the power to drive the vehicle on its own.
Fuel is saved by shutting the gasoline engine down altogether whenever the vehicle comes to a full stop.

Also, since the electric is there to provide additional thrust, the gasoline engine doesn't need to be as large. (The Aura Green Line, for instance, has a 4-cylinder engine where non-hybrid versions have V6's.)

The advantages of a system like this are cost and size. The system requires little alteration to the basic engine and transmission layout so that it costs much less to manufacture than a complex "full hybrid" system.

Also, since electricity needs are lower, the system requires only a small battery pack which, again, saves on costs, but also saves weight and space. Other hybrid sedans, such as the Nissan Maxima and Toyota Camry Hybrids, lose trunk space to make room for batteries.

The downsides are that the system's impact on fuel economy is relatively small while the drag on driving performance is sizable.

When not boosting performance, the Green Line electric motor/generator remains fully engaged, acting like an anchor bogging the car down whenever the gas pedal isn't being pressed.

Performance hybrid
The Lexus LS600h offers the performance of a V12 with the fuel economy of a V8, Toyota boasts.
Compared to those cars, the Lexus looks downright thrifty. Not only does it get better fuel economy - it even costs a lot less. The V12-powered BMW 760li gets 15 mpg and costs about $20,000 more. The Lexus gets 21 mpg.

And the LS's performance really is impressive. Step on the gas and the 600 horsepower engine pushes you back in your seat with an easy whisper, barely straining as the needle on the electric boost gauge moves into "performance" territory.

Toyota doesn't expect to sell very many of these cars. Market experience shows that hybrid shoppers are mostly interested in one thing: burning as little fuel as possible. High-end luxury hybrid buyers represent a market that has not yet shown itself. One can make a case for a performance-oriented six-figure hybrid car, but for now the jury is still out.

Two-mode hybrid
GMC Yukon Hybrid. This fall, General Motors will be coming out with hybrid versions of the company's most popular full-sized SUVs, the Chevrolet Tahoe and GMC Yukon.
It might seem silly to make hybrid versions of these big vehicles, but if you consider the amount of fuel ultimately saved, it actually makes a lot of sense. Even a modest improvement in the efficiency of a vehicle that uses a lot of fuel will save more gallons than a large improvement in an already-efficient small car.

There are performance challenges in creating a large hybrid SUV, though. If the hybrid version can't tow or haul just like the non-hybrid, consumers won't buy it. Instead they'll just go back to non-hybrid SUVs. So the hybrid SUVs have the same big V8 engines as their non-hybrid counterparts, ready to pull a trailer when needed.

When not needed, however, GM's "dual mode" hybrid system employs a variety of fuel-saving tricks when the vehicle is traveling at highway speeds.

Four of the eight cylinders will shut down when their power is not needed. (The hybrid uses a large engine - 6.0 liters - so that half will still provide adequate pull and the SUV can spend more time in 4-cylinder mode.)

The SUV's electric motor also connects to the wheels one way at low speeds and another at high speeds, allowing it to provide maximum assistance at any speed.

As with many other hybrid vehicles, the GM hybrid SUVs can travel under electric power alone for short distances at low speeds, and the gasoline engine shuts down altogether whenever the vehicle stops.

Plug-in Hybrid
Chevrolet Volt. Even though it has a gasoline engine and an electric motor, GM is careful not to call the Chevrolet Volt a hybrid car. We've included it here, though, because it's commonly referred to as a "plug-in hybrid." GM calls it a plug-in electric vehicle with on-board power generation.
The point is that, while the Volt has a gasoline engine, the engine does not power the car's wheels. The wheels are powered by an electric motor. Batteries for the electric motor can be charged by plugging the Volt into an ordinary electrical outlet.

After the batteries are fully charged, the car can be driven for up to 40 miles without needing additional charging. If batteries do run low, the gasoline engine will run to generate electricity as needed.

The only difference then between the Volt and what you would ordinarily call "an electric car" is that it can charge its own batteries - whenever that may be needed - in addition to using power supplied by your local electric utility.GM has no official on-sale date for the Volt. More research is still needed on the battery, and there's no way to put a timetable on the needed breakthroughs, the company has said.
(C)CNN

Prius still king as hybrid auto sales rise

Record sales for hybrid vehicles seen for 2007 as more models enter the market. Diesels expected to grow even faster.

The Toyota Prius remained America's most popular gasoline/electric vehicle even as sales of hybrids rose 35 percent in the first quarter of 2007 compared to last year, according to a new report from J.D. Power and Associates.

Sales of diesel-powered vehicles, already a larger portion of the market than hybrids, are expected to grow even faster.

A total of 187,000 hybrid vehicles were sold in the United States in the first six months of 2007, according to J.D. Power. Sales of hybrid vehicles are expected to decline slightly in the second half of the year but, nevertheless, J.D. Power expects a total of 345,000 to be sold over the whole year. That would compare to 256,000 sold in 2006.

"High gas prices during the first half of 2007, coupled with automakers lowering the price premium for most hybrid models, have given the hybrid market a boost," said Mike Omotoso, senior manager of global powertrain forecasting for J.D. Power and Associates.

Lower prices for hybrids, as well as sales incentives, have helped make hybrids a more economically viable choice for consumers wanting to save money on fuel.

The Toyota Prius accounted for slightly more than half of all hybrid vehicles sold in the first half of 2007. Toyota has recently begun offering sales incentives on the Prius which, for years, had been selling so well that even used models were in high demand.

"Toyota realized that they had to offer incentives for the Prius to offset the decrease in the federal tax break, which decreased from more than $3,000 in 2006 to less than $1,000 in 2007," said Omotoso. "The incentives helped Toyota maintain a strong sales pace for the Prius."

A recent J.D. Power consumer survey showed flagging consumer interest in hybrids, but interest remains strong enough to maintain a continued rise in sales.

"While consideration for hybrids is falling, interest in hybrids is still strong among consumers, and projections indicate steady growth for this segment in the coming years," said Omotoso. "Bringing additional hybrid models to the market will serve to fuel that interest."

Despite increasing competition from other hybrid models - including seven new models expected to enter the market later this year - J.D. Power expects the Prius to remain the sales leader for several more years. Among the new hybrid models expected this year are hybrid versions of Ford's Ford Fusion and Mercury Milan sedans and hybrid versions of General Motor's full-size SUVs.

J.D. Power expects hybrid vehicles to make up 4.6 percent of the total new vehicle market by 2010 when there will be as many as 65 hybrid models for sale in the U.S.

Diesel vehicles, including heavy-duty pickups such as the Ford SuperDuty, already make up about three percent of the new vehicle market, Omotoso said.

That percentage is expected to rise to about five percent by 2010, said Omotoso, with most of that growth coming from newly introduced passenger vehicles such as a diesel-powered Honda Accord that will replace the current Accord Hybrid.
(C)CNN

About Paying for Cars With Cash

There are two questions that greet every car buyer who walks into a showroom: “Are you ready to buy today?” and “How do you plan to pay?”

If the answer to the first is yes, there are smiles all around. If the answer to the second is cash, that warm greeting may grow chilly.

To be sure, no dealer will turn away a cash-paying customer, not in the atmosphere that surrounds the automobile industry these days, but all things considered, they are less welcome than buyers who want to lease or finance their cars. “We actually love all paying customers,” said George Borst, the chief executive of Toyota Financial, “but we really want people to finance.”

On the other hand, many car dealers are trying to clear out big inventories at the end of the 2007 model year to prepare for fresh models that begin arriving soon.

But buyers who pay cash, whether they write a check or borrow the money elsewhere and bring it to the showroom, provide car dealers with fewer opportunities to make money on a car deal.

That ranges from the cut they get from arranging a lease or loan, to options like extended warranties or antirust coating that buyers are more likely to choose if they can fold it into the amount they borrow. In some cases, those extras account for up to 75 percent of a showroom’s profits.

But, to some dealers’ chagrin, cash deals are up in 2007. Some 11.7 percent of buyers paid cash for cars in the first half of this year, versus about 8 percent over the last few years, according to a survey by CNW Marketing Research, which studies car buying habits.

In all, about 26 percent of buyers are bringing cash to the table, whether it is out of their bank accounts or in pre-arranged loans through their credit unions, banks or home lenders, according to the Power Information Network, the research arm of J. D. Power & Associates.

That overall figure is up slightly from last year, but still below the one-third of buyers who paid cash in the 1950s, when customers, many with lingering memories of the Great Depression, came to showrooms with their check books or stacks of bills.

It is in line, however, with the rate during the 1970s and 1980s, before car companies made widespread use of cut-rate loans and discount lease plans.

One big reason for the recent rise in cash-paying buyers is the introduction of small and less-expensive cars into the American market, like the Honda Fit, Toyota Yaris and Nissan Versa, said Art Spinella, the president of CNW Marketing.

Because many consumers purchase small vehicles as second and third cars, and have a car loan for their primary vehicle, a number are choosing instead to pay cash rather than take on another loan, Mr. Spinella said. That is particularly true for women buyers, who account for about 42 percent of cash-paying customers.

Cash-paying buyers, who tend to be wealthier than typical consumers, are often reaping investment profits. This year, 34.8 percent paid for their cars by selling stock, the most common source of cash, compared with 31.8 percent who took money out of their savings, Mr. Spinella’s data showed.

Indeed, at brands like Mercedes-Benz, Volvo, Audi and BMW, as many as one-third of transactions are cash sales.

For these customers, sticker price can be no object. One shopper at Lexus of Ann Arbor, Mich., recently paid $116,000 in cash for the Lexus LS 460 Lh, the hybrid version of Lexus’s ultra luxury sedan, which went on sale in July.

Mark A. Louria, the general sales manager there, said about 25 percent of his customers paid cash for their new cars, keeping them for an average of six to seven years. Mr. Louria said he tried to encourage many customers to lease their cars instead, arguing that it was a better way to take advantage of ever-changing technology.

In the end, “it’s whatever works best for them,” Mr. Louria said.

Shopping sites like Edmunds.com, Cars.com, Kelly Blue Book (kbb.com) and Autobytel.com are places where consumers can research data like the invoice price, and the amount that manufacturers are giving to dealers in rebates and extra incentives.

Those who plunk down dollar bills often cite a single reason. “I just don’t like debt,” said Todd Larson of Shorewood, Minn. Mr. Larson and his wife, Linda, paid $33,000 cash for their 2005 Ford Freestyle, as well as a 2001 Jeep Cherokee.

For Matthew Galloghy, 30, who lives in Batavia, Ohio, outside Cincinnati, it is simply saving money. He recently paid about $20,000 for a Honda Accord, and plans to drive it for about 10 years.

Mr. Galloghy takes his thrift to another level. He said he would make a monthly deposit equal to a car payment, or about $300, in a money market account. “And now I certainly have a cushion for emergencies or anything else that may come up,” Mr. Galloghy said.

Cash purchases had all but died out in 1998, when buyers were snapping up cheap lease deals that allowed them to take home more expensive models, especially sport utility vehicles, for little down and minimal monthly payments.

After a rebound, they plummeted again in the months after the September 2001 attacks, when auto companies led by General Motors rolled out zero percent financing plans in an effort to spur auto sales.

Lately, these plans have been far more limited than they were earlier this decade, said Jesse Toprak, an analyst with Edmunds.com, a Web site that offers car-buying advice. Many automakers, who made zero percent financing available to virtually any customer six years ago, now offer it only to those with the best credit, he said.

Auto company finance arms and banks have been burned by oversetting these cars’ residual value, or the amount that they estimate the vehicle to be worth when the lease is finished. The higher the residual, the lower the monthly payment, but a too-high residual means the finance company takes a loss on the car after it is turned in.

These lenders also have been hurt by their practice of encouraging five and six-year car loans, which can lead to lower payments, but can result in a vehicle being worth less than the remaining amount to be paid off, a situation the industry calls “upside down.”

Zero-percent-financing plans, in which buyers need only pay for taxes, licenses and other documentation, can prove more beneficial to consumers with the best credit.

Likewise, a discounted lease of 36 months or less can allow trend-conscious customers to swap their cars for the next hot model without gambling on the car’s value, even though they will pay interest on the lease, transaction fees, and may need a down payment. No matter what, buyers need to haggle over the price first before discussing the details.

But some buyers simply want to own outright. In that case, these consumers need to do their homework before they begin negotiating, checking out the prices that are being paid in their area for the automobile they want on sites like Edmunds, which provides a tool it calls the “true market value.”

Buyers enter their ZIP codes, and then choose the options they want, and are provided with the price most frequently paid by purchasers in their area.

Without that knowledge, cash-paying customers risk not just a frosty dealer response, but a concerted effort to get them to change their minds, said Mr. Toprak, who sold cars early in his career.

“When I was at a closing and the customer said, ‘this is a cash deal,’ I knew I would not make any money for the next hour,” he said.

Mr. Toprak advised cash buyers to get prices from several dealers through their Web sites. If a sales person balks at honoring that figure because a customer wants to pay cash, the buyer can threaten to go elsewhere, he said.

Still, some buyers prefer to stick to their guns.

John Kealing, a St. Louis salesman, paid $34,000 cash for his 2006 Infiniti G35x, the second car this decade for which he has paid cash. Mr. Kealing said he deliberately waited until the last minute to tell the dealer that he was paying cash. “He found out when he put the loan document in front of me,” Mr. Kealing said.

The dealer “tried to talk me out of it, actually,” he said. “He told me he had some great rates, but I didn’t waver.”

Rob Butler, owner of the Butler Automotive Group in Indianapolis, said he doesn’t discourage customers who want to pay cash from doing so.

“If a guy likes to write a check, fine,” Mr. Butler said. “Cash is still cash.”
(C)NYT

2007 Hyundai Azera Test Drive

If you can do without a few frills, Hyundai's Azera rides with some heady competition in the near-luxury segment, but at a much lower price.
MSRP: $24,235 - $27,335

Hyundai’s Azera is a midsize, entry-level luxury sedan that replaced the XG350 when it debuted for 2006. It is, in so many ways, light years ahead of that model, which itself seemed to be at least a generation or more behind its Japanese rivals in terms of performance, styling and accommodations. The question, however, is whether the Azera, no matter the improvements over the car it replaces, qualifies as a true competitor to luxury vehicles like the Lexus ES 350, or whether it’s merely Hyundai’s slightly dressier version of cars like the Honda Accord, Toyota Camry or, for that matter, Hyundai’s own Sonata. We’ll take the middle ground and call it a reasonable, and in some ways superior, alternative to models like the Buick LaCrosse or Toyota Avalon.

The Hyundai Azera costs a couple of thousand dollars less than an Avalon, and a lot less than a Lexus ES 350. It’s well equipped with only a handful of options available, but offers nothing in the way of the “gee-whiz” electronics that tend to define the latest luxury vehicles. This helps keep the cost down, but it tends to limit its appeal among gadget freaks that seek status in extolling the virtues of features like adaptive headlamps, “smart key” systems and laser-guided cruise control to their country-club acquaintances.

The car carries over from its inaugural 2006 model year with only minor changes that include new backlit electroluminescent instrumentation of the sort that Lexus has employed since the original LS 400. An engine immobilizer security feature is now included to help shave a few dollars off the car’s insurance premiums for comprehensive coverage, and the side mirrors incorporate turn-signal indicators, a feature that is both practical but also a bit of a conceit, in that luxury cars like Mercedes-Benzes typically have such indicators in their side mirrors.

As with all other Hyundais, the Azera is covered by a warranty that puts most, if not all, of the luxury makes to shame. This includes a five-year/60,000-mile bumper-to-bumper protection that pretty much takes care of everything, save for maintenance and normal wear-and-tear; 10-year/100,000-mile powertrain coverage for major components; and five-year/unlimited mileage roadside assistance, which is essentially a free auto-club subscription for towing and other perks.

As General Motors has discovered, selling cars with a generous warranty is a great way to attract buyers who might otherwise eschew a particular brand for fear of reliability issues. While we have not heard any widespread complaints about the longevity of recent Hyundai models, and their initial build quality is eclipsing that of older brands, according to J.D. Power and Associates’ Initial Quality Study, we’d look at the warranty as a no-cost service contract, which would otherwise cost several thousand dollars if sold by a dealer’s finance and insurance department.

Exterior
Overall, the Hyundai Azera is a handsomely styled, though not particularly flashy, automobile. With the logos covered up, few casual onlookers would likely identify it as a Hyundai, and some might even mistake it for a Lexus or Infiniti. It lacks the overt visual personality of, say, a Jaguar S-Type or Mercedes-Benz CLS-Class, but it’s in no way unattractive.

A wide front grille is flanked by horizontal halogen projector-beam headlamps, and the front fenders flow cleanly to the rear of the vehicle without much in the way of clutter or adornment. Its roofline stays high until curving sharply downward just before the rearward edge of the back door. A higher and more horizontal roofline may not look as sleek as many competing sedans that follow the trend toward swoopy looks, but it does keep taller occupants from bumping their heads when getting in and out of the backseat. A prominent “Azera” logo in chrome between the taillamps is perhaps a bit too brash for what is otherwise a subtlety styled car.

The Limited version of the Hyundai Azera tends to look a bit dressier than the SE, given its larger and fancier 17-inch, 10-spoke aluminum alloy wheels, which are not available as a factory option on the base car.

As is the case with most upscale models, the Azera’s exterior colors tend to be on the sedate side, with silver, beige, green, light blue and gray being the dominant hues. The silver model we drove nonetheless had an attractive and well-executed paint finish.

Interior
If the Hyundai Azera’s outward appearance suggests it’s from one of the upscale Asian brands, the sedan’s interior literally shouts the inference. Its attractive design is straight out of the Lexus sketchbook, and it’s well finished with quality materials used throughout the roomy cabin.

The seats — our test vehicle’s were finished in leather — are supportive and offer sufficient comfort, even over longer treks. Eight-way power adjustments are standard for the driver; the front passenger gets four-way adjustments. It may take some time to find one’s “sweet spot,” as is often the case with multiple-choice cushions, but posterior nirvana is generally obtainable for even those of larger build.

Unfortunately, memory settings for the seats are only offered as part of the $2,550 Limited Ultimate Package on the top model. Heated front seats are standard on the Limited and are optional with the base car in the $1,800 SE Premium Package.

The rear seat offers sufficient room for two six-footers, with a third, albeit shorter, occupant able to fit between them as the need arises. Entry and exit to and from the rear seat is generally good. The rear seat folds flat in 60/40-split sections to maximize cargo-carrying abilities. The fold-down rear seat backs are mainly useful for toting longer objects, as opposed to big, bulky ones like televisions or desks; you’ll want a hatchback or SUV for those items.

A leather-wrapped tilting and telescoping steering wheel with integrated audio-system controls is standard; adjustable brake and accelerator pedals, a boon to motorists shorter or taller than the norm, are only available on the Limited model as part of the Ultimate Package.

The Hyundai Azera’s dashboard is attractive and controls are well laid out. It can be finished in beige, black or gray; choose either of the latter two treatments to avoid distracting reflections on the inside of the windshield on sunny days. While a GPS navigation system remains unavailable, one of the unintended bonuses is that the center stack of audio, climate-control and other switchgear is uncomplicated and intuitive to operate, without the necessity for a touch screen or confusing integrated multimedia controls you’ll find on many other upscale models. (Besides, you can always purchase an inexpensive portable navigation device for journeys into unfamiliar areas.) All buttons and switches are well identified and large enough to operate while wearing gloves.

The Azera SE comes adequately equipped with an AM/FM/CD stereo that can play MP3 files on discs, automatic air-conditioning and the usual power accessories. The Limited adds wood trim and a power rear sunshade. Front, front side and head-curtain airbags are included across the line, as are “active” head restraints designed to mitigate whiplash injuries in rear-end collisions.

A power sunroof and a CD changer are available on both versions, while a power tilt/telescoping steering wheel, rain-sensing wipers, power folding outside mirrors and the adjustable pedals with memory setting are only offered through the Limited Ultimate Package.

Performance
The Azera’s all-aluminum 3.8-liter V6 engine operates smoothly and quietly, and it employs the latest technology like variable valve timing to generate a more-than-adequate 263 hp. The engine provides more muscle than many midsize sedans in the same price range and is only slightly less powerful and a bit courser in operation than the Lexus ES 350’s 275-hp V6.

A five-speed automatic is the only available transmission, and it performs admirably. It affords manual gear selection for added control while careening through twisty curves or for dropping a gear as you hit a highway on-ramp.

At an estimated 17 mpg city/26 mpg highway, the Azera is neither an economy car nor a gas guzzler. Depending on how you drive, you can expect those figures to be off by a few miles per gallon in real-world use, but not prohibitively so.

While the Azera is certainly no sport sedan, it behaves admirably in most respects, with ample comfort and relatively neutral front-drive handling characteristics. Front-drive vehicles have most of their weight over the front wheels, and so they don’t generally feel as nimble as many rear-wheel-drive cars.

We found the Hyundai Azera to be pleasant in our urban and highway jaunts alike. Its suspension is tuned on the soft side, but the car doesn’t wallow over bumps and pavement imperfections. The car’s speed-sensitive power steering applies more assistance at lower velocities to make parking and garage maneuvers easier, but it tightens up on the highway when a more-solid feel and higher steering effort are advantageous. The car’s turning radius is reasonably tight, so it requires little effort to parallel park, though unlike other models in its class, neither rear proximity warnings nor a backup camera are available to make the chore that much easier.

The larger 17-inch wheels and all-season tires on the Limited (the SE comes with 16-inch rims and rubber) help improve the car’s ride and handling a bit, but not dramatically so. Four-wheel disc antilock brakes with electronic brake-force distribution are standard and help bring the car to a stop with reasonable authority and control. The Hyundai Azera does not have a brake assist function found on many luxury cars; this feature brings an added margin of safety in panic-stop situations by applying maximum braking force when a panic stop is detected.

Stability and traction control systems are included to help mitigate wheel slippage and prevent a loss of control in extreme handling situations and/or slippery surfaces. Both systems work well, though (as in most vehicles) you’ll want to switch the traction control off when attempting low-speed maneuvers, especially parking, in measurable snow when a certain amount of wheel slippage is otherwise unavoidable.

All in all, we think that the Hyundai Azera is a solid value and one worth considering for those who don’t care about brand clout or having the latest high-tech gizmos. Its amenities, quality and performance are at least equal to those of competing models in its price range and even stand up well to more-expensive models. Just bear in mind that if you like sporty driving dynamics, this probably isn’t the car for you.
(C)Forbes

Earthquake: Toyota getting back to normal

No. 1 carmaker, hit by supply problems following an earthquake last week, lost 55,000 units of vehicle production, but reaffirms its overall sales target for 2007.

Toyota Motor Corp. said it would resume work at two-thirds of its car assembly lines in Japan on Tuesday after an earthquake cut off supplies of key components to its factories, and it kept its global sales targets unchanged for 2007.

Auto production at Japanese carmakers has virtually ground to a halt after the country's top supplier of piston rings, Riken Corp., was hit by an earthquake on July 16.

Speaking at its annual mid-year news conference, Toyota President Katsuaki Watanabe said on Monday the automaker would lose about 55,000 units of vehicle output after a complete stoppage at all domestic plants through Monday and at 20 of the 31 assembly lines at its 12 group-wide car factories on Tuesday.

Plans for Wednesday and beyond would be decided on Tuesday.

But Watanabe stressed that shutting down factory production was not alarming under the circumstances, and defended Toyota's famed lean manufacturing method as one of its competitive strengths.

"We will gauge how to make up for the lost production in due time," Watanabe said. "What's important is being able to figure out how swiftly we can fix the problem and return to normal."

Car sales in Japan have declined across the board, but Toyota's domestic factories have been working at full speed to satisfy demand overseas. Toyota exports 60 percent of its Japan-made vehicles.

Watanabe conceded that the domestic market remained tough - Toyota's sales fell 10 percent in the first half of the year to 826,000 units - but said he was counting on new car launches and the Tokyo Motor Show in the latter half to jump-start sales.

"We realize that our domestic sales target of 1.72 million units (for 2007) is very challenging, but we've seen some improvement in July and we're not changing our global targets," he said.

Toyota in December set a parent-only sales goal of 8.4 million vehicles for 2007 and 9.34 million units for the group, including Daihatsu Motor Co. and Hino Motors Ltd. Both figures represent a 6 percent rise from 2006.

Margin goal
Toyota, which overtook General Motors Corp. as the world's biggest automaker last year, has been boosting its sales volume and profits steadily driven by its popular, fuel-efficient models such as the Camry and Prius sedans.

Management has set a goal of 10 percent operating profit margin, up from 9.3 percent in the business year ended March 31, and Watanabe said the automaker would keep that target for the mid to longer terms despite intensifying competition, the growing popularity of smaller, cheaper cars and the need to step up spending on developing environmental and safety technologies.

"I think it's a good target that (also) works for the mid to long term," he said.

Toyota already has the highest profit margin among the world's mass-volume carmakers. Domestic rivals Honda Motor Co. and Nissan Motor Co. had margins of 7.7 percent and 7.4 percent, respectively, last year.

As part of its safety activities, Toyota announced on Monday it would include side airbags and curtain shield airbags as standard equipment on all new passenger cars going forward.
(C)Reuters

Hybrid lovers: The honeymoon may be over

As the reality of fuel efficiency sinks in, fewer new car buyers are considering a hybrid, according to J.D. Power.

The percentage of car shoppers considering hybrid vehicles has declined in the past year, according to a survey released Tuesday by J.D. Power and Associates.

Fifty percent of new vehicle shoppers surveyed said they are considering a gasoline/hybrid electric vehicle. That's down from 57 percent last year.

"In the 2006 study, we found consumers often overestimated the fuel efficiency of hybrid-electric vehicles, and the decrease in consideration of hybrids in 2007 may be a result of their more realistic understanding of the actual fuel economy capabilities," said Mike Marshall, director of automotive emerging technologies at J.D. Power.

Interest in hybrid vehicles declined the most among younger shoppers. Last year, 73 percent of car shoppers between ages 16 and 25 said they were interested in a hybrid vehicle. This year, 60 percent were.

Car shoppers also said they were willing to pay an extra $2,396 for a hybrid powertrain while expecting a fuel economy improvement of 18.5 miles per gallon.

Meanwhile, consideration for diesel-powered vehicles stands at 23 percent. Last year, only 12 percent of car shoppers considered purchasing one. New clean-diesel models, which have much cleaner exhaust than older versions, have just begun appearing on the market this year along with the low-sulfur diesel fuel needed to run them.

Shoppers expected to pay $1,491 extra for a diesel powertrain. They also expected to get about 15 mpg better fuel economy.

"As the automotive industry steadily offers more alternative powertrain/fuel options to consumers, buyer preferences will continue to shift the market in the coming years," said Marshall. "

The consumer research company also released an Automotive Environmental Index which ranks auto companies and specific models according to their fuel economy and emissions as determined by data from the Environmental Protection Agency and vehicle owners.

Toyota was the highest-ranking car brand in J.D. Power's Automotive Environmental Index, followed by Volkswagen and Honda. This is the second year J.D. Power has released that Index and Toyota has moved up six rank positions since last year.

The index is based on a car's emissions as reported by the U.S. Environmental Protection Agency and its fuel economy as reported by the EPA and by drivers responding to a separate survey by J.D. Power.

Of the top 30 vehicles in the J.D. Power index, 10 were hybrids from Ford, General Motors and Toyota.

Toyota, including its Lexus luxury brand, had more vehicles in the list than any other manufacturer.
(C)CNN

Plug-In Hybrids a Solution to Global Warming

The first major analysis of the potential impact of plug-in hybrid electric vehicles has found the widespread adoption of such cars and trucks would dramatically reduce greenhouse gas emissions in the United States and improve air quality.

By 2050, plug-in hybrids, or PHEVS, could eliminate 450 million metric tons of CO2 annually - the equivalent of taking 82.5 million conventional cars, or a third of the nation's current fleet - off the road. That would also cut oil consumption by nearly 4 million barrels a day. Assuming PHEVs hit the market by 2010, and depending on sales of the cars, the total reduction in greenhouse gases by 2050 would 3.4 to 10.3 billion metric tons, according to the study conducted by the non-profit Electric Power Research Institute and the Natural Resources Defense Council. The study was based on sophisticated computer modeling of the U.S. power grid and transportation system.

"What we’re talking about today is potentially a very, very large effect," said John Bryson, CEO of utility giant Edison International (EIX), during a press conference in Washington, D.C. this morning. Utilities like Edison, PG&E (PCG) and Austin Energy have taken the lead in pushing automakers to get in gear on plug-in hybrids.

Even if plug-in hybrids become the dominant form of transportation they would only spike electricity demand by five to eight percent, researchers said, because most car owners probably will charge their vehicles at night when power plants are idle or under-utilized. The study's computer models considered various scenarios, from a high CO2-intensive grid to a greener one as well as plug-in hybrids with varying ranges and sales. But even if plug-in hybrids made up only 20 percent of the nation's vehicle fleet in 2050 and the electric grid remained relatively dirty, greenhouse gas emissions would still decline by some 163 million metric tons annually.

The impact of plug-in hybrids on global warming will depend on the electric system, noted NRDC scientist Dan Lashof. "The key to utilizing plug-in hybrids is a cleaner power grid," he said. The greener the grid, the greater the greenhouse gas reductions as coal-fired power plants are displaced by renewable energy or begin to deploy technology to capture their CO2 emissions.

General Motors (GM) executive Tony Posawatz brought a plug-in Chevrolet Volt concept car to the press conference. The automaker is designing the Volt to run primarily on battery power and use other alternative fuels to extend its range. "We at General Motors are certainly very interested in this study," said Posawatz. "The potential for plug-ins, I think everyone recognizes, is tremendous."
(C)B2

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

Big Brother can save you money

Car insurers explore ways to track drivers so they know whom they can charge less.

A new discount plan from GMAC Insurance gives a discount on premiums to drivers of General Motors vehicles with the OnStar service if they let the insurer track the number of miles they drive.

Other companies have been experimenting with similar programs, which is causing concern about how much privacy drivers may unwittingly give up in exchange for savings.

OnStar is a program built into most newer GM vehicles that allows occupants to communicate with a help-desk operator.

Among the services are travel directions and restaurant reservations. An OnStar call can also be initiated automatically in the event of a crash to get help quickly. OnStar subscribers can also get a monthly diagnostic email detailing any needed maintenance or potential problems for their car.

The only information OnStar would share with GMAC insurance, both companies said, would be the number of miles driven each month. GMAC would use that information to help it calculate risk. Drivers must enroll in the OnStar Vehicle Diagnostics service to get the discount.

"I wouldn't really consider that to be particularly invasive," said Paul Stephens, director of policy and advocacy for the Privacy Rights Clearinghouse. According to him, it's data that is commonly given out that doesn't dig very deeply into a driver's habits.

The biggest discount of 54 percent would go to those who drive fewer than 2,500 miles per year. The smallest discount of 13 percent would go to those who drive between 12,501 and 15,000 miles per year. No discount would go to those who drive more than 15,000 miles per year.

The plan will be available in 34 states, but will roll out in more states next year, the company said. OnStar currently claims over 5 million total subscribers

GMAC Insurance has been offering the discount on a test basis since January, 2004. So far, according to the company, 10,000 people have signed on.

GMAC Insurance, which is 49 percent owned by General Motors, insures all types of cars, not just GM cars, the company said, but this program would only be available to GM drivers.

Others testing the waters
Progressive Insurance offers a similar program in a few states. It's called TripSense, and it requires participants to plug a computer chip into a port in the the car's dashboard.

The chip collects data, including the number of miles driven and time of day when the vehicles is driven. Participants remove the chip on a regular basis and connect it to a computer to upload the data to Progressive's computers. In exchange, they receive discounts of as much as 25 percent on their insurance premiums, according to the company.

Adding time of day invites the potential for unforeseen uses of the data, according to Stephens. For example, the information might could be subpoenaed in a divorce case to prove that someone was taking a few extra trips that weren't being divulged to his or her spouse.

"I saved $100 on my auto insurance, but I've got a pretty damning piece of evidence here that can be used against me and cost me tens of thousands of dollars," Stephens said.

Progressive also collects data about vehicle speed, acceleration and braking, but that information is used only for research purposes, the company said, and it would not be used to set rates, or as a basis for canceling a policy.

These discount programs are voluntary. As long as consumers understand fully what data is being collected and how it's being used, it's up to them to decide how much information they're comfortable with sharing to save money, said Stephens.

The GMAC/OnStar announcement may spur larger insurers to begin experimenting with programs like these soon, said Brian Sullivan, publisher of insurance industry newsletter Risk Information.

Spokesmen for State Farm and Allstate said their companies are looking into it.

Keep on Truckin
Data-tracking discount programs that collect and analyze even more detailed data than those used by GMAC and Progressive, are already used by the commercial trucking business, according to Sullivan.

Customer acceptance is less of an issue there because the customers aren't the drivers but the trucking company owners who share the insurance company's interest in regulating and tracking driver behavior, said Sullivan.

"The nice thing about truckers," he said, "is if you can make them pee in a cup you can make them do anything."

Programs like that will provide more information about how much impact various data points should have on computing insurance risk and, therefore, premiums, said Sullivan.

And they actually change the way truck drivers operate their vehicles, said Sullivan. When truck drivers are told they are being tracked, as opposed to when they are tracked without their knowledge, they drive more carefully, Sullivan said.

"If everyone had this device on their car," he said, "we'd have far fewer accidents on the road."
(C)Peter Valdes-Dapena

Once Frumpy, Green Cars Start Showing Some Flash

When Christopher Paine, the director of “Who Killed the Electric Car?” filmed the General Motors EV1, he had to search for a flattering perspective.

“When we filmed the car on the road, its best angle was the low front shot from the side,” he said. “It was gorgeous. The back of the car was more challenging. The car’s style did not appeal to certain design sensibilities.

“That Citroën-like back was not successful,” he added.

Mr. Paine is putting it mildly. The EV1 was derided for its appearance. So was the spacey Honda Insight, the first hybrid to go on sale in the United States. Neither was a commercial success.

Both shared a stylistic similarity to the long skirts of the early 20th century: They suggested Popeye’s pal, Olive Oyl, in her ankle-length dress. The rear fender skirts seemed frumpy.

Honda’s hybrid evoked similar reactions. While the Insight could theoretically get 56 miles a gallon in the city and 70 on the highway, its shape put people off.

The EV1, G.M.’s pioneering electric car, and the recently discontinued Insight raised a challenge that designers are still dealing with. How do you signal green to other drivers, and is it for pride or marketing? How do you provide drivers assurance about the novel technology? What does green look like? How do you design a green car? How green do drivers want to appear?

One way to suggest green through design is simply to paint or mark models that have better fuel economy or reduced emissions. Toyota offers the hybrid versions of the Camry in a color called Jasper Pearl, a light, almost luminous, green. When I drove a test model, several people asked if the car was a hybrid, simply because of its strange green paint, I believe.

Saturn offers the hybrid version of its Vue utility wagon in green. It also applies what it calls a Green Line badge to them — the word line implying more green models to come. Ford adds a green-leaf badge to hybrid versions of its Escape and Mercury Mariner.

BMW’s 7 Series with hydrogen power is indistinguishable from other 7 sedans except for its badge. Honda’s discontinued Accord Hybrid resembled the standard model, and its Civic Hybrid is distinguished from its siblings largely by pie-pan wheel covers.

The Toyota Prius offers a now-recognizable and characteristic silhouette: a long arc of roof, a short hood and a high, stubby back. It is not lovely and it is not as radically different from other cars as the EV1 or the Insight. But it is different enough to signal that it represents a different kind of car.

While in the traditional visual language of auto design the small hood sen