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TIPS FOR GETTING BEST DEAL ON CAR FINANCING
4 August 2000
For most people, new-car shopping involves not just picking the vehicle you want at an affordable price, but also negotiating the best loan (or lease) and striking a deal on your trade-in.
The best advice is to treat each of the three separately. Here are some guidelines to follow that will help you get a fair deal:
* Do financing homework before you buy. You can learn about interest rates for new and used cars by searching the Internet where you'll find your bank has a site, as do dealers and other sources of financing. You can also check newspaper ads for current specials or simply call you banker. The idea is to determine what you can afford before you go shopping.
* Focus on getting the lowest possible interest rate, not the monthly payment. It's a critical factor in determining what your car will cost over the entire term of the loan.
* Get a handle of the value of your trade-in before you go shopping. Your banker can help, so can wants ads, auto insurance providers and a price guide such as the Canadian Red Book which is available in most libraries.
* Be certain of what the monthly payment includes before signing on the bottom line. You'll want to know not just the purchase price, but also the down payment,
trade-in value, and the interest rate.
* Decide in advance whether you want such items as an
extended warranty, credit life insurance, rust-protecting undercoating or a security system.
* Find out if the manufacturer of the vehicle you want is offering some sort of customer incentive, such as a cash rebate or
low-rate financing. Most manufacturers have a customer service 1-800 number in the phone book or you can simply ask your dealer.
Okay, now the question is to rebate or to interest rate. That is, if you're faced with a choice of low interest rate or a cash rebate, which do you take? Here's a quick little formula that gives you the answer.
We start with 3?year, $15,000 loan. What we're doing is comparing three per cent financing versus a $1,500 rebate and eight per cent financing, assuming you apply the rebate to the down payment.
If the total at the bottom is positive, the low-rate financing is a better deal. If the total is negative, go with the rebate to save money.
Rebate/Interest Rate Formula
Loan amount...............$15,000
Divide by 2................$7,500
Multiply by
the difference
between interest rates.......x .05
Subtotal......................$375
Multiply by the number of
years in loan term.............x 3
Subtotal....................$1,125
Subtract rebate...........- $1,500
Total.......................- $375
Go with the rebate. But if you're confused, ask for advice from your accountant, your banker or a financial advisor, or talk to your dealer's finance department.
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 AFFORDABLE CARS ARE OUT THERE
4 August 2000
We are a nation of minivans, compact cars, subcompact cars and pickup trucks, says Richmond Hill-based auto analyst Dennis DesRosiers of DesRosiers Automotive Consultants.
Compact and subcompact cars, especially. According to DesRosiers, more than 65 per cent of all new cars sales in Canada fall into this area, a place the automakers themselves like to call the "lower middle."
Interestingly, while there's no doubt that automakers have put more effort into building and selling larger, better-equipped and more profitable cars, there is still plenty of choice for the budget new-car shopper down in the "lower middle." Especially in the $15,000 range.
There are even a couple of offerings in the $11,500-$12,5000 range, though the cost of complying with safety and emissions regulations has made these cars barely profitable or not profitable at all. Of course when you get below $14,000-$15,000 the financially challenged buyer will find very basic transportation, stripped down models if you will.
That means no air conditioning, no power door locks/windows/side mirrors, no remote keyless entry and the like. But these cars all meet federal safety regulations for crash protection and a radio of some kind is generally standard. And they're fuel efficient, mostly because these small, light cars are powered by very small engines.
Finally, there is some variety to be found in the affordable car marketplace. Variety in the sense that you have hatchbacks, sedans, station wagons and convertibles to choose from.
Here, then, is a rundown of entry models from Canada's automakers, presented in alphabetical order:
Chevrolet Cavalier/Pontiac Sunfire: Lineup: 2-door convertible/4-dr sedan/2-dr coupe. Price range: $15,765-$27,200. For year 2000 these mainstays of the General Motors car family have been given a minor facelift, a tweaking if you will. They are the only cars on this list powered by a pushrod engine; all the rest have overhead cam designs. Even the least expensive cars have plenty of features.
Chrysler Neon: Lineup: 4-dr sedan. Price range: $17,995. Earlier this year Chrysler launched the 2000 Neon. The low-end Neon was scrapped in favor of one Highline model at one simplified price. Certainly this re-made Neon is far more sophisticated than the previous edition. But you gotta wonder about Chrysler's strategy of not offering a bargain-basement version of the Neon.
Daewoo Lanos: Lineup: 2-dr hatchback/4-dr sedan. Price range: $12,600-$16,300. These Korean-built cars are just now making their way west of Ontario, where they have been on sale for many months now. Not fancy, but Korean automakers have plenty of experience in meeting Canadian tastes.
Ford Escort ZX2: Lineup: 2-dr coupe. Price range: $17,895. This is probably the last year for this model, given that the Escort sedan/wagon have already been replaced in Canada by the Ford Focus.
Ford Focus: Lineup: 2-dr hatchback/4-dr sedan/4-dr wagon. Price range: $14,895-$19,695. Last year the Focus was European Car of the Year, which speaks volumes about the ride/handling characteristics of a model that in Canada replaces not just the Escort, but also the Contour/Mercury Mystique. It's a bit of a gamble for Ford to try to cover such a broad range of the market with one model, even if it comes in sedan, hatchback and station wagon flavors.
Honda Civic: Lineup: 2-dr coupe/2-dr hatchback/4-dr sedan. Price range: $14,300-$23,400. Few argue that the Civic has been one of the standards in affordable cars, if not the standard for the industry. The Civic lineup stretches from a very bare-bones hatchback to a sports car-like
SiR. Something for everybody there.
Hyundai Accent: Lineup: 4-dr sedan/2-dr hatchback. Price range: $11,565-$13,495. Very quietly Hyundai has been racking up impressive sales gains with its assortment of mostly very budget-conscious automobiles. The Accent won't set your head spinning with its performance, but even when it's loaded it sells for a price that won't force you into a second mortgage.
Hyundai Elantra: Lineup: 4-dr sedan/4-dr station wagon. Price range: $14,875-$17,975. A little bigger, a little better equipped, a little more comfortable to drive than the Accent. Hyundai continues to learn lessons about refinement.
Kia Sephia: Lineup: 4-dr sedan. Price range: $12,995-$14,945. Available for now only in Eastern Canada, but this Korean automaker is aggressively seeking dealers to expand out West. Interested? Give them a call in Toronto.
Mazda Protege: Lineup: 4-dr sedan. Price range: $14,995-$17,390. The Protege has been a huge hit since this re-invented model was launched just about one year ago. A very nice car to drive, it's also roomy inside and boasts styling that seems to appeal very much to younger buyers. A great advertising campaign hasn't hurt, either. Has an outside shot at being the best-selling single nameplate in Canada.
Pontiac Firefly/Chevrolet Metro: Lineup: 2-dr hatchback/4-door sedan. Price range: $11,410-$12,175. Perennially one of the most fuel efficient cars in Canada, the Metro/Firefly are built at a joint facility in Ontario with Suzuki. In fact the Suzuki Swift is virtually the same car.
Saturn SC/SL: Lineup: 3-dr coupe/4-dr sedan/4-dr station wagon. Price range: $13,588-$21,023. The three-door coupe was a brilliant idea whose time was long overdue when it arrived last year. Buyers absolutely love the shopping experience at Saturn, but these cars have received only minor tinkering since they arrived almost a decade ago.
Subaru Impreza: Lineup: 2-dr coupe/4-dr sedan/4-dr wagon. Price range: $17,795-$26,995. All Subarus are all-wheel drive, which gives this lineup an edge over all the competition. The Impreza Brighton wagon, at $17,795, may be the best value in the whole new car market.
Suzuki Swift: Lineup: 2-dr hatchback. Price range: $11,595. Easy on the pocketbook, and like the Metro/Firefly, surprisingly fun to drive. Just not overly sophisticated.
Suzuki Esteem: Lineup: 4-dr sedan/4-dr station wagon. Price range: $15,495-$19,495. The Esteem is not a four-door version of the Swift, as some might be led to believe. The Esteem is actually a pretty well-considered small car, along the lines of Toyota's Echo and Corolla.
Toyota Echo: Lineup: 2-dr sedan/4-dr sedan. Price range: $13,835-$14,175. For such a small car the Echo is very, very quiet on the road. The most quiet car available for under $20,000. Lots of room inside, too. Quirky styling (the speedometer is in the centre of the dashboard) and narrow stance may take some time to catch on. We fell in love with the original Beetle, though, didn't we? Regardless, several hours behind the wheel will surprise many drivers in a positive way.
Toyota Corolla: Lineup: 4-dr sedan. Price range: $15,625-$20,575. The Corolla is the best-selling model of all time and there are good reasons why. This is a well-built, thoroughly refined small car. Quality is impeccable and Toyota has plenty of awards to prove it. Due for an update next year.
Volkswagen Golf/Jetta/Cabrio: Lineup: 2-dr hatchback/4-dr hatchback/2-dr convertible. Price range: $18,950-$33,650. VW doesn't really play in the base model, entry level league as it once did. But make no mistake about the Golf and Jetta's attention to detail and high level of features.
VW New Beetle: Lineup: 2-dr coupe. Price range: $21,170-$32,725. Oh, the Beetle. Starting at more than $21,000 it's not really a car for penny-pinching buyers. But you just have to smile when you look at the shape. Took some real daring for VW to go for styling like this.
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 AUTO INDUSTRY TO BE TRANSFORMED BY
E-COMMERCE
2 June 2000
Canadian consumers haven't yet embraced Internet car sales with the same fervor as Americans, but they will. It's just a matter of time,
says automotive analyst Dennis DesRosiers of DesRosiers Automobile Consultants.
"I can envision it taking one or two years until, say, 10-15 per cent of (Canadian) buyers purchase their cars over the Internet. In five
years it could be 50 per cent, or more," says DesRosiers. That's certainly not the case now. DesRosiers estimates that last year
about 50,000 buyers clicked their mouses to a vehicle purchase-20,000 new, 30,000 used. So only 1.2 per cent of the 4.2 million vehicles
bought in '99 were done through a Net transaction. In the United States, by contrast, DesRosiers reports that Internet transactions accounted for
about 10 per cent of an estimated 47 million new and used vehicle sales. But there's plenty of evidence to suggest that very shortly millions of
Canadians will turn to the Net when shopping for a new or used vehicle.
According to studies by both J.D. Power & Associates and Forrester Research, in the U.S. about 40 percent of all
new-vehicle buyers used the Internet in some way to purchase a car last year. Power predicts the
number will jump to 55 percent this year, while Forrester suggest at least 50 per cent of car shoppers will tap the Net. By 2003, Power
predicts that the Internet will play a role in 80 per cent of automobile purchases in the U.S.
Canadians may now be trailing their U.S. consumer counterparts, but that won't last
forever-or even for very long, contends DesRosiers. Indeed, according to research from the Angus Reid Group,
one-third of on-line users say they will either probably (20 per cent) or definitely
(13 per cent) make purchases over the Internet in the future. Already, 20 per cent of Canadians say they have purchased something
on-line, while another 36 per cent say they have comparison shopped over the Net.
And 21 per cent say they have used financial services on-line.
A number of factors are holding back Canadian consumers from stampeding to the Internet to buy a
car-some cultural and some technical. On the cultural side, DesRosiers suggests that the typical Canadian shopper
simply is not as aggressive and demanding as the typical American. We Canadians also generally do not have the same passionate love affair
with cars for which Americans are famous. So Canadians are not forcing the issue when it comes to buying cars on the Web.
On the technical side, dealer invoice pricing which is readily available for U.S. vehicles is tough to get in Canada. That leaves
Canadian buyers negotiating down from the commonly available manufacturer's suggested retail price (MSRP) rather than negotiating up
from dealer invoice, as is the case in the U.S. In addition, says DesRosiers, Canada's huge geographic area and small population make it
impossible for Canadian web site developers to achieve the same economies of scale as U.S. developers.
But as autobytel.ca president Brent Jones says, the one thing you can be sure of about the Internet is that it's going to keep changing. Such
is the case now in Canada.
Autobytel.ca, the Canadian arm of the oldest web buying service in the U.S., is just one of a burgeoning number of automotive web sites which
have appeared in the last year. So in addition to autobytel.ca, there are autonet.ca, autonet.ca, autoweb.com, carsbynet, driveonline.ca,
chariots.com, and canadacar.com. As well, about 63 per cent of Canadian car dealerships have their own web sites and all major manufacturers do,
too.
On the new vehicle side, virtually all the buying services provide essentially the same thing. That is, plenty of information about
vehicles, manufacturer's pricing and an on-line contact with one or more car dealers. The latter is a key point. By law all new car purchases in
Canada must be transacted through a car dealer. So while it is possible to place a car purchase request via the Net, no one actually buys a car
directly from a manufacturer on the web. That's not to say a transaction can't be conducted almost completely
on-line, but it is to say that every car buyer must complete the transaction with a dealer. What the buying services do is take your
on-line request for a quote and refer it to a dealer near you, who in turn has the option of
contacting you or not. From there the negotiation begins. Dealers pay a fee to belong to one of the buying services. The services themselves
contend that they screen dealers carefully for high customersatisfaction ratings in consumer surveys. But by their very nature, all
these sites function to some extent as referral or lead-generation services for car dealers. In addition, most of these sites provide
financing, leasing, insurance and warranty services, along with a range of other research
services-including vehicle reviews.
Interestingly, however, according to DesRosiers just 40 per cent of the 63 per cent of dealers with active web sites update their sites
regularly or have an employee who conducts Internet sales and marketing. That fact alone limits the number of dealers available for consumers who
wish to use an Internet buying service.
Manufacturer have also gotten actively involved in the web, in part because they would like more direct contact with their customers. Ford
of Canada, the first of Canada's Big Three to launch a website in 1995, last year began offering an
on-line shopping feature called "Buyer Connection." It provides customers with the ability to "build" and price
a new Ford or Lincoln model on-line. Ford of Canada president Bobby Gaunt says, "Buyer Connection offers customers the virtual ability to
conduct electronic business with a dealership from the comfort of their homes, offices or cottages." BMW Canada also just launched a web site
that allows buyers to configure a vehicle on-line, and even work out a financing package. But in these and other cases, the final transaction
is conducted through a dealer. General Motors of Canada and other makers also have extensive web sites.
Clearly, then, when it comes to purchasing a vehicle, e-commerce remains in its infancy. For now, the Net remains a brilliant source of
information, as well as a tool to put buyers in contact with dealers. But in the future will the Internet make dealerships extinct? Not
likely, says DesRosiers and other auto analysts. But the dealers who survive and thrive in an era of
e-commerce will be those who provide exceptional customer service to well-informed and highly demanding
customers.
Indeed, in the recent Polk Automotive Internet Activity Analysis in the U.S. reveals that increased Internet shopping for new vehicles will
impact price competition and the level of test-driving at dealerships, creating a busier atmosphere for most dealerships. The study also shows
that, as online shopping for new vehicles rises, manufacturers and dealers will have to work even harder at building customer loyalty.
Among other things, Internet shoppers place more importance on the test drive than do traditional shoppers, so dealers will need to have test
cars ready and available in their inventory.
"Dealerships can provide that one key piece of information that consumers cannot access
on-line - the actual driving experience," says Polks's Karen Piurkowski. "By the time Internet shoppers actually visit
the dealership, they're already armed with a wealth of information about the vehicles they want to buy. So, besides the test drive, pricing is
their key focus."
That means price competition will become increasingly more intense, as informed consumers do extensive comparison shopping on the Net. The Polk
study revealed that Internet shoppers do their homework more aggressively and more thoroughly than traditional shoppers. In addition
to what they found on dealer and manufacturer web sites, Polk found that Net-
savvy shoppers look to consumer magazines, awards for superior performance,
word-of-mouth, automotive magazines and newspaper articles for information, opinion and analysis.
The focus of Internet shoppers on information gathering and competitive pricing could translate into less loyal customers, too. Polk's study's
concludes that Internet shoppers are less likely than traditional shoppers to be loyal to a particular manufacturer, make or even vehicle
segment. Just over a third of Internet shoppers repurchased the same make, compared to half of traditional shoppers. At the manufacturer
level, 54 percent of Internet shoppers repurchased from the same manufacturer, compared to 64 percent of traditional shoppers. Chris Denove, director of consulting operations at J.D. Power says that
demanding consumers are looking for dealers equipped to handle Web-wired shoppers who want a
hassle-free, competitively-priced buying experience. But he points out that the largest group using the Web for car shopping
isn't Generation X (people in their late 20s and early 30s), but baby boomers in their late 30s and 40s. These buyers are mature, financially
stable, impatient, knowledgeable and not easily intimidated.
Recognizing and addressing the e-commerce revolution in car buying means meeting the needs of this new breed of customer, adds DesRosiers.
Many of Canada's car dealers will not find this an easy task, he adds, predicting that perhaps as many as
one-third of Canada's approximately 3,200 dealers will disappear because they haven't embraced the reality
of the Net. "I think a lot of dealers will accept it and do well," says DesRosiers.
"Many others will reject it, fight it, and they're lost."
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CAR COMPANIES AMONG THE PIONEERS OF E-COMMERCE
Dec 15 1999
Who says you can't teach an old do new tricks?
Car manufacturers are some of the oldest, most established companies in
the world, yet General Motors Corp. and Ford Motor Co., among others, are
poised to carve huge profits from expanded Internet and e-commerce
ventures.
In fact, Warburg Dillon Read analyst Saul Rubin has issued a research
report stating that both Ford and GM enjoy advantages based on their sheer
size that position them to be major players in business-to-business
e-commerce.
Rubin says the benefits of e-commerce could be worth as much as $15 a
share to GM and $7 a share to Ford (all figures in US dollars). Rubin
focused on recent developments involving GM partnering with Commerce One
Inc. and Ford partnering with Oracle Corp. Together, the two deals could
ultimately involve the combined estimated $800 billion extended supply
chain of the two companies.
(Ford alone does $80 billion in annual purchasing transactions with more
than 30,000 suppliers and activities along the extended supply chain are
valued at some $300 billion. GM spends about $87 billion a year with about
30,000 suppliers and the company's extended supply chain is value at up to
about$500 billion.)
Rubin says that it appears the partnerships are hoping to generate
revenues of about $1 billion in one and a half years and $4 billion?$5
billion in four to five years. Rubin's numbers are consistent with
estimates by Boston-based research firm AMR Research Inc., which notes
that the Ford-Oracle partnership could produce revenue of close to $1
billion within the next two years. Ultimately, Rubin sees GM and Ford
aiming to own large portions if not all of their own supply bases, as well
as the extended supply chain of other manufacturers. This is one reason
Rubin has "strong buy" and "buy" ratings on GM and
Ford, respectively.
Currently the details are sketchy but what is emerging is a vision of GM
and Ford using Internet technology as the key to speeding, controlling and
profiting from purchasing transactions with their own suppliers, as well
as between suppliers. By using e-commerce, Ford and GM hope to reduce what
is now estimated at about $100 for every one of the hundreds of thousands
of direct supplier-to-manufacturer transactions. As well, they hope to
benefit by linking suppliers to each other.
The idea is for the Internet to replace countless forms and elaborate
personal networks with a kind of on-line bazaar where buyers and sellers
meet to conduct deals almost instantly.
In the case of Ford, software provider Oracle Corp. of Redwood Shores,
Calif., is the partner in what's being called the AutoXchange program.
AutoXchange is scheduled to be up and running by early next year. When
fully operational, AutoXchange will be a flexible marketplaces created by
its users who will be able to take part in online auctions, and complete
purchases at the flick of a mouse. Ford believes AutoXchange will become
the e-business backbone connecting Ford customers and suppliers.
GM's MarketSite, a product of a partnership with Commerce One Inc. of
Walnut Creek, Calif.,is also expected to on line by early next year.
Similar to AutoXchange, GM MarketSite is also envisioned as a virtual
marketplace for products, materials, parts, and services.
Ford and GM has said that suppliers will be strongly encouraged to
participate, although not forced. But with visions of lower procurement
costs, reduced manufacturing-cycle times, and a more responsive supplier
base dancing in their heads, it's hard to envisions Ford and GM not
pushing their suppliers hard to participate.
So what could go wrong? Imagine this: when GM and Ford are combined, only
the U.S. Government is a bigger consumer of goods services. The technology
to manage so many high-value transactions will be new when it goes on
line, so the potential for bugs exists in a very real way.
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 JAPANESE MAKERS REPORT DROP IN EARNINGS
Nov 19 1999
An unexpectedly strong yen has put enormous pressure on the profitability of Japanese automakers, especially those most exposed to the North American market.
Honda Motor Co.'s first half group net profit fell 14 per cent, 136.3 billion yen from 158.2 billion yen a year earlier. Its sales totaled 3.033 trillion yen, down 3.2% from 3.134 trillion yen.
Toyota Motor Corp., Japan's largest automaker and the third largest in the world, reported consolidated
half- year operating profits slipped 10 per cent, with group operating profit at 362.56 billion yen.
However, because of an accounting change Toyota reported a net profit of 201.66 billion yen in the
April - September period, up 4.7% from a year earlier. Without deferred tax accounting, which smoothed out differences in timing between income for tax purposes and income for financial reporting purposes, Toyota's consolidated results would have posted a net profit decrease of 6.6 per cent.
Toyota said its overall vehicle sales in the fiscal first half increased 1.25% from a year earlier to 1,542,076 units
-- 793,399 in the domestic market, down 1.1%, and 748,677 overseas, up 3.8%, thanks to strong demand in the United States and Europe.
Mazda Motor Co., meanwhile, reported six-month results that reflected numerous efficiencies brought in by executives from Ford Motor Co., while holds a controlling 33.4 per cent interest in Mazda. Japan's fifth largest automaker, which last year reported its first group net profit in six years, posted net profit of 13.2 billion yen ($126.1 million) in the six months ended Sept. 30. That compared with a loss of 4.4 billion yen a year earlier-despite a 9.4 per cent drop in sales to 1.088 trillion yen.
Mazda also noted that it added 92 affiliates to its consolidated earnings report this year, for a total of 134. This is in line with changes to Japanese accounting rules. If the
year- ago figures were recalculated to include those 92 firms, net income would have shown a 17.6 billion yen rise this year, said Mazda.
All the automakers have noted that they have struggled to cope with rise in the Japanese currency. The yen strengthened to 117 yen to the US dollar in the first half compared to 138 yen a year ago. Currently, the yen is trading in the 105-range to the US dollar.
The results from all three makers were largely in line with analysts' expectations.
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INFLUENTIAL ANALYST RECOMMENDS CAUTION FOR AUTO INVESTORS
Nov 19 1999
Steven Girsky, the influential Morgan Stanley Dean Witter auto analyst, is cautioning investors to be wary about further investments in the traditional American Big 3 automakers.
Girsky says General Motors Corp., Ford Motor Co. and DaimlerChrysler AG will struggle to retain market share if the red-hot U.S. car market falters next year.
Currently the U.S. new vehicle market is on track for a record 16.7 million in sales this year, but many are predicting a drop to 15.7 million cars and light trucks next year.
In particular, analysts such as Girsky note that sales of profitable pickup trucks, sport utility vehicles and minivans are slowing, while capacity continues to grow.
Girsky says each point of share is worth $800 million to $1 billion US in profits. Girsky says that GM needs to show it can produce exciting new vehicles, Ford needs to fix its
money-losing European and South American operations and DaimlerChrylser needs to demonstrate that the promised huge dividends of the year-old merger offer a tangible return for investors. DaimlerChrylser is also heavily exposed to the light truck market in North America.
Meanwhile, Goldman Sachs & Co. auto analyst Gary Lapidus has suggested in a research note that Ford Motor Co. initiate a
stock-repurchase program. He likes Ford as an investment because it sells for less than eight times free cash flow.
He estimates that Ford will have $25 billion US of excess capital by 2003. That's a "lazy asset" that should be used in part for a stock repurchase.
Lapidas said a stock-repurchase program aggressively pursued would increase Ford's 2002 earnings per share from $7.50 to $8.80 and drive Ford's dividend per share up 15 per annually at constant total cash.
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