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The Story Of How CAD Took The Auto Industry

Flashy, full-coloured images tumbling around a computer screen are beginning to catch the eye of some of the UK’s leading industrial designers. The reason is simple. If lifelike models of new products can be created on a computer system much faster than on paper, the designer has more time to come up with the next …

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Industry Keeps Complaining

Echoing their complaints from a decade ago, the Big Three automakers last week began lobbying Congress for a cap on the market share that Japanese companies should be allowed to earn in the U.S. market. Ford, Chrysler and the United Auto Workers (UAW) have even gone so far as to cloak their campaign in nationalism. …

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Yep, I'd write it off too. ;)

Calculating A Writeoff: Car Insurance Shenanigans

As the last driver in a five-car string, Grady Piersall could see everything unfold in front of him on busy Route 224, “Blood Alley” to the locals in Clackamas, Ore. He saw smoke roll off the tires, hoods and trunks Pop one by one upon impact … and his own 1987 Ford Escort slide helplessly …

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She's a real beauty.

Getting The Car Price You Want

Talk about bad timing. No sooner had Saddam Hussein launched world petroleum prices into orbit than Congress slapped a new tax on gasoline. Top that with already sluggish car sales and you get the soggiest prospects for auto dealers in years. Manufacturers are so jumpy they seem willing to try almost anything to get you …

View full post

Fuel Efficiency Is Job One

Very much like tentative swimmers, Cadillac and Chrysler are testing the waters of public concern about fuel economy by modifying their advertising to promote the fuel efficiency of their cars. Cadillac, a division of the General Motors Corporation, and the Chrysler Corporation have added some new taglines and titles in television and print ads that …

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The Story Of How CAD Took The Auto IndustryIndustry Keeps ComplainingCalculating A Writeoff: Car Insurance ShenanigansGetting The Car Price You WantFuel Efficiency Is Job One

The Story Of How CAD Took The Auto Industry

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auto industry

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Flashy, full-coloured images tumbling around a computer screen are beginning to catch the eye of some of the UK’s leading industrial designers. The reason is simple. If lifelike models of new products can be created on a computer system much faster than on paper, the designer has more time to come up with the next round of bright ideas and there is also a chance of speeding up the whole design to manufacturing process. With many companies now obsessed by the time it takes them to get their products to market, it is a chance they believe is worth taking.

Already most of the major car manufacturers have invested in systems for their styling departments. So have some of the companies that specialize in providing design and engineering services to the motor makers. In industries such as consumer electronics, communications and packaging, there is also a very healthy interest in conceptual design systems.

Still, it is a market in its infancy. Worldwide sales of computer-aided industrial design systems are expected to reach $150 million this year and double to $300 million in 1992. This compares with multi billions of dollars generated each year from sales of computer systems to the creative designer’s colleagues in engineering and drafting.

The difference reflects the demands of the designer for a system that is easy to use and, above all, fast. Only recently has sufficient desktop computer power been available (at an affordable price) to produce three-dimensional, realistic images that can be instantly danced around the screen. |If it doesn’t move in real time, it’s not 3D graphics,’ explains Jim Clark of Silicon Graphics, one of the companies making graphics workstations for this market.

As the hardware has developed, so has the software, but it is still mostly the preserve of small development houses. One of the issues with some of the hardware has been the high likelihood of hard drive failure, which remains a danger for almost all hard drive based design systems.

Canadian-based Alias Research, which started life selling its software to film animators, soon recognized a much more lucrative market for its modelling software in industrial design. The story is the same at Computer Design, a US company that originally developed its software for textile and fashion design but which is now being adapted for styling the interiors and exterior of cars.

The fascination with these systems is two-fold. Firstly they produce a high quality, realistic image of a product which leaves fewer doubts about the designer’s intentions than a paper drawing. Other departments can look at the image from every conceivable angle and if marketing decides it cannot sell the product, or manufacturing that it can’t make it, changes can be made early on. Then by capturing the design information on a computer it can easily be electronically transferred to other computer systems.

Users of the systems are already reaping some of the benefits. At British Telecom Research, which is using Alias as the front end of an integrated computer-aided engineering facility to design the next generation of telephones, the biggest plus is the strengthening of the link between industrial and engineering design. Understanding between the two disciplines is enhanced and risks are minimized.

Simplifying the communication of ideas is also a high priority for industrial design company Ogle Design, although it is more concerned with presenting concepts to its clients. |We can develop several concepts and even put them into context – we can show how a teapot might look on a shelf full of crockery, say – which is very important,’ explains Richard Buckland, Ogle’s managing director. Clients can then see the various options on the computer screen.

Interestingly, the justification for investing in these systems rarely revolves around cost cutting yet, at 80,000 [pounds] upwards for the hardware and software, for a single user they are expensive tools. Chris Johnson, sytlist at car designers Canewdon Consultants, insists that 80,000 [pounds] is a small price to pay for |a system that you can do useful work on almost immediately’. He is using Computer Design software, at present mainly to develop aspects of car interiors, such as seats and their fabric coverings.

A much more cautious recent investor in Alias is Rover Cars. |If you listen to the sales people, these systems are perfect for everyone,’ says David Arbuckle, the company’s design and production director. |We’ll be finding out what they mean to us in the next few months. If they are good enough, they will give us the opportunity in the future to move more quickly from concept to production.’

Rover is not the only company with reservations about these systems. Even enthusiasts bristle at the suggestion that the compute will see them abandoning their traditional tools of pen and paper. British Telecom designer Mike Lawson agrees that these systems are |very powerful tools which change the way you work’. But he still sketches his initial ideas before entering them on the computer.

Similarly most companies will continue to build physical models of their new designs. They concede that they may build fewer models, saving some time and money, but |there is no substitute for the real thing’, says Geoff Matthews, managing director of Styling International, part of the Hawtal Whiting automotive design group. A computer screen, he points out, is only two-dimensional and representing a 14-foot car on a 14-inch screen is an enormous risk and I don’t think anyone would be confident enough unless they built a full scale model’. For the car industry he has yet to be convinced that there are any commercial benefits in computer-aided styling and designing.

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Industry Keeps Complaining

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Echoing their complaints from a decade ago, the Big Three automakers last week began lobbying Congress for a cap on the market share that Japanese companies should be allowed to earn in the U.S. market.

Ford, Chrysler and the United Auto Workers (UAW) have even gone so far as to cloak their campaign in nationalism. They are suggesting that restrictions on imports would serve Japan right for its reluctance to fully back the allied military coalition fighting in the Persian Gulf. The idea is backed by some Congressional leaders, notably House majority leader Richard Gephardt (D-Mo.). Put simply, the carmakers and the UAW are saying, “You don’t support our war, we don’t buy your Mazdas and Toyotas.”

Now that we’ve finally entered a war in the Gulf, such patriotic breast-beating will no doubt be popular-briefly. But the ploy will ultimately fail, and deserves to fail. Detroit has presented Washington with a hideous equation, one that violates all marketing sense and decency.

What is the war in the Gulf all about? It’s about freedom, resisting aggression, and the free flow of oil. Those three principles go hand-in-hand with the free trade system that unites the industrial democracies. But Detroit, which has spent the past 10 years failing to make cars competitive with the Japanese, and the past year bashing the Japanese in ads, still can’t get used to a global marketplace in which it must compete like everyone else.

True, the Japanese market is not entirely open to U.S. cars. But if Detroit wants to fight that battle, let it do so aboveboard, without dragging in the extraneous argument of the Gulf War.

Chrysler’s Lee Iacocca has spent more time during the past five years waving the flag than developing cars that U.S. consumers want to buy. Now Iacocca and Ford boss Harold “Red” Poling want to limit the Japanese share of the car market to well below the 32% they earned last year. No numbers have been mentioned yet, but Detroit is probably looking for a ceiling of 25% or less.

A UAW measure, endorsed by Iacocca, would also limit the number of cars rolling out of the eight Japanese plants in the U.S. Japanese companies could then be forced to idle some of the workers they employ in this country. It might also force them to raise prices at a time of economic anxiety in the U.S.

The automakers and the UAW are saying, in essence, that consumers should not be allowed to decide whether they should buy an American or a Japanese car. Detroit wants to decide for them.

Why not just have Congress pass a law requiring that, for the duration of the Gulf crisis, all car buyers must seek Lee Iacocca’s approval for the model car they want? Of course, buyers better like Chrysler Le Barons and Eagle Summits. Dealers report no shortage of them on the lots.

Where is General Motors in this debate? For the moment, chief executive Robert Stempel is sitting on his hands. GM’s Chevy Geo cars are built with Japanese partners. They are the division’s least expensive vehicles, drawing many young buyers to Chevrolet dealerships. So far, Stempel has been reluctant to bite the hand that is feeding his dealers.

It is undeniable that most Japanese carmakers, especially Honda and Toyota, can sell as many cars in the U.S. as they can make. In fact, even in a recession, Honda and Toyota dealers can charge a premium over what they normally would get because of the demand for their quality, fuel-efficient cars.

Why? Because they do on a regular basis what the Big Three are forgetting how to do. They build cars that consumers between the ages of 20 and 45 really want. These are cars rated tops in consumer satisfaction by independent research groups.

The U.S. auto market is not the forum for deciding if Japan has done enough to support the allies in the Gulf. That issue-totally distinct from auto sales-concerns complex cultural matters going back through 45 years of post-World War II Japanese history. That Detroit should link the issues now only demonstrates how far behind it is in understanding the market challenges it faces.

Richard Gephardt, Ford, Chrysler and the UAW want to use the American consumer to punish Japan for a less than enthusiastic response in the Persian Gulf. Fine, let’s ask Rep. Gephardt, Iacocca and the union leaders to sacrifice something for us. Next Sunday they’re all allowed to watch the Super Bowl. But could they please try doing so only on American-made TVs?

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Calculating A Writeoff: Car Insurance Shenanigans

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As the last driver in a five-car string, Grady Piersall could see everything unfold in front of him on busy Route 224, “Blood Alley” to the locals in Clackamas, Ore. He saw smoke roll off the tires, hoods and trunks Pop one by one upon impact … and his own 1987 Ford Escort slide helplessly into the melee. “I sort of punctuated the end of it,” he quips today. But it was no laughing matter when Piersall’s insurance company declared his car a total loss and offered him $2,874 to replace it.

Yep, I'd write it off too. ;)

Piersall, an electronics technician, balked at the proceedings and negotiated with his insurance company. Today he can be seen again driving his beloved Escort. But the aftermath of the wreck remains “a real stinging memory.”

To call a car “totaled” that could probably be driven away puzzles some people. The real issue for insurance companies is not so much the repairability of your damaged car as what your car is worth compared with its repair cost.

With even simple collision repairs topping $2,000 to $3,000, junking the car is sometimes the cheaper way out of a claim for an insurance company. For example, a 1986 Nissan Sentra XE with a retail value of roughly $3,375 would be considered totaled if it sustained $2,700 worth of damage. When you subtract any deductible stated in your policy, you may feel the same as Grady Piersall, seething while you shop for another car, knowing that it’s going to cost you money. And anyone unlucky enough to wreck a late-model car learns that a car loses up to one-fifth its value during the first year.

Not surprisingly, a lot of people cry foul when they contemplate the impact of an insurance settlement for a damaged or totaled car. “It’s the most frequent complaint we receive,” says Lisa Joyce, a spokeswoman for the insurance division of the Oregon Department of Insurance and Finance.

“Most people believe their cars are worth more.” But she says the problem is uninformed owners rather than stingy insurers. “Consumers don’t understand the process,” she says.

The Frame Is Key

There’s no set formula for determining when a car is totaled. The answer to that problem, generally, depends on what your vehicle is worth before a collision. Cross that magic line in repair estimates and your car is a goner. Some insurance companies peg a total loss at the point at which damages equal or exceed 75% to 80% of a car’s retail value. Others use a method that adds the salvage value to the cost of repairs. If that sum is greater than the car’s retail value-boom, you’ve got a totaled car.

Many states have regulations that must be followed to determine the cash value of a car. Pennsylvania allows three methods: the average of two figures from accepted used-car guides; the actual cost of a comparable car; or quotes from two dealers.

Among the guidebooks consulted are the National Automobile Dealers Association’s Official Used Car Guide and the Kelley Blue Book. These books get their statistics from a variety of sources, which can include dealer transactions and wholesale auctions.

Increasingly popular are computerized services offered by firms such as CCC Information Services. State Farm and Allstate, two large auto insurers, are among its clients. CCC uses a network of reporters” who track the selling price of cars from 3,500 dealers. An adjuster using that system can match a car as closely as possible to what is available and to recent sales in the area to determine its value.

The company also offers a service that will search for comparable autos. Instead of receiving a check, you can get another car as similar to yours as the company can find. Or take the check and the company will help you shop for another car. Lenders may be receptive to this “substitute collateral” and allow you to continue payment on your original loan.

YOUR ROLE IS CRITICAL

Besides books, computers and price information on recent sales from local dealers, your car’s condition enters the equation. Deductions in value may be taken for rust, previous damage and visible wear and tear.

Here’s where you come in. You want your car’s value to be fair and accurate. If you’re dissatisfied with the settlement proposed for a totaled car:

* Ask how the insurer determined the value of your car and the cost to repair it. What knocked the numbers up or down? Rust is certainly a negative, but a new set of tires is a positive and may not have been included in the calculations. What about the tape deck you had installed? Or a new engine? What if you own a unique or unusual model?

“Give me facts so that I can see whether you have a case,” says Mike Robisch, a claims representative for Transamerica Insurance, in Southfield, Mich. Robisch uses a 1967 Ford Mustang as an example of the latitude in a claims settlement. Mint condition Mustang coupes of that model year can command prices today of $7,000. But that same model driven every day can go for as little as $600.

* Visit or call used-car lots to locate cars similar to yours. Asking prices for used cars can be 10% or more above the selling price but provide a ballpark figure on what your car is worth. Or ask dealers what your car would sell for. Check newspaper ads, again remembering these prices are likely to be higher than the final selling figure. Either way, if you find a sale for an amount greater than you are offered, you may find a receptive ear at the insurance company.

* Don’t overlook another player in this process: the shop where repairs to your car may be made. That’s how Piersall won a reprieve for his totaled car. By working closely with Terry Williamson, who operates a collision-repair shop in Boring, Ore., Piersall was able to lower the repair estimate. Much of the savings came from substituting “after market” parts sold by companies other than the maker of the car. Often these parts are cheaper.

Williamson cut his price for some of the work and negotiated with the adjuster of the insurance company so both sides could agree on a repair cost that kept the car out of the totaled category. “It’s a headache to do all this negotiating,” Williamson admits, “but the customer didn’t want to give up the car, and we were able to save it.”

One caveat: Before you begin arguing your claim, review your policy. To be covered for a claim, items such as custom wheels may require a special rider to your policy, at an added expense. If you didn’t declare them before the accident, you may have trouble collecting for them after a collision.

Still Unsatisfied?

You don’t have to accept the settlement offered by an adjuster. You can make a counter proposal. But if negotiations fail, you can take your argument to a higher authority, generally a senior adjuster or a committee organized to handle disputes. No luck there? Many insurers have consumer affairs or customer relations departments that may be able to help. Don’t leave your insurance agent out of this process. Your premiums pay the rent, so you should have a strong ally who can help argue your case.

If that doesn’t help, you can take your complaint to the state organization that regulates insurance where you live. Offices are located in state capitals. State commissions have a section or department devoted to resolving consumer complaints, although they can’t legally dictate a settlement.

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Getting The Car Price You Want

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Talk about bad timing. No sooner had Saddam Hussein launched world petroleum prices into orbit than Congress slapped a new tax on gasoline. Top that with already sluggish car sales and you get the soggiest prospects for auto dealers in years.

She's a real beauty.

Manufacturers are so jumpy they seem willing to try almost anything to get you to buy a new car. Saturn launched its sports car by offering “charter members” a no-questions-asked, return-after-30-days-or-1,500-miles guarantee. Most automakers have tried to jump start the season with rebates of a few hundred to several thousand dollars.

In the following article you’ll find the facts and figures you need to drive a hard bargain on a new car, wagon, minivan, utility vehicle or small truck. We’ll suggest what to look for when you shop, a task we’ve simplified by highlighting a winners’ circle in each price range. We’ll also give you the tools you need to negotiate for a car and help you choose the best financing.

 

Consider these shopping recommendations before you go anywhere near a showroom. SHOP FOR VALUE. One of the best measures of a car’s value is the price you can get when you sell it. In the tables that follow you’ll find each car’s estimated resale value after four years expressed as a percentage of the original sticker price. We also highlight the car with the highest anticipated resale value in each category.

The difference between a high percentage and a low one can be considerable. This year’s value leader, the $15,695 Honda Prelude, should be worth $8,632 in four years, or 55% of its original value. In contrast, the $10,070 Chevrolet Corsica, which at 22% has the lowest retained value, would fetch an estimated $2,215.

 

Anticipate Insurance Costs

The insurance index will help you judge the relative cost of collision and comprehensive coverage for similarly priced cars. The index is ranked from I to 17 (the higher the number, the higher the cost) and is based on past and anticipated claims for accidents, vandalism and theft. Large cars are usually cheaper to insure than smaller ones. Most two-door cars cost more to insure than those with four doors. A sporty car with the highest rating, such as the Pontiac Firebird Trans Am, would cost a married driver in Columbus, Ohio, about $850 a year to insure-three times as much as the 5-rated Pontiac 6000 LE, a four-door sedan.

The Insurance Services Office (ISO), which supplies the data to insurance companies, compiled the index. Rates in parentheses refer to alternative body styles of the same car.

Safety Costs More

All new cars come with passive restraints for the front seats. These can be either air bags or automatic seat belts. We recommend that you shop for a car equipped with an air bag. The numbers are compelling. With an air bag and a belt, you have a 45% to 55% chance of surviving an otherwise fatal crash, according to a recent study by the National Highway Traffic Safety Administration. You’ll walk away from the same wreck 35% to 50% of the time with a belt alone.

An optional air bag can cost as much as $1,000, but you’ll recover part of the expense in lower insurance fees for medical coverage. GEICO, for example, will reduce rates in most states by 25% for cars with a driver’s air bag. Other companies offer similar discounts for passive restraints.

The other safety feature worth considering is an anti-lock brake system (ABS), which electronically keeps wheels from locking into a skid, even on slippery pavement. The tables show whether anti-lock brakes are standard equipment. If they are optional, you’ll find the suggested retail prices and dealer costs.

The Ford Tempo GL and Mercury Topaz GS are basically the same car. But the Topaz costs you $524 more, for which you get such extras as door trim and a tachometer. Chevy’s Geo Prizm costs about $682 more than its twin, the Toyota Corolla. The two-door Mazda Navajo LX utility vehicle costs $1,320 more than the nearly identical Ford Explorer XL. The Mitsubishi Eclipse GSX is $246 more than the Eagle Talon TSi AWD. In general, American-made versions are cheaper

BALANCE THE HORSE-POWER AND WEIGHT.
Horsepower is a critical measure of engine power and an indicator of how easily a car can carry weight. Divide the car’s curb weight-the unoccupied car with all standard equipment and fluids-by the horsepower. The lower the number, the less strain on the engine.

SET YOUR TARGET PRICE. Our suggested retail price (which doesn’t include freight charges) should match what you find in the showroom. In some cases manufacturers may have increased their prices. Most of the prices were supplied by Nationwide Auto Brokers (800-521-7257), which sells additional price lists as they become available.

The other figure you need to determine your price is the dealer cost, or wholesale price. Compare the suggested retail price plus the retail cost of the optional equipment you want with the total dealer cost. Your target is somewhere between the two. The more expensive the car, the more room you have to negotiate. There’s usually more markup on luxury cars.

Prices on the newest cars  are up 2% to 2.5% on average, but you shouldn’t have to pay for the increase. In today’s market dealers expect to make a 7.5% markup over cost-more if the manufacturer gives them discounts. Hard bargaining can cut that margin in hall

First agree on the price, then settle the financing. Make it clear that the deal is contingent on getting favorable rates. To negotiate, you need the following information:

* The dealer cost. Tell the salesperson exactly what your price offer is and stick to it. One Maryland woman walked out on a dealer who wouldn’t meet her $15,000 limit on a Toyota Celica equipped the way she wanted it. The second dealer said no problem,” but then claimed the dealership couldn’t get a similar Celica for at least two months. Wouldn’t she take the fully loaded beauty that was on hand (with a $21,500 sticker price) for $16,800? Our shopper walked away.

The next day, she got a call from the second dealer with an offer she couldn’t refuse: She got the Celica with all the extras for 15,500-$6,000 under the sticker price.

Your target price should be close to the dealer cost. But there’s bargaining room here. The dealership’s cost figure actually overstates its true cost since a typical 3% manufacturer’s “holdback” on domestic cars and other special discounts haven’t been subtracted from the figure. Because of holdbacks, some dealers can still make a profit from a sale that is “below cost.” You can use your knowledge of such dealer paybacks in your negotiations.

Nissan, for example, is paying dealers $400 to $800 per truck to meet quotas. Chrysler is offering dealers $300 to $3,000 on all 1991 cars and trucks until December 16. Suzuki will pay dealers $500 for each 1991 Sidekick utility vehicle. The dealer can keep rebates like these or pass them along to you.

* The supply of cars. When the supply of domestic cars tops 60 to 65 days, it’s a buyer’s market. The bigger the so-called days’ supply, the better bargaining position you’ll be in.

Some heavily overstocked domestic cars recently included the Cadillac Allante (186 days), Chevrolet Corvette (126), Chevrolet Caprice (119), Cadillac Brougham (118), Buick Reatta (110) and Chrysler Imperial (106). At the other end of the spectrum were such cars as the Dodge Monaco (15 days), Eagle Premier (28), Oldsmobile Cutlass Ciera (37), Ford Tempo (39) and Chevrolet Cavalier (41). Scarce imports included the Lexus cars (15 days), Mitsubishis (16), Toyota trucks (19) and Jaguars (33).

Days’ supplies for all models are reported around the second week of each month. They are published in Automotive News, a trade publication available at most public libraries.

* The age of the car The longer the car sits on the lot, the more eager the dealer is to get rid of it. Check the manufacturer’s label on the driver’s side door post; it should tell you when and where the car was made. If you decide that’s the car you want, ask the dealer for a lower price.

* The cost of unnecessary options. Dealer prep is normally part of the retail price. If it’s listed separately, don’t pay for it. You shouldn’t have to pay the dealer’s advertising fees, documentary or computer charges, import tariff fees, currency valuation fees and additional markups. Some are legitimate costs; others are simply add-ons. But all should be absorbed by the dealership.

* Dirty dealing. The dealer who “lowballs” the price of a car and then attempts to recover the discount by selling you an extended warranty or service contract, pushing financing with high rates, or offering you a low price for your trade-in doesn’t deserve your business.

A dealer who hustles extraneous add-ons such as fabric sealer is trying to wring an extra buck out of the sale. Rustproofing is unnecessary; paint sealer does nothing a good wax job won’t do; Scotchguard is applied at the factory in 1991 Chevrolets and Geos, or you can apply fabric protection yourself for under $20.

If a salesperson pushes those extras, decline them. If he or she persists, leave. A nearby dealership may be more eager to move out cars. Dealers outside the city limits may often be more flexible than the high-traffic dealerships in the city.

Most new-car buyers turn to traditional lenders-banks, savings and loans, credit unions and automakers’ finance companies-when buying a new car. You have more, and better, choices for the 1991 models.

“Cars are actually better buys today because of concessions,” says John Hammond, an economist and managing partner at J.D. Power and Associates. Even before the new cars arrived, General Motors began offering 3.9% to 10.9% financing on some 2012 Chevys, Buicks, and Pontiacs. Ford rolled back some 1991 price hikes and is offering 7.9% financing or rebates ranging from $500 to $1,000 on Ford and Mercury cars and Ford trucks until December 11.

And you may have choices that a dealer can’t hope to match.

PAY CASH. For those who can afford it, there’s no better way: Pay cash for a Mazda 929 S sedan, for example, and you save $5,280 in interest on a $20,000, four-year loan at 12% with 20% down. The savings on a less expensive car-$1,456 on a $6,895 Honda Civic hatchback with the same loan terms, for example-is only slightly less dramatic.

 

CONSIDER THE DEALER’S REBATE VERSUS LOW-RATE FINANCING. Before you discuss financing with the dealer, familiarize yourself with market rates. Loan interest should be expressed as an annual percentage rate (APR) so you can compare rates from different lenders. Then compare those rates with what the dealer has to offer.

As a rule of thumb, the less you borrow, the more sense it makes to take a rebate. The more you borrow and the higher the price of the car, the more favorable financing becomes. For example, Chevrolet offered a $1,000 rebate or four-year, 7.9% financing on its 1991 Geo Tracker 4WD ($11,285) this fall. When the prevailing interest rate is 12% on auto loans, 7.9% financing on a $9,028 loan ($11,285 minus a 20% down payment) saves $853. The rebate is a better deal. On the other hand, if you have a choice between a $1,500 rebate or 7.9% financing on a $28,595 Oldsmobile Ninety-Eight Touring Sedan, financing a $22,876 loan under the same terms as above would save $2,160. In this case the financing is a much better deal.

SELL YOUR OLD CAR YOURSELF INSTEAD OF TRADING IT IN.

You’ll generally get the full retail price for your old car, rather than the scaled down wholesale price a dealer would pay you. If you do trade in your old car, however, the amount should be listed on the contract. In most states, sales taxes are figured on the net price after the trade-in value has been deducted.

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Fuel Efficiency Is Job One

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Very much like tentative swimmers, Cadillac and Chrysler are testing the waters of public concern about fuel economy by modifying their advertising to promote the fuel efficiency of their cars.

How do you make this fuel efficient?

Cadillac, a division of the General Motors Corporation, and the Chrysler Corporation have added some new taglines and titles in television and print ads that had been completed before Iraq invaded Kuwait and the price of oil and gasoline surged.

Chrysler’s changes are designed primarily to attract buyers looking for the most fuel-efficient cars and trucks made by an American auto maker. Cadillac’s changes are aimed at reassuring prospective customers who may be having second thoughts about buying a large car.

But the two auto makers have been reluctant to push the theme too hard because they are concerned a more vocal approach could backfire and end up heightening fears of impending gasoline shortages. And that could hurt sales even more.

So Chrysler has added one line at the bottom of its ”Advantage: Chrysler” ads calling attention to its corporate average fuel economy, which is higher than either G.M.’s or that of the Ford Motor Company.

”That line was in response to the perception that there was going to be a fuel shortage,” said Tom Houston, a spokesman for Chrysler.

Cadillac has revamped some of its television and print ads to play up the Environmental Protection Agency’s certification that 1991 Cadillacs can go a little more than 26 miles on a gallon of gas under highway driving conditions, an improvement of one mile a gallon over last year’s models. Cadillac’s six models get 16 miles a gallon in city driving, unchanged from last year.

Cadillac executives seized on the highway mileage improvement, accomplished largely by adding smoother-shifting transmissions and new fuel-injection systems, to update their pitch for big cars. A new tagline about the Cadillac being ”as responsible to own as they are responsive to drive” was patched on to some of the division’s television commercials, intended to reassure prospective buyers that they would not be out of step with the times by purchasing a Cadillac.

”Availability and price of gas doesn’t affect luxury car buyers much in their purchasing decisions,” said Peter R. Levin, director of advertising for Cadillac. ”But many still had memories of previous oil crises, and they did not want to project an image of being irresponsible by purchasing a luxury car.”

Cadillac’s changes were made based on a survey of luxury car owners in seven major cities a week after the Iraqi invasion.

”Initially, our 1991 product advertising focused only on the performance aspects of our new engines,” Mr. Levin said.

But, he added, ”We don’t want to overdo the message about fuel economy because that might cause a sense of panic or discourage people from deciding to buy a luxury car altogether.”

Most car companies say they are content to run commercials developed before the Persian Gulf crisis drove up the price of gasoline by more than 20 cents a gallon. With the American appetite for big, less-efficient cars, pickup trucks and mini-vans as keen as ever, auto makers apparently do not risk being penalized in the marketplace for pushing the performance, styling and reliability of their vehicles.

Some Japanese manufacturers say they are already well positioned with cars that are at least widely perceived as being fuel efficient.

”There’s no need for us to shift our advertising,” said David W. Danzer, corporate marketing manager for Toyota Motor Sales U.S.A., ”because our customers tell us that fuel economy is already one of their highest considerations in choosing a Toyota.”

Still, the overall fuel economy of many Japanese manufacturers’ fleets has slipped in the last two years as the cars they sell in the United States have grown larger and heavier. Mr. Levin said Cadillac did not plan to redo its ad campaign for 1991, but it might tinker further with the fuel economy theme if war broke out in the Persian Gulf and fuel prices soared.

”In normal times, a V-8 engine is a key signal to luxury car buyers,” said the Cadillac advertising manager. Cadillac now promotes itself as the only luxury car line besides Rolls-Royce to offer V-8 engines as standard equipment in all of its models.

”But if the situation worsened, we might not want to emphasize that,” Mr. Levin said

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Keep The Car, Save A Bundle

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old cars

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Four years ago, Richard Bagozzi thought his new Chevrolet Cavalier station wagon would last seven or eight years. Now he’s not so sure. Rust is showing up along the bottom of the door panels.

It's cheaper to keep her, apparently.

The seat belts are balky. He’s afraid the car may not make it another three or four years. So the Ann Arbor, Mich., college professor is faced with a common dilemma. Should he gamble that this car will last or should he take on the expense of a new car?

 

The numbers suggest he should keep the old one. At 50,000 miles, a regularly maintained car should last another 50,000 miles or more. The average car will last 11.4 years by 1995 and up to 12 years by 2000, estimates the University of Michigan’sDelphi V forecast and analysis of the U.S. automotive industry. 

Bagozzi will spend less running his Cavalier than he win buying a new car. Insurance premiums on older cars are lower, as are registration and property use fees in some states. And although conventional wisdom says you shouldn’t throw money into a depreciating asset, it’s often cheaper to pay for repairs on an old car than it is to buy a replacement car. “If it’s economically feasible for somebody else to rely on your old car, doesn’t it make sense to keep it yourself.?” asks John Fobian, an automotive consultant and former director of engineering for the American Automobile Association.

 

WHEN YOU COMPARE COSTS

Ownership costs-such as depreciation, finance charges, insurance, registration fees and taxes-typically fall as a car ages. Operating costs-gas, off and, particularly, maintenance and repairs-typically rise. Sentiment aside, to figure out whether to keep your old car, first estimate how much your costs would be over the next four years. Then compare those expenses with the estimated costs of buying and running a new car, says John Burton, a professor of consumer studies at the University of Utah, in Salt Lake City. The results can be startling. “My 1983 Nissan with 100,000 miles costs so little to run at this point that I can’t afford to get rid of it,” he says.

Suppose you own a completely paid-off American-made, four-door sedan with a six-cylinder engine. It cost $10,278 new four years ago and is now worth $4,455. You decide to sell it and apply the proceeds toward a down payment on a new four-door sedan costing $12,669, leaving a balance of $8,214, which you will finance at 12% interest.

 

If you drive the new car 15,000 miles a year for four years, your projected cost-including financing, taxes, fuel, insurance and maintenance-would be 23.4 cents per mile, according to Runzheimer International, a management consulting firm. The cost of keeping your old car over the same number of years would be only 12.7 cents per mile. Over the four-year period, you would save roughly $6,400 by keeping your old car. At that rate, you’re saving too much to sell.

Calculating Cost Of Ownership

One of the most important considerations with an old car is whether your ownership costs will indeed head down over the next four years. Some things to look at:

* Depreciation. This varies widely from car to car and doesn’t move in a straight line. The loss is usually greatest in the first few years, then it levels out. A 1990 Oldsmobile Toronado, for example, is expected to lose 64% of its value after two years, then an additional 13% in years three and four combined, according to GE Capital’s Automotive Financing Handbook. So in four years, the car, which costs $25,000 new, would be worth $5,750 on the resale market-23% of its original cost. Bagozzi’s four-year-old Cavalier is now worth only 24% of what he paid for it in 1986. If he keeps the car, he can spread the depreciation over several more years, thus lowering his overall expense of ownership.

 

Other cars do much better. A four-year-old Honda Prelude S, for example, retains 52% of its original value. Hondas in general do well; the Honda Accord and CRX are worth 47% and 43%, respectively, of their original value after four years. Among the highest-value midpriced cars after four years are the Acura Integra 47%); Nissan Maxima 43%); Toyota Camry 43%); Volvo 240 43%); and Mitsubishi Eclipse (42%).

European luxury cars retain the highest values as a group. For example, the Porsche 911 retains 49%; the BMW 525i, 47%; and the Mercedes-Benz 300E, 47%. Unfortunately, American luxury cars don’t do as well. The Lincoln Continental retains only 34%; the Chrysler New Yorker, 28%; and the Cadillac Eldorado, 27%.

You can check the value of comparable used cars in newspaper ads or used-car guides (available at many libraries) or at banks. To get an idea of how much depreciation has cost you, subtract the used-car value from the price you originally paid.

 

The rule of thumb here: Cars with the highest retained value give you the most money to roll over into a new car. Cars with the least retained value are top candidates for keepers-unless you have reason to believe your operating costs, discussed below, will skyrocket.

 

* Finance charges. You owe interest on the unpaid balance of a car loan. As a result, substantially larger portions of your payments go for interest in the early months of a loan. The result is a slow buildup of your equity. For that reason, it doesn’t make economic sense to sell a car when you’re “upside down” on the loan-owing more than the value of the car.

* Insurance. A car usually becomes cheaper to insure as it depreciates. Your collision and comprehensive insurance costs should drop by 14% over the second four years you own a car, estimates Runzheimer. While finance companies frequently require you to carry insurance to protect their interests, once the payments end you are free to restructure your coverage.

 

“Some people carry collision insurance no matter how old the car is, just for peace of mind,” says Steve Gross, editor of the Complete Car Cost Guide. But most owners of cars originally priced under $12,500 drop their collision coverage after five years, says Gross. Most stop at six years for cars costing up to $17,500; seven years for cars up to $24,000; and nine years for automobiles up to $40,000. Owners of the top-price cars tend to keep collision coverage for the fife of the car.

 

* Taxes and registration fees. Many states charge lower fees on an older car. Registration fees decline with the age of a car in California, Colorado, Idaho, Iowa, Michigan, Minnesota, New Jersey, Nevada, New Mexico, North Dakota, Oklahoma, South Dakota, Texas and Wyoming. The state of Wyoming, for example, sets a $15 registration fee while local jurisdictions add a charge based on the declining percentage of the car’s original value. For a $12,000 car, the add-on fee can range from a high of $216 to a low of $54 a year, depending on how old the car is.

Where automobiles are taxed as personal property, you can pay much less as the market value of the car declines. In Kansas City, the personal property tax on a four-year-old Ford Taurus station wagon is $359. For a brand-new Taurus, it’s $866.

 

Five states-Colorado, Maine, Massachusetts, New Hampshire and Washington-levy similar taxes, which also decline with the value of the car.

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