Certified Used Cars - What's the Deal?

Nearly every car manufacturer now has a certified used-car program in which it's dealers offer late model, low mileage cars that have been thoroughly inspected, repaired, and guaranteed with a warranty.

Although the cost of these vehicles is understandably a little higher than for uncertified vehicles, customers are increasingly finding that the extra peace of mind is worth the extra cost.

When a vehicle is selected by a dealer to become certified, it is inspected according to a detailed checklist which often contains 150 or more specific points of inspection. Then each vehicle is given an extended warranty, backed by the manufacturer. Every manufacturer's program is a little different in the details, but the concept is the same.

Beware of certification programs that are not backed by a car manufacturer. Some independent dealers may offer certified car programs that should be approached with some caution.

GM Vehicles Diagnose Themselves

GM has introduced an interesting, and useful, service for their On-Star equipped vehicles. The vehicles automatically and periodically test themselves for problems, looking at critical systems such as the engine, transmission, anti-lock brakes, electrical, and air bag system. Then a detailed report is emailed to the vehicle owner indicating the results of the diagnostic tests as well as reminders for scheduled maintenance, remaining oil life, and other information. The diagnostics can also be run between regular checks by simply pressing the OnStar button in the vehicle.

This service doesn't cost extra for OnStar subscribers and works for any OnStar equipped GM vehicle delivered after 4/21/2004.

The Big Push to Hybrids

With gasoline pricing increasing to historic levels comes a new push from automobile manufacturers to "educate" consumers about hybrid vehicles that promise improved gas mileage and protection for the environment.

Toyota, for one, will soon begin an aggressive new advertising campaign for its hybrid offerings. Other manufacturers will begin offering new hybrid versions of SUVs. Look for all manufacturers to try to increase consumer awareness for hybrid vehicles. They'll spend a lot of time and money trying to convince the public that hybrids are cool and smart.

Hybrid is in; big gas guzzlers are out -- at least for now. It remains to be seen how the automotive public will react to the new direction. Are we really concerned about gas prices? Do we really care about the environment? Are we really convinced that hybrid vehicles help solve the problems? Are hybrids really cool, or geeky?

Let's wait a year and take another look.

Car Buying Myth #3

Myth #3: Insurance pays for destroyed or stolen cars, regardless of loan balance

Technically, this is true, but not in the way that most people interpret it.

If your car is stolen or totally destroyed in an accident, fire, or flood, the insurance company pays the current market value, which is sometimes called replacement value. This would be fine if the car was paid for.

Unfortunately, in these days of long-term loans, low down payments, deferred payments, and roll-over balances, it is very common for automotive consumers to be "upside down" for much, if not most, of their loan period.

This means that at any given time, the amount remaining on the loan exceeds the actual value of the vehicle. In this case, if the vehicle is stolen or destroyed, the insurance payment would only cover part of the loan payoff, leaving a "gap" that the consumer would be held responsible for paying in cash. In many situations, this could amount to thousands of dollars. The thing that is frequently misunderstood here is that the insurance company does not pay the amount owed, it pays for the value of the vehicle.

This is also a common situation in leasing. However, most auto lease companies cover both themselves and the consumer lessee by providing free "gap insurance" or a "gap wavier" that pays any remaining amount after insurance has paid.

Hurricane Damaged Cars - Beware !

Hurricane Katrina damaged as many as a half-million motor vehicles in New Orleans and on the Gulf coast. This includes new and used vehicles belonging to dealers, as well as vehicles belonging to individuals and companies. Many were physically damaged or destroyed, while others were flooded, in some cases by salt water. Most will be "totaled" by owners' insurance companies.

The problem for automotive consumers in future months is that a large number of the these vehicles -- many 2006 models -- will reappear on the market, even though they have been written off by insurance companies as total losses. Many states allow such vehicles to come back to life with "salvage" titles. In other states, these vehicles may be titled without indication of salvage status. Scammers know how to work the system to their advantage.

For consumers who will be buying used cars -- or even new cars -- in the coming months, extreme caution should be exercised. Look for signs of damage repair, get a CARFAX vehicle history report, check the title, and get a qualified mechanic's inspection. Flood damaged cars may have a musty odor inside, or a cheap "odor killer" smell. Look for signs of water in the trunk and engine compartment. Be suspicious of unusually low prices.

Katrina Aftermath — Off Topic

I'm sorry that this post is off-topic but I just have to make some comments.

There were so many problems with the reaction to hurricane Katrina and so many Monday-morning- quarterbacks who think they know why. But the fact is that this disaster was of such immense proportions and scope that it overwhelmed our ability to plan, or even comprehend, such an event.

However, there are some important lessons that have been (hopefully) learned by this tragedy. Let me point out some of them.

1) Disaster plans for high-density urban areas occupied largely by poor, uneducated, and non-mobile people MUST be very different than for a relatively affluent, informed, highly mobile population. Mandatory evacuation orders mean nothing to someone who doesn't have the means, or desire, to evacuate -- or the educated realization that evacuation is in their best interest.

2) Communications systems, both official and public, fail when wide-spread electrical outages occur. All modern communications systems depend on the availability of conventional electrical power. Even battery-powered police hand-held radios have to be be recharged. Cell phones depend on power at the antenna towers. Generators are not a good solution because they depend on the availability of gasoline -- which fail when gasoline is not accessable. A new national communication system MUST be devised that operates on alternative energy sources and satellite communications. Much of the early TV coverage of the Katrina disaster only got through to us because the networks made use of crude, but effective, satellite phones.

3) It is not realistic to expect the U.S. government, or even state governments, to have adequate people and resources in place to handle a disaster of this size -- or to have them pre-positioned in just the right places at just the right times. There MUST be a national disaster plan that involves not only government and military personnel and resources, but also involves corporations, private businesses, local governments, individual volunteers, and agencies such as the Red Cross in a COORDINATED plan. How many web sites have we seen pop up that purport to link victims with their families? Shouldn't here be just one?

4) Back to communications, which is the single largest failure of the recent disaster. When police radio communication towers are down, when electrical power is off, when federal agencies can't talk to local agencies, when TV stations can't forward warnings to viewers, when residents don't know the seriousness of what's happening around them, it all spells a disaster of the worst magnitude. Again, a NATIONAL communications plan is required that not only dictates how communications between agencies and to the public happens, but also how the public receives emergency communications. This plan should include free hand-cranked radios and TV's, free FRS/Weather radios, cell phone alert and communication systems, neighborhood loudspeaker systems, underground cell-phone tower "silos" that raise during emergencies, personal satellite communications systems or emergency "locators" like those used in airplanes. Unfortunately, our country is very technically sophisticated, but little of that technology goes to the real benefit of our people when in need.

Problems with New Car Models

We've heard for years that we shouldn't buy brand new car models, or models that have been significantly redesigned, in their first year. The reasoning was that you would be exposing yourself to the potential problems of an untested new design and that buying a model in at least it's second year would be much safer.

Now, the October 2005 issue of Consumer Reports magazine confirms this advice in an article that reports the results of a significant new study conducted with thousands of its readers. They looked at 79 models that were introduced new or underwent a redesign in the 2000 through 2002 model years. They found that the new models experienced an average 44 percent higher problem rate that the previous model year. They also found that, after a new model or redesign, the problem rate dropped by as much as 46 percent in the second and third year.

What does this suggest? First, if you absolutely have to have a new or newly redesigned model, expect more problems. Try to buy a brand that, historically, has had fewer problems overall. Second, if you buy a used car, try to avoid those years in which the model was new or significantly redesigned. Buy a year later, or a year earlier.

The SUV is Dead !

Well, not quite. But large gas-hungry SUVs certainly have one foot in the grave. Many people who are trying to sell these beasts are finding that buyers are few and far between. And prices are plummeting. Average resale prices for large SUVs have dropped 7.1% since last year, and the rate is increasing.

Current gas prices are making large SUVs expensive to drive and consumers are questioning their real need for such vehicles. Although gas prices are exploding in the wake of the New Orleans disaster, some settling will take place later. However, it's unlikely we will ever see sub-$2 prices again. High fuel prices are here to stay.

SUV owners who want to trade or sell will suffer from the rapid depreciation. Those who want to buy will find bargains. For those whose lifestyles require larger vehicle may find more affordable solutions in 6-cylinder 2WD models, especially the newer models based on car frames. Gas-electric hybrids also offer possible solutions, but high initial costs offset much of the savings in gas cost.

Manufacturers are also seeing the writing on the wall. Expect large cutbacks in manufacturing of current models, and fewer models being offered in the coming years. There will also be attempts to improve gas mileage but there is only so much that can be done.

Large SUVs will likely be the dinosaurs of our time, just as huge finned Cadillacs are relics of a previous gasoline crisis. Future generations will be able to see and muse over them in museums.