Servassist Blog

Auto budgeting 101

We often hear the automotive purchase referred to as the "second largest investment" we will generally make after purchasing a house. In this day in age for many this may be true, though I might suggest for those without kids in college. Nevertheless, the automobile does represent a significant financial commitment for most and can therefore, have a substantial influence on the average person's budget.

Like fixed rate mortgages, which have recently reared their ugly heads in the wake of a real estate boom and increasing interest rates, there are unfortunately pitfalls one can encounter when approaching the automotive purchase or lease. While you aren't going to see your rate change, there are plenty of other variables that can swing both the utility and return you see from your automotive investment.

A common theme that is seen among purchasers, especially younger ones, is focusing on a car payment as a gauge to how much they can afford. The monthly car payment is but one of many factors in the auto budget and by itself, says little if anything about how much the car is actually costing you or what kind of deal you may have received at your retailer. The simple economic principle of the time value of money (essentially saying that one dollar today is worth more than the same dollar tomorrow) is a concept that has been used (and all too often exploited) in just about every car deal ever concocted and is critical in our ability to purchase large ticket items, which we pay for over time as we certainly can't "afford" them otherwise.

It is very easy to get caught up in the excitement of the purchase and let emotion take over and the next thing you know, you have the payment you were looking for, but all the other terms are greatly slanted in favor of the dealership and/or loan provider without you realizing it. This can lead not only to budget problems down the road but also the dreaded "upside down" negative equity scenario you face when your vehicle is worth less than you owe on it.

The challenges to your budget are limited to purchasing either. Leasing can make a lot of sense emotionally as well as financially for many as it allows you to often "buy more car than you can afford" but also because it can typically do it with a lower payment. Again, however, it pays greatly to do your homework and understand the deal/process entirely or you can end up over-extended. A common issue unique to leases is the mileage allowance built into the deal. Leases are structured in part around residual values, or how much a car is worth at the end of the deal. This amount is based on a certain mileage allowance and the last thing you want to do is mismanage your mileage budget and have to pay penalties at the end of your lease.

Once people have gone through the process once or twice they learn very quickly that the auto purchase is a serious thing not to be taken lightly. One general rule is to purchase less car than you can afford. Another tip, especially useful for two+ car families is to consider purchasing one car, whose service may be dedicated primarily to longer trips, the best maintenance, etc...and leasing a second vehicle to handle the day-to-day errands, shorter trips etc. This allows you to have two different vehicles for appropriate jobs and allows you to fine tune both your overall budget, and mileage use of the leased car.

One last issue to consider are the hidden costs that come with owning/leasing a car. Items like taxes, insurance, service & repair all factor heavily into the equation and can quickly make the difference between the freedom a car provides or a downward cycle of financial missteps.

To read an article on the basics of automotive budgeting, click here.

Gimme a brake...

There is an interesting report, which recently came out of the UK, from an auto parts supplier that cites a steady upswing in the inquiry and sale of brake discs, aka rotors. What makes the report newsworthy, however, is that the brakes that seem to be wearing out faster are on new vehicles.

What could be the cause for new brakes to breakdown?

According to the article, there could be several things going on. One of the first culprits, is the rotor's close colleague, the brake pad. Brake pads have been designed from several different materials and compounds including asbestos. Apparently, some manufacturers are using harder materials in the design of their pads in an effort to both improve braking and, as some might suggest, to increase the length of the product. Let's face it, from a marketing standpoint, "long-lasting" anything does pretty well, especially in automotive aftermarket parts.

The rub, quite literally, is that where brake pads used to be the item that one would swap out more regularly as brakes faded, the discs don't seem to be keeping up with pads like before.

Another, related cause the article suggests is simply inferior materials and cheaper substitute that have come from companies in places known for lower quality/lower cost components. Without mentioning any names, it wouldn't be much of a stretch to think some manufacturers are using this route to save a buck. It should be noted however, that the increase in brake failure isn't limited to the economy brands, there is evidence of it from BMW and Mercedes-Benz, for example.

The most interesting cause of brake rotor failure, however, has to with how long a vehicle sits around before it is sold. The very nature of brake design provides continually exposed metal at all four corners in a vehicle with disc brakes. Even using the brakes briefly scrubs the rotor surface leaving it open to the elements.

With new cars, lower turnover means vehicles may sit in various ports and lots for up to several months at a time, without regular use of the brakes. When corrosion and contaniments go to work, using the brakes again can lead to warping and other defects, which ultimately leads to vibration at speed, as well as, deterioration of brake performance.

Hmm, stock-piling of cars sitting around collecting dust before they are sold with the possiblity of cheap parts...sound familiar. There are several brands that fit this bill in the states, so as a precaution, you might want to casually ask when your new car came in or was built when you are finalizing that deal on any model that isn't jumping off the lots. Brakes are typically considered a wear and tear item, so even at a 25,000 mile failure, claiming a defective part may prove difficult. You might want to check ahead of time.

Idle time (i.e. no use at all) is bad for collectible cars for a host of reasons including drained batteries, seized parts, cracked hoses & seals, etc...apparently it isn't to good for new cars either.

Claim this!

For anyone who may have missed it, Anderson Cooper recently reported on an 18-month CNN auto insurance investigation with some fairly interesting findings.

The crux of the issue is that the majority insurance companies make "claimant negotiation," ignornance, and practices deliberately designed to undercut the policy holder an integral part of their business model. Not that surprising really, but it is interesting to see exactly how the program works.

To see how the insurance companies use the 3 D's, delay, deny, and defend to save money on claims owed to policy holders, click here.

As usual, the comments following the story are as interesting as the content itself.

The "new" fuel

At first glimpse, a recent article in the Arizona Republic titled "European drivers shifting gears, Americans are expected to follow" seemed to be yet another account of how many Europeans choose diesel-powered vehicles when compared to North Americans. On closer inspection however, the article did provide some interesting points.

The article first pegs the number of diesel vehicles as a percentage of total sales in the US as zero, which I would say is spot on. Their European equivalent number, however, they claim just passed 50% in 2006, which sounds a bit suspect when you consider that 70% of Audis, 67% of BMWs, and 58% of Mercedes-Benz vehicles sold at "home" are of the diesel variety. But, no matter, the number is obviously high one way or another.

The article goes on to talk about the typical highlights like, 30% better fuel economy, improved diesel injection technology, low maintenance/long-lasting characteristics, etc... Then they cite an Autobytel survey that said a full 72% of respondents said they were "absolutely open" to considering a diesel vehicle. This survey was done in January, a similar question in an April survey received only a 31% positive response. This, my friends, is news.

Another interesting fact is that the 2008 VW Jetta TDI will not only be a 50-state vehicle, but will also achieve a stellar 60 mpg on the highway, and that without the use of regenerative braking or electric motors.

So, it sounds like the sentiment towards diesels may finally be changing. Now it is up to the manufacturers to just get them here.

To read the article in full, click here.

The shortest mile

A trip to Grandma's house in Arkansas about four years ago and a little bad luck for Honda seems to have opened a large can of worms, or in this particular case, a large can of miles.

When the owner of a Honda Odyssey made a trip side by side with another vehicle, they were surprised to find that the mileage (odometer) readings between the two cars for the same trip didn't match. When the issue was brought up to lawyer Lay Kutchka, it may not have received much attention, except that Kutchka also owns a Honda Odyssey from the same year making it an ideal test for Honda odometer accuracy.

Fast forward to today, or if you drive a Honda or Acura vehicle built between 2002 and 2006 (plus 2007 Honda Fit), double fast forward to today and Honda has conceded that up to 6 million vehicles and their owners may have been affected.

Further investigation over the last four years has illustrated that Honda and Acura odometers are not only inaccurate, but that they are uniformly inaccurate, which according to the lawyers representing the class action suit, is certainly a more egregious misrepresentation and one that suggests a deliberate and calculated policy to shortchange owners.

Odometers from these cars are on average about 3.75% off, meaning that they record miles faster than those from other auto makers. If you drive 100 miles, your Honda will indicate you have driven nearly 104. The company claims that the odometers are within industry standards, however, they have been able to since dial them in closer to zero, which suggests that they were erring not on the side of caution, but in the side of Honda's benefit at the cost of customer. Some of the issues raised by the falsely adjusted odometers are warranty claims, which the company has agreed to compensate owners for, as well as, owners of leased vehicles who may have received mileage penalties for going over their allowance.

Who doesn't lease a car and then calculate exactly how many miles they can drive a day until the end of the lease? It is one thing to be penalized for actually driving farther than you have paid for, but to find out that your odometer was deliberately set forward by nearly four percent feels for many like outright fraud. Not only does this have an immediate impact on the owner's true cost of ownership, but it also has consequences on residual values, resale values and brand perception.

3.75% may not sound like a lot, but consider that a used Honda that has been driven an indicated 103,750 miles, has really only driven 100,000, the difference being more than a trip across the country. This car may actually look better and drive better, certainly adding to Honda's reputation as a reliable brand. It is understood that speedometers can be inaccurate to some degree, expecially at higher speeds, but a mile is a mile all day long and is not a moving target for anyone's odometer, not with today's technology.

As it turns out, Honda isn't the only manufacturer to commit poor odometer judgment, though they were the first to be caught on a large scale. There is a movement to expose Nissan as well, and I suspect a little digging may find that it doesn't end there. Mistakes can happen, as my family found out in the late 80's with a Porsche 911 that came from the factory with a speedometer that was marked in mileage, but contained an odometer registering kilometers. This was clearly a mistake or possibly a prank by someone at VDO, but an isolated case nonetheless. Unfortunately for Honda, the same can't be said.

To see an article on the settlement, click here.
Owners of affected vehicles can find information on the issue here.

AAP doesn't want to cater just to AARP DIYers

Advance Auto Parts is one of the biggest players in the $257 billion (with a B) US automotive aftermarket industry. Going squarely after the DIY service, maintenance and parts crowd, the company employs about 43,000 people, covers roughly two-thirds of the country geographically and has 3,000 stores. Annual revenues are about $4.3 billion, which is actually quite close to the company's market cap. Based in Roanoke, VA, the company ranks 447 on the Fortune 500 list of America's largest corporations.

The reason this company deserves mention at the moment is because they have had a bumpy ride over the last two years in terms of performance and stock price (they have been public for about five years). On a recent conference call, the company CEO pledged to take a hard and fundamental look at the companies position relative to industry trends even going as far to hire outside opinions to compliment the internal assessment. The company has grown at a rapid clip for some time making expansion through rapid store openings are fundamental component of their strategy.

This recent gut-check, however, suggests that there may be some more significant issues at hand. Analysts suggest that this may not be something unique to Advance Auto Parts, but a reaction to something more systemic in the industry as vehicles become more complex, ie. difficult for the average owner to service or maintain, as well as, the shifting demographics of the person who do DIY work, which is rapidly declining.

If the domestic auto industry provides any barometer, things might look more than a bit stormy (long-term) for someone like AAP, provided they don't shift their business to handle a greater percentage of service work, which is probably one of their few avenues for change. As we know, the US industry is made up of many players and not just limited to the OEMs who may be experiencing declining sales, market share and closing plants. When you consider that nearly one in five workers in the US in either directly involved or influenced by the US auto industry, this is a prime example.

To see an article on AAP including an excerpt from the CEO, click here.

Towing for Gold

For those of you who do not have a AAA membership or roadside assistance through your manufacturer, all may not be lost when your car up and gives up the ghost on the side of the road, inevitably on the coldest and rainiest/snowiest of days, along a busy highway where passing trucks carry enough speed to seemingly move your car with their gust of momentum as they past by. These breakdowns also have a habit of happening at the worst of times, probably at the tale end of your lunch break when you are trying to squeeze in an annoying errand, with many pressing issues accumulating on your desk, just after you have finished a huge Mexican lunch, on a Monday.

Well, if this has ever happened to you before, in all likelihood, you have probably vowed to give up your sole to get that membership and never let if happen again, if not gone out and gotten a new car. But, for those of us still tempting fate, there is a new service from towPartners that has aggregated the contact information and service descriptions from nearly 5,000 Gold member towing services across the country.

So, you no longer need a yellow pages in your trunk, though you will need an internet-enabled phone or pda with you at the time of the "panne."

To see a release about the service, click here.

Service, taken to task

The National Automotive Service Task Force is the industry association put together by manufacturers to organize the access and consistent delivery of service information to independent auto service centers and personnel. At least that is how they would describe themselves.

Should you ask the Automotive Service Association, they would probably have a similar take on the make-up and role of the NASTF. Should you ask the Coalition for Automotive Repair Equality (CARE) however, and you will get a much different response, one along the lines of "a pseudo task force made up by manufacturers to organize the deliberate and limited dissemination of service information to independent garages so as to repress any industry call to action or legislation while preserving the service and maintenance competitive advantage provided through the hoarding of proprietary information designed with this very goal in mind."

Certainly these are very different opinions and the source of considerable industry strife. The NASTF recently launched a new website, which it claims was designed to help support the distribution of information and streamline the request process. The site redesign certainly looks like a gesture by the group to do just that, though it doesn't take long to see that the information and links there are identical to what was available from the old version.

Anyone on the other side of the equation would say that this is simply a token PR stunt to make it appear that the task force is doing more than it really is, which is maintain the status quo. Meanwhile the Right to Repair Act continues to rattle around Washington and any state with the strength of their mechanics behind it.

To see the new NASTF website, click here and see what you think. The saga continues.

Cars all around

If some days it feels like cars are taking over your world, then it may actually be true. While there once was a time when your average family had exactly one vehicle, today's average household mirrors more like one person per car.

The US is often criticized for its role in consumption of fossil fuels and contribution to greenhouse gases. It doesn't take far to look, however, to see where the problem might lie, meaning, our garage. As a matter of fact, more than 21 million families have more than two cars, and 2 million homes have a whopping five vehicles or more.

The physical topography, developed democapitalist lifestyle and access to a relatively inexpensive car fleet (while often faced with few alternatives) has made ours a real car culture. While our country is particularly well suited for the widespread use of concepts like diesel technology and a more thorough light-rail and general train network, it is difficult and/or expensive to change from the norm, which in our case is having your own wheels. The freedom the car provides is unparalleled, especially in much of the country, which enjoys a more remote or rural orientation.

To put aside the environmental impact or those issues of increased traffic and road deterioration, etc...there is certainly the issue of vehicle service & maintenance, which comes up when your family has its own fleet. When you consider the car service is already one of those items that creeps up at the worst possible times only to get put off longer than it probably should, then that family with five or six cars hiring a part-time mechanic doesn't seem like that much of a stretch.

With the increased complexity in the modern equivalent of a "beater," do-it-yourself items are quickly becoming as rare as the average person brought up on the farm or other locale that would have the basic mechanical knowledge or experience to address it. Certainly the car brands you choose make a difference and staying current with the service will also help, finding that local mechanic, chain, dealership, independent or otherwise, is more important than ever.

To see an interesting article on evolution of the family fleet, click here.

Warming up to winter driving

It doesn't take a well-seasoned automotive technician to realize that how you operate your vehicle during and just after start-up has a significant influence on its condition over time, especially during winter months.

Everyone has been there, and for many (those without the luxury of an enclosed garage, for example), continue to be there everyday, heading out into the frigid morning, seeing your vehicle encased in layer of thick ice, even though it didn't rain or snow. You look at the windshield wipers, which are now fused to the windshield and wonder how they will ever possibly move before April. Then you unlock, which optimistically suggests that there is in fact some life there still, but then you must open the door. It comes out, but only after harsh creak and crunch of a thin layer of ice.

The leather seat beckons...it is as hard and cold as a frozen pond and you wonder why they haven't come up with remote seat heater controls, never mind the starters. The chill brought on by the seats and steering wheel alone can make even the steadfast question their reason for living in this part of the country and set the tone for the whole day, which is inevitably a Monday.

Once you have fiddled with the keys in your glove-laden hands, its time. You crank it over and hear that all to familiar, rrr.........rrr.........rrr....rrr..rr.... and whether or not you actually start at this point is seemingly out of your hands.

It is this point and the next 10 minutes or so where engine wear is at its highest (least protected by lubricants) and least efficient. But because automotive technology has changed considerably over the last 2-3 decades, there are some conflicting philosophies on just what the responsible driver does next.

For example, do I now get out the reluctantly running vehicle to retrieve my coffee or get to work on the ice barrier, which has effectively doubled the thickness of my glass?

In earlier vehicles, especially those with carburetors, warming up the vehicle was crucial to not only getting the oil up to temperature, but also successfully completing the "choke." In most modern vehicles with electronic fuel injection, sensors detect engine temp and compensate timing, injection and even transmission functions as the car warms, meaning a formal warming up period is largely unnecessary and actually not recommended. However, on the flip side, while driving your car at low engine speeds until it actually warms up is the fastest and most effective way to warm it up, exceeding maybe 3,000 rpm is not a good idea either. While the efi/ecu can accommodate the temperature and newer oils cope better with lower temps, it can be very destructive to internal components to rev an engine before it is properly heated.

So, the best way to minimize those ghastly shrieks, whistles and other horrible noises brought on by rubbing improperly lubricated metal parts against one another may actually be to drive through it. Just be careful when you do it. You car feels as still and uncomfortable as you do in those temps, but if we all slow down and warm up together, we have a good chance of making it at least until tomorrow morning.

To see an article describing the modern warm-up period, click here.