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New car advertising: open season on consumers

Posted on 25. Mar, 2009 by webmestre in North America, Uncategorized

New car advertising: open season on consumers

MONTREAL, March 25 /CNW Telbec/ – The Automobile Protection Association
issued its annual review of the auto industry today. APA’s Lemon-Aid ratings
of the 2009 new vehicles are available free on the APA’s website at
www.apa.ca, and in French in the annual auto issue of Protégez-Vous, the
consumer magazine.
APA president George Iny reported that consumers who are in the market
for a vehicle have it good. Prices for new vehicles are at historic lows,
thanks to clearance pricing by the domestic automakers and large rebates on
Korean and Japanese models. Leasing is generally less attractive than it was
in 2008, except for European luxury makes like Mercedes and Audi. An
entry-level luxury car from Mercedes now has a lower monthly lease payment
than several loaded Japanese intermediates.
Used vehicle selection is excellent, as consumers benefit from the large
number of lease returns on 2004-2006 models. APA says there has been a
significant clean-up of used car advertising in Quebec, with almost all
dealers advertising an all-in price with no extras, and the mileage for each
vehicle now indicated in the ads. In Montreal, buying a used vehicle has
become easier and a lot more pleasant, with the profusion of used car
superstores selling vehicles in large indoor showrooms at low non-negotiable
prices.

The 2009 vehicles

Among carmakers, APA reports that Hyundai and Kia now have several
vehicles in the top tier of their segments, while still managing to sell at
prices below much of the competition. In the hotly contested compact car
segment, Mazda just introduced the new 3, which is the only all-new Japanese
car in this segment in 2009; it has quickly risen to the top of the sales
chart, showing the importance of competitive products even in a weak market.
Among the three domestic manufacturers, APA has seen the most improvement
in the reliability of Ford products, beginning with the 2005 model year and
improving every year since. GM is uneven: there are significant powertrain
improvements, but GM cars are still not trouble-free. Chrysler’s newest crop
of cars is undistinguished.
The 2009 model year is seeing an increase in confusing and deceptive
advertising practices by new car dealers and some automakers. Among this
year’s advertising “innovations”, the APA warned consumers to watch out for:

<<
- Extra long financing terms running to 84 and 96 months

According to the APA, seven- and eight-year car financing is a risky
proposition for most consumers, especially with domestic vehicles that
depreciate very quickly. For the first five years of one of these long loans,
the consumer will owe more on the loan than the market value of their car -
that’s called being “upside down” in the car business.

- Advertised $O down available in the bold print

The real downpayment of several thousand dollars is hidden in the fine
print

- Weekly and bi-weekly rather than monthly payment quotes, to make the
cost appear lower
>>

Among the worst examples of advertising APA identified is a “Two-for-One”
promotion. With interest accrued over 96 months at a hefty 8.5 percent, APA
calculated the deal actually works out to “Two vehicles for the price of
Three”.
Among the automakers, APA identified Honda and Acura as having
advertising that was frequently unclear, confusing, and incomplete. Iny said
the actions of the automakers and dealers who engage in deceptive retailing
practices are outrageous. “On one hand they’re lobbying for public assistance
from the government, and on the other they’re duping the very people they’re
asking to help them.” APA said that the automakers and dealer trade
associations are blocking improved advertising standards in Quebec and
Ontario, when they should be policing their members instead.

Risks related to a possible failure at GM or Chrysler

APA says there is a strategy consumers can use to reduce their risk in
the event of a reorganization. In Quebec, a car loan (instalment sale)
requires the lender to assume all of the obligations of the dealer including
the warranty in the event of a bankruptcy, up to the value of the loan. It’s
important protection contained in Quebec’s Consumer Protection Act.
According to the APA, there will always be a large demand for domestic
pickups from construction industry and commercial users, and those vehicles
are likely to stay in production and feature viable parts and service after a
reorganization. APA says the risks for Hummer, Saab, Saturn and Pontiac buyers
depend on the model. Saabs and some Saturn models don’t share any components
with other GM makes and are riskier buys.

<<
What you can do:

- For similar money, pick the rebate over the low interest rate.
- Limit your financing to 72 months
- With decent credit you don’t need to pay over 6% interest for financing
through a bank or the dealer. Don’t pay the 8% and higher rates asked
for by many dealers, which nets them a higher commission from the bank.

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Tags: APA, Automobile Protection Association, Canada, Consumers, Environment, Fuel economy, Lemon-Aid, Safety, Technology