U.S. may have been too hasty in closing down car dealers

A new report by the Troubled Asset Relief Program has found that the United States Treasury Department should have carefully considered its decision to order GM and Chrysler to close hundreds of dealerships while the two companies were in the bailout process.

GM and Chrysler both went bankrupt during the financial crisis, forcing the government to step in and take over the companies’ balance sheets. The Treasury Department rejected GM and Chrysler’s plan to close dealerships over a five-year period, calling the measures “too slow,” and instead asked the two automakers to close hundreds of dealerships immediately in an effort to cut costs. Now, many are questioning the decision, as GM and Chrysler have rebounded to the point that they are reinstating many of the dealers.

Special inspector general Neil Barofsky wrote in his recent report that “such dramatic and accelerated dealership closings may not have been necessary and underscores the need for the Treasury to tread very carefully when considering such decisions in the future”

With the closing of so many dealerships, many lightly used cars have found their way onto the pre-owned market. Drivers in areas with a closed GM or Chrysler dealer may want to head to a used car lot in order to find deals and savings.

The most popular used cars

Buying a used car can be tricky. While there is tons of information available on the internet and other resources about new cars, used cars bring with them their own special considerations.

For starters, every used car is different. Although potential buyers can look up information regarding how particular models tend to perform, two cars from the same model year with the same mileage may actually drive completely differently, depending on the vehicle’s history and maintenance.

Another consideration is reliability. Is the car considered to be a generally reliable model? Is it backed by a certified warranty? And if it breaks down, will parts be easy to obtain in order to fix it?

Finally, the most important factor for many consumers is price and resale value. These figures can fluctuate wildly depending on the make, model and overall market. A used BMW, for example, will most likely have better resale value than a used Toyota, simply because of the prestige that comes along with the brand name.

With that in mind, the most popular used vehicles differ quite a bit from the most popular new vehicles. According to data gathered during the second half of 2009 by Cars.com, there are significant differences between the two lists. The news source compiles the lists based on user inquiries and searches while shopping for a car on their site. And the results could influence car buyers in the market for a used vehicle.

Toyota and Honda dominate the new cars, for instance, with no other brand cracking the top 10. Toyota has six of the top 10 most popular new car models, including the first-place Camry. Other popular Toyota models include the Prius, Corolla, Rav4, Tacoma and Siena. Honda, meanwhile, has four of the top 10 spots, with the Accord, Civic, CR-V and Odyssey models.

Yet the most popular used cars are considerably more varied. Honda and Toyota’s most popular models, the Accord and Civic and Camry and Corolla respectively, all make the list, but in different positions. The Accord is the most popular used car model, followed closely by the Civic – a big shift from their third and fourth positions on the new car list.

The Ford Mustang is the most popular domestic used car model, followed by its fleetmate, the F-150 pickup truck. The fact that these cars place so highly on the used car list but not the new car one suggests that car buyers look for performance and utility when buying a used car. Other entries on the list, like the Jeep Grand Cherokee and Wrangler, also point to this conclusion.

Again, every used car will drive differently, and buyers should test out several models before deciding on a car that’s right for them. But the most popular used car list is a good indicator of the types of models that many buyers are satisfied with.

Used car buyers must consider resale value

When buying a used car, one of the most important considerations is resale value. By their very definition, pre-owned cars have already been driven, and many drivers only expect used vehicles to be serviceable for a few years before trading it in for something different. When that time comes, no driver wants the vehicle’s value to have been completely depreciated.

There are many factors that contribute to the resale value of a car, including maintenance history, mileage and even aesthetics like color and interior trim. But the most important consideration is make and model.

Resale or residual values also contribute to the leasing of a vehicle. A car with higher resale capabilities will be worth more at the end of the lease, which means drivers have to repay less. That leads to lower overall monthly payments.

With these important considerations in mind, Cars.com helps potential used car buyers by maintaining lists of the cars with the best and worst resale values. While these values are for late-model used cars, those values generally dictate the value of older models within the same generation as well.

BMW‘s Mini brand is the big winner in overall resale value, with the Mini Cooper and Mini Cooper S taking the top two spots. Both models retain a whopping two-thirds of their value. BMW also takes the third spot as well with its 1 Series Coupe. In general, used BMW vehicles have high resale value because of the prestige of the brand name and the high standards of engineering that comes with it.

The Ford Mustang, Mazda3, Toyota Prius Hatchback and Honda Insight take spots seven through 10 on the list, with each of them keeping 60 percent of their residual values.

The news provider also organizes resale values by class. Those looking for utility vehicles might be interested to know that the Toyota Sequioa, Ford F-150, Honda Odyssey and Toyota Tacoma all placed at tops of their class. Other class winners include the Range Rover Sport, Lexus LS460 and Nissan Maxima.

However, there are also a few pitfalls in the used car market, which the news source lists on its Worst Overall Resale Value list. Generally, cars with 2WD have a much lower residual value than their 4WD counterparts. The 2WD models of the Mitsubishi Endeavor, Jeep Commander and Dodge Dakota, for example, all made the list.

The worst resale value in America is currently the Cadillac DTS, a full-size sedan. Other passenger cars that placed on the list include the Lincoln Town Car, Mercury Grand Marquis and Chrysler Sebring, all of which retain less than one-third of their initial value.

Considering the current state of vehicle prices, the difference between a car with great resale value and one with poor resale value can be thousands of dollars. In addition, resale value is often a pretty good indicator of the general quality of the vehicle. The point is that those in the market for a used auto should do their research before committing to any vehicle, and sticking with models with a high resale value is always a good decision.

Toyota and Tesla to work on electric RAV4

Toyota has announced plans to work with electric car company Tesla in order to develop a battery-powered version of its popular RAV4 crossover.

The Toyota-Tesla partnership began when Toyota invested about $50 million in the small company earlier this year. Since then, Tesla successfully went public and began plans to take over Toyota’s closed NUMMI factory in California.

The new electric RAV4 is the first joint venture on a vehicle between the two. Toyota will provide most of the parts for the vehicle, while Tesla will contribute its electric powertrain and battery technology, according to the Los Angeles Times.

Interestingly, the car is not the first electric RAV4. Toyota previously made several limited edition prototypes of the vehicle earlier in the decade, but never commercialized the product for the mass market.

“The Toyota RAV4 EV has been a terrific workhorse for the past decade. Hundreds of the original cars are still running seven to 10 years after manufacture in both fleets and private hands,” Paul Scott, one of the rare owners of the first-generation RAV4 EV, told the news source.

Those who still prefer their vehicles powered by gas may want to consider purchasing a used Toyota RAV4.

What is the APEAL of certain car models?

Test drives can only go so far – a driver needs to really have the car for a few months before they can be sure if the car is right for them. For those in the market for a vehicle, JD Power helps buyers arrive at that decision. Their annual APEAL survey (Automotive Performance, Execution, and Layout) is designed to complement their Initial Quality Survey, which tracks problems with a vehicle in the first 90 days. While that is one measure of quality, APEAL looks more at the intangibles, asking recent owners to rate over 80 factors that get to the heart of whether they like the car or not. The results of this APEAL survey tracked 2010 model cars for sale, meaning that many of these vehicles can now be found on the used market.

Following the trend that started in the Initial Quality Survey, American brands posted the biggest improvement in this year’s survery, overtaking foreign cars in average rating for the first time since 1997. The study showed that redesigned vehicles from Ford and GM were among the highest rated models in the poll. Chrysler did not fare as well, but it was enough for the Big Three and their associated brands to top the foreign average.

"Historically, vehicle models achieving high APEAL scores have been shown to generate faster sales, higher profit margins and less need for cash incentives," the study said. "High levels of vehicle appeal also have a strong influence on customer recommendation rates."

Owners may want to rush out and throw down money on these used cars right away. However, the APEAL survey demonstrates the benefits of waiting. By showing patience, finding out which models are highly-rated and performing well without issues, and then waiting for these late-model vehicles to hit the used car market, drivers can save a bundle and get a car they know will be up to snuff.

Porsche took home the crown, as it did in the Initial Quality Survey as well. However, there were major discrepancies between the two results. For example, Land Rovers were last in initial quality, but fifth in APEAL. Jaguar, second in APEAL, was fifth from the bottom in initial quality.

Ford’s Lincoln brand was the best domestic brand, followed closely by GM’s Cadillac. Chevy and Ford placed around the middle of the pack, while Chrysler took last with its Jeep brand, third to last with its self-titled models, and eighth from last for Dodge. Its new Ram truck brand fared the best, but still placed slightly below Chevy and Ford. However, Chrysler has a slew of redesigned models debuting soon.

Ford continued its impressive turnaround by taking top marks in the most categories, with five. It won outright with its Explorer, Expedition, Flex, Fusion and Taurus models.

Other highly-ranked vehicles included the BMW 3 and 5 Series and the Mercedes E- and S-Class.

Driver error may be to blame in some Toyota cases

Toyota is still recovering from its well-publicized problems with unintended acceleration in its vehicles, and a slew of independent consultants, including the government, is testing the vehicles in question in order to determine what caused the issue.

Leaked data from preliminary testing by the National Highway Traffic Safety Administration has shown that driver error, rather than electronics or design flaws, may have been a factor in at least some of the cases, according to USA Today. Electronic data recorders in the vehicle can tell analysts exactly what was happening at the time of the crash. A driver who meant to slam on the brakes may have accidentally hit the gas in the heat of the moment and blamed it on unintended acceleration.

It is unclear how many of the cases were caused by driver error. Toyota has pointed to possible problems with poorly-fitting floor mats and sticky gas pedals, and has disputed the findings of Professor Dan Gilbert, an independent consultant who found that the vehicle’s electronic system may be at fault.

Unintended acceleration in Toyota vehicles has accounted for an estimated 80 fatalities, according to the NHTSA, although that number may drop with the new findings.

Drivers interested in choosing a Toyota for their next vehicle may want to look at used Toyota vehicles, as older models of Corollas and Camrys are known to be unaffected by the problem.

Automakers focusing on gas mileage

Traditionally, automakers only make small changes on models year-to-year, only truly changing the cars with their publicized “redesigns.” However, sometimes automakers make small tweaks to increase a car’s appeal, as they have been doing lately in attempts to improve gas mileage.

Fuel economy has become an important consideration for consumers looking to save at the pump. With that in mind, some automakers are making slight changes to their vehicles in order to improve their EPA-rated mileage, according to the Associated Press.

Honda, for example, has made some slight changes to its popular Accord model for the 2011 model year. Changes to the car’s aerodynamics, gears, and engine friction have increased mileage from 31 to 34 miles per gallon on the highway and 21 to 23 in the city. That puts it in second place of the midsize models for fuel economy, trailing the Hyundai Sonata’s 35 mpg.

Chrysler has also announced plans to make similar changes to its Sebring and Dodge Avenger models, promising large increases to their current ratings of 21 city/30 highway miles per gallon.

Those looking to save money might want to look at fuel efficient used cars, as they will save money not only at the pump, but also at the dealer.

BMW updates earnings outlook

Strong sales have caused BMW to update its earnings outlook for the year, as surprising demand for luxury vehicles has caused the market to begin to rebound.

BMW originally predicted sales to increase this year by a single-digit percentile to around 1.3 million vehicles. However, brisk sales in China and demand for its 5-Series model have caused the automaker to revise those statements, instead predicting 10 percent growth and over 1.4 million cars sold, according to BusinessWeek.

Sales of BMW vehicles rose 13 percent during the first half of the year. BMW says that its second quarter results, which it will report on August 3rd will reflect the increased demand.

BMW has gained market share in China, as the company’s vehicles proved popular. The strong surge in demand has caused BMW to ship an additional 10,000 3-Series vehicles than it initially predicted it would sell.

"It’s not just strong sales in China, it’s also the delivery of new models and the effect of cost-cutting steps," John Buckland, an analyst at MF Global UK Ltd, told the news source.

In addition, BMW announced that its redesigned 5-Series sedan was sold out in all markets worldwide.

Those who see themselves in a BMW don’t need to break the bank to do so. It might be possible to find deals on used BMW vehicles by visiting local dealers.

Man sets fire to used Mercedes

One great thing about buying a used Mercedes is that the brand name will mean that it will always be easy to sell later, and if its truly a classic, it may even appreciate in value. However, one man’s attempts to sell his used Mercedes were dashed when an arsonist allegedly set fire to the vehicle and posted the pictures to Facebook.

Asgard Tarick Gilbert, 36, of Belfast, Maine, has been arrested and charged with felony arson, according to the Bangor News. The owner of the vehicle, a 1982 Mercedes, had been attempting to sell it. Police came upon the blaze and Gilbert snapping pictures on June 28th. Gilbert claimed to the two officers that he had recently discovered the fire.

The officers took down his information as a person of interest in the case. Gilbert later returned to the scene and took pictures of the charred car, posting them on Facebook along with the original photos in an album marked “Warzone.” This caused police to issue a warrant for the seizure of his computer and cell phone.

However, the real break came when police investigated the security tapes of the nearby Belfast Variety convenience store. The tapes show Gilbert on his bike at 12:30 AM, filling a gas can with kerosene before speeding away.

Gilbert is currently being held on $2,000 bail.

Consultants say Toyota must improve quality control

Independent consultants have advised Japanese automaker Toyota to begin a full assessment of its quality control procedures in the wake of the company’s massive recalls.

Toyota has faced scrutiny from a number of independent bodies, including the National Highway Traffic Safety Administration, who slapped the company with a $16.4 million dollar fine for failing to respond properly to recalls. The company has vowed to improve its safety, but it has also run into trouble with its independent experts.

E-mails obtained by the Associated Press showed that the company was not pleased with the work of independent hire Professor David Gilbert, whose findings showed that electronics may be to blame in the vehicles’ failings. Exponent, a consulting firm hired by the automaker, was criticized by a House committee for its past results that seemed to always favor the auto industry.

The consultants’ recommended that Toyota beef up their quality controls. Toyota has publicly apologized for the safety issues and plans to spend millions to improve its safety and consumer complaint divisions.

While Toyota sorts out its mechanical issues, prospective car buyers may want to consider a used Toyota, as the early-decade models are well-known for their safety and reliability.

Toyota has recalled over 8.5 million vehicles since October.