Like Many, Auto Industry Cutting Costs on Road to Recovery
In an attempt to recover in these hard economic times, the auto industry is following suit as many companies try to reduce costs as they up sales.
On the consumer end, buyers of autos who are themselves struggling through the economic blight may reduce costs of their own with the purchase of an extended warranty.
This spring, GM announced that it would repay 8.1 billion of government loans five years early, mitigating the controversy surrounding the government's previous bailout. Moreover, AutoNation, which owns a string of dealerships in the southern U.S., posted a surprizing 60% profit, indicative of a renewed confidence in Americans about the auto industry.
Taken together, these signs indicate a clear turnaround for an industry recently on the verge of bankruptcy.
Cautionary words for U.S. consumers
But analysts warn there are still precautions to be taken by consumers, such as having an extended warranty: Broad reduction in costs means dealers and manufacturers may be less willing to undertake costly repairs once they've sold a vehicle.
Coverage may be reduced, and the length of a warranty might decrease. In situations like this, some consumers find that the purchase of an extended warranty from a reputable company such as AA Auto Protection is critical. This company has 60 years experience with auto protection, and basically changed the face of the warranty industry with their catering to a wide variety of customers, and customized warranty plans. They are also directly insured by AM best rated insurance companies, and their pricing is the most competitive and visible in the business.
A bumper-to-bumper warranty can extend the life of a vehicle, something increasingly important in these tough economic times.
The industry may be recovering, but times are still tough, and the outlook, shaky: A warranty nullifies any surprise costs incurred by vehicle breakdown, made more likely by poorly maintained roads.
Underfunded road repair crews
Even while road expenses are increasing, state funding for these endeavors remains at a low. This is causing many municipal counties in states across the nation to struggle with road maintenance costs, causing motorists to sustain damage to their vehicles.
In Granby, MA, a report found that the town has an estimated $6 million dollars in backlog repairs, according to the Hampshire County Gazette. Nearby towns are paving less than they used to. And a record number of roads are in "reclaim" status, meaning the costly prospect of ripping it up and starting over.
The problem stems from a simple economic fact: State funds have remained consistently flat for the past decade, while road expenses have increased dramatically.
Deteriorating roads are driving up costs even as there are more roads to maintain. Towns simply cannot use the same funds from years ago to address modern needs, and funds have not increased to match inflation or the economic troubles. In addition, the price of asphalt has more than doubled since 1999.
"I think it's a crisis," Granby highway superintended David Desrosiers told the news source.
All of that spells bad news for drivers not protected by an extended warranty plan. Although municipal towns in Massachusetts are being hit especially hard, the problems are such that they could apply to small towns nationwide.
Auto Financing and the New Consumer Finance Protection Agency : More worries for the consumer?
In an attempt to escape jurisdiction of the new Consumer Finance Protection Agency which is part of the Obama Administration financial reform legislation, furious lobbying has been taking place on the part of dealers:
Auto dealers are lobbying furiously to escape the jurisdiction of the newconsumer finance protection agency in the financial reform legislation. Dealers’ reps claim they already are regulated by state agencies and that the new regulation would tighten credit for consumers. The whole controversy made us wonder: What are they trying to hide from regulators?
If you are about to buy a new or used car, it is a question you should ask and be prepared for. “Car dealers buy and sell money for profit, ” says Linda Goldberg, owner of auto brokerage firm CarQ which arrangesfinancing for clients as well as negotiating their car purchases. “Sometimes the financing profit can be three times the dealer’s profit from selling the car.” But the typical consumer focuses on the car’s price and isn’t sufficiently skeptical when he goes to the dealer’s finance and insurance specialist-generally known as “the F&I guy” (even though some are women).