New car advertising: open season on consumers

New car advertising: open season on consumers

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News Release
For immediate release
March 25, 2009

The Automobile Protection Association issued its annual review of the auto industry today, to accompany the launch of the April auto issue of Protégez-Vous, the French language consumer magazine. The English language version of APA’s ratings of the 2009 new vehicles is available on the APA’s website at

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 many 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, 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 in Quebec.

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 the electrical systems, suspensions and brakes on GM cars are still not trouble-free. At Chrysler, the core Jeep products have improved but Chrysler’s newest crop of cars is undistinguished. 

New car advertising: open season on consumers

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
  • Very large rebates of $8,500 or more, not applicable to most of the vehicles in the ad (in one case not applicable to any vehicle in the ad!)
  • Phony 2 for 1 offers (buy one car get one free)

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.

Among brands with better advertising standards, the APA identified Hyundai and Toyota Canada, whose advertising is more complete and manages to avoid most, though not all, of the confusion and partial information present in competing advertising.

Risks related to a possible failure at GM or Chrysler

APA says there are too many unknowns for it to predict if the bailouts of GM and Chrysler will succeed over the long term and what the companies may look like in coming years. It’s already clear that a bailout package will exceed 50 billion dollars for the two companies, with assistance coming mainly from the US, and also Canada, Australia and likely Europe. 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. Other models like the Saturn Aura and Outlook share most components with the GMC, Buick or Chevrolet brands that will likely be around to ensure service.

At Chrysler, it’s the small cars that are at risk in the event of a merger or takeover with another automaker. The future of the Jeep brand appears more secure.

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.
  • Consult the manufacturer’s website. Most will add transport and preparation charges and other fees to advertised prices that are incomplete.