Category Archives: Cool Cars

BMW, Cool Cars, Toyota

The Incredible Depreciating Luxury Car Market

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Hey Cool Car Fans,

I really enjoy driving European and other luxury brand vehicles, such as Audi, BMW, Mercedes Benz and other high-end cars. Who doesn’t? They often have great technology, handle extremely well on the road and have fantastic performance. However, everyone knows that there is a cost involved in driving these vehicles and so once they are out of warranty they tend to depreciate like a rock.

THE TOYOTA RAV4 VS THE BMW X5

The other day I had a client call me about consigning his 2011 Toyota RAV4 LE, so a base model vehicle with a sunroof, and it had out 60,000 miles on it. I looked up what the trade value would be on his vehicle if we didn’t consign it and I just sent it to the dealer auction. It was $10,000 based on what they have been selling for at auction.

As the conversation progressed, he said that he was thinking that he might want to also get out of his 2010 BMW X5 with the 4.8l motor that was pretty hard loaded. It had more miles than the Toyota RAV4 with around 94,000 miles on the odometer. I looked that one up for him as well and to his shock and amazement it was selling at auction for the same price as the 2011 Toyota RAV4, which was about $10,000 for a trade-in value.

That’s pretty unreal considering the 350hp 2010 BMW X5 4.8l had an MSRP of $56,300 before adding in all the options for the vehicle. It’s more like $60,000 to $65,000 by the time you start adding options on a vehicle like that one. And that’s compared to a 179hp 4 cylinder 2011 Toyota RAV4 LE with an MSRP of about $25,575. So, you have a high-performance german luxury brand that is over twice the amount of money new selling 7 to 8 years later for the same amount of money at auction and at retail as a basic Japanese SUV. Which means that if you’re into European vehicles be prepared to lose money or you can buy them at a substantial discount.

WHY DO MORE EXPENSIVE CARS LOSE THEIR VALUE SO MUCH

It seems pretty amazing that a more expensive vehicle would depreciate more than a less expensive vehicle, but part of the problem is the cost of parts and overall repair costs. Many times people who own a less expensive vehicle will work on vehicles themselves rather than taking it to the dealership for repairs. These people don’t count the time that they are spending fixing brakes or doing oil changes or other repairs into their overall cost of ownership. Most people who own more expensive vehicles don’t tend to work on their own vehicles, so they take it to the dealer at $150 to $200 an hour. They don’t always think about the fact that they could be going to a less expensive repair shop, with a lower hourly rate, for some of their more basic repairs.

For example, I had to replace a radiator overflow in a 2011 BMW 3 Series and the local BMW dealer wanted $500 to do it. I found the part on Amazon for $80 and had a local repair shop install it for me for a half hour of bill time for $50 and a $500 repair turned into a $130 repair. You can’t find after-market parts for most high-line vehicles for the first few years of production, so you have to wait a few years before you can find other options for parts than the dealership. The parts can be very expensive, which is one of the reasons why these vehicles do not hold their value the way the Toyota or Honda vehicles do. It’s a supply and demand issue because people want to have lower repair costs.

Basically, you can thank the dealers and the mechanics for depreciating your Euro luxury vehicles. If you know what you’re doing you can get a great deal on a luxury performance vehicle a few years old. Which is the case for The Cool Car Guy because I like driving vehicles that sold for $65,000 new for $10,000 to $20,000.

Of course, I shouldn’t be telling people this because the more people who figure this out the more expensive these vehicles are going to be and they won’t depreciate as much based on supply and demand. The reality though is as long as the majority of people keep wanting to drive a 7 or 8 year old Japanese vehicle for 50% off, I’ll keep telling my clients that they can be driving the equivalent year high-performance vehicle for 70% to 85% off and laugh all the way to the bank.
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Auto Consultant – John Boyd: The Cool Car Guy
John is an auto consultant who owns CoolCarGuy.com that is a licensed car dealership in Lone Tree, CO. He can help you save time and money on any make or model, new or used, lease or purchase – nationwide! Call or email John about your next vehicle! jboyd@coolcarguy.com or Twitter @coolcarguy

Cool Cars, Financing, Leasing

Should You Lease A Car If You Plan To Keep It 10 Years

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Hey Cool Car Fans,

Last year someone asked this question on a website and I decided to answer it for them since so many people are anti-leasing today.  I think this is because most people do not take the time to understand how interest rates work on purchasing a vehicle.

Since I own a used car dealership, I primarily finance mostly used vehicles for people.  Most of my clients pay cash or they borrow against the equity in their cash value life insurance policies and pay back the insurance company using an unstructured loan.  This is by far the best way to purchase a vehicle because there isn’t any credit involved and you may payments on your own terms.  I explain this in detail at CoolCarsForLife.com if you’re interested in reading about that strategy.

You can check out my business model by visiting CoolCarGuy.com and what it is that I do.  I figured I would write an article about this topic though since so many people buy vehicles instead of lease vehicles.

13 YEARS LATER

Recently, I had a client track me down who purchased a used Acura MDX from me 13 years ago.  I was 37 years old when she purchased her last vehicle from me and she must have appreciated the experience to track me down again.  She was also impressed with the longevity of her Acura MDX that now had close to 180,000 miles on the odometer.  She was ready for a new one.  This is a woman who keeps her vehicles for a long time and she decided that she wanted a new one.

If she had purchased a new one the interest rate was pretty good, but it wasn’t amazing.  However, by leasing the vehicle her money factor was .00050, which is the equivalent of about a 1.2% effective interest rate.  She also didn’t want a huge payment on a vehicle that had an MSRP of $51,595 and leasing allowed her to only make payments on the depreciation of the vehicle.  By leasing it using what is commonly called a “closed-end lease” today, she was able to lock in the residual value and purchase the vehicle in the future for around $29,000.

THE RESIDUAL VALUE

Most leasing companies design their leases in such a way that if you go over the miles you purchase they are going to hit you with $.10, $.15, $.20 or $.25 a mile should you turn the vehicle back into the leasing company.  There are actually some leasing companies and manufacturers that will hammer you for the miles, even if you don’t turn the vehicle back in, which is crazy.  I’ve seen Mercedes-Benz do this and it’s a total “jerk”‘ move because you’re buying the vehicle and they don’t have any assumed risk or additional depreciation that it is costing them.

If it’s an “open-end commercial lease”, like on a truck for a construction company, then it makes sense to charge for the depreciation without a guaranteed residual value because they are structuring the lease that way upfront based on future unknowns.  The company might beat the crap out of the truck and it will be worth thousands less at the end of the lease, so the residual may not be locked in or it might be extremely low.   You want to make sure you read the lease agreement or know what you’re getting into when you lease a vehicle for sure and most people don’t.  When they get burned at the end they are ticked off because they thought that their Mercedes-Benz lease worked like their previous Toyota lease.

LEASING STANDARDS

Typically though, most leasing companies are going to structure their residual so that if you stay within the miles and you give the vehicle back they can sell it at auction and not lose money.  They are going to give you the option of buying the vehicle out without nailing  you for miles on top of the residual value, which is the right thing to do since you are sharing in the risk on the vehicle with them.  Some leasing companies, usually manufacturer’s like BMW for example, will put a really high residual on their car and that can give you a low payment, but they are banking on people going over their mileage, giving the car back and collecting money on tires, wear and tear and the mileage hit before sending it to auction or letting a franchise dealership buy it back.

The benefit though is that if you get the right lease and you lock-in the residual value then the miles are not really that important on the right vehicle.  An Acura MDX for example that you can buy for around $29,000 in three years with 12,000 miles a year is going to more than likely retail for more than that amount with 36,000 miles.  Which means that if you put on 45,000 miles you can still buy it out at the end of the lease and drive it another six to ten years and you should still be in great shape.  You have a lower payment for the first three years and a manageable payment if you choose to finance the remainder for the another three or five years.

I’ve leased Subaru’s, Honda’s and Toyota’s to people here in Colorado where they will look at the residual after three years and they realize they are in an “equity position” at the end of the lease term.  Often times they will call me and just ask me to help them buy their vehicle at the end of the lease.  The Toyota Tacoma or 4Runner is a great example of this kind of a strategy and many of the Subaru’s like the Crosstrek.  You get to the end of the lease and you realize that if you give it back to the leasing company Toyota or Subaru are going to sell it at auction for a few thousand less than what they are selling for online.  Why wouldn’t you just buy it out and sell it yourself or keep it?  These are what I refer to as an “equity lease” because you have equity in the vehicle at the end of the lease term.

GETTING THE VEHICLE YOU REALLY WANT

Instead of running around looking for the obscure off-lease, hard to find, overpriced used vehicle you could be driving a new vehicle and financing it over a longer term knowing that you’re going to keep it for 12 or 13 years like my client decided to do.  The first few years she is paying very little of the lease payment in interest and most of her payment is going toward depreciation.

Some of you may be thinking this is a really bad idea because you are financing the vehicle over a longer term.  The reality is the amount of interest she will pay is less for the first three years and she is going to keep the vehicle longer than someone who is buying a vehicle that already has three, four or even five years of driving on it.  This is the mistake and the reality that the financial wizards giving people bad advice don’t seem to understand.

If you buy a vehicle with 45,000 miles on it and you drive it for five years at 20,000 miles a year your vehicle now has 145,000 miles on it and it’s pretty much worthless.   If you finance or lease a new vehicle and you drive it for eight or ten years and it has 160,000 miles on it at 20,000 miles a year, it’s worth about the same as the genius who has 145,000 miles on their used vehicle.   The difference is your vehicle had a full warranty and no wear and tear on it to start.  In fact, you will probably get 9 or 10 years out of it as the original owner and are much more likely to maintain the vehicle to last.  The depreciation on a vehicle once it hits 145,000 miles compared to 180,000 miles is negligible.

The fact is that most people have to get out of their vehicles sooner than planned because they are paying too much in monthly payments to maintain them.  When a costly repair comes they have to unload them because they can’t afford the repair costs on their used car that they are still making payments on.
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Auto Consultant – John Boyd: The Cool Car Guy
John is an auto consultant who owns CoolCarGuy.com that is a licensed car dealership in Lone Tree, CO.  He can help you save time and money on any make or model, new or used, lease or purchase – nationwide! Call or email John about your next vehicle! jboyd@coolcarguy.com or Twitter @coolcarguy

Cool Cars

Why Do Car Dealerships Buy Vehicles At Dealer Auctions

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Hey Cool Car Fans,

Someone recently asked me why so many used vehicles are purchased by dealers at auction.  I figured I would write a post explaining why auctions are used by dealerships to buy and sell cars.

WHY DEALER AUCTIONS

The first reason that dealers will end up being at a Dealer Auction is because they cannot choose what vehicles they take in on trade. This happens daily.  Someone wants to buy a Ford F150 that I might have on consignment and they have a Toyota Corolla to trade.  I may not want the Toyota Corolla in my dealership inventory taking up space and having to recondition it, advertise it, etc.  So, I send it up to the auction for another dealer to bid on it and put it in their inventory.  I just want to sell the Ford F150 that I have available, so I’m willing to roll the dice on the Toyota Corolla and send it up to the auction.

This is one of the reasons why most used car managers don’t really care about the trade value in the NADA or KBB book, but what the vehicle you’re trading is probably going to bring at auction.  Most people go in thinking that the dealership is trying to rip them off on their trade, but the reality is the used car manager doesn’t want to get stuck with a vehicle they don’t really want.  After you drive off, the used car manager has to decide whether to try to sell your nicely used vehicle with all of it’s issues or send it to auction.

THE BURN RATE OR THE TURN

Believe it or not, the car that you trade is not going up in value every month.  On the contrary, each month a third-party in the form of NADA and Kelly Blue Book are coming out with a book or website telling the world that your vehicle is worth less than it was the month before.  A dealer needs to unload vehicles that have been on their lot for 60 or 90 days to avoid loosing too much money in depreciation.  Most dealerships also have a floor plan with a curtailment, so they have to turn those vehicles or write a check to the floor plan company for part of the cost of the vehicle or the full amount.  Think about if you have fifty vehicles in inventory and the average curtailment is $1,500 and the dealer has to write a check for $75,000 to keep all of those vehicles on their floor plan.  That’s a big incentive to send it to the auction and unload the vehicle.

Dealers also have certain vehicles that sell better in their inventory.  If you owned a Lexus dealership and someone trades a Chevy Cruze the odds are pretty good you don’t want it in your inventory.  You send it up to the auction to free up capital that allows you to buy another Lexus or Toyota or some other used car that sells well on your lot.

The auction ends up being an efficient way to unload unwanted inventory or to pickup new inventory for the dealership.  It’s dealers purchasing vehicles from other dealers, so the emotion is out of the equation compared to buying from a consumer.  The consumer has an emotional tie to a vehicle where the used car manager doesn’t care – it’s just moving metal.

I use the dealer auctions quite often to find inventory for my clients for this very reason.
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Auto Consultant – John Boyd: The Cool Car Guy
John is an auto consultant who owns CoolCarGuy.com that is a licensed car dealership in Lone Tree, CO.  He can help you save time and money on any make or model, new or used, lease or purchase – nationwide! Call or email John about your next vehicle! jboyd@coolcarguy.com or Twitter @coolcarguy

Cool Cars, Leasing

What To Know Before You Swap Out Someone’s Lease

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Hey Cool Car Fans,

A few times a year I will get an email or a phone call from someone asking me if they should take over someone else’s lease.  There are websites that offer this service and I’ve done this for some of my clients as well, not through those websites, but directly through the leasing company.  I only would do this when it makes sense.

I figured I would write a quick article about the benefits and disasters that can occur in assuming a lease or using a lease buyout service.

WHEN TAKING OVER SOMEONE’S LEASE MAKES SENSE

First of all, it rarely ever makes sense to take over someone’s lease because you are assuming the remainder of their financial obligation.

However, if you have credit issues and the person’s lease that you’re assuming has stellar credit you could really hit pay dirt.  The problem is that you have to get the leasing company to authorize you to assume their lease, so they are going to require that you have good enough credit and the financial ability to pay back the lease.  There is where the problem lies for most people because if the person who has the original lease obligation has better credit and a better financial situation than the person applying to assume the lease, what is the incentive for the leasing company?

The other time it can make sense is if you want to buy the vehicle at the end of the lease term and the person trying to get out of the lease doesn’t have that many payments left on it.  For example, let’s say that you are interested in buying a 2017 Porsche Macan.  You could take over someone’s lease that they have for $996 a month for 18 months and if the residual to buy it out at the end is $31.141 that could play really well for you.  You’re grabbing a much more expensive vehicle for under $50,000.   I saw this exact opportunity by the way.  Again, you have to see if it makes sense or if you are better off just buying the vehicle as I will discuss next.

WHY TAKING OVER SOMEONE’S LEASE USUALLY DOESN’T MAKE SENSE

As I mentioned before, assuming a lease could make sense if you have credit challenges and you can get a better lease payment than you would get on your own.  However, what if you have better credit than the person who’s lease you are assuming?  They maybe at a 6% effective interest rate and you could be getting a lease on your own at a near 0% effective interest.  The lease is being sold based on a payment, but it in fact might be a really terrible lease that you are assuming.

The residual may also be terrible as well.  If your goal is to give the vehicle back at the end of the lease and you can stay within the remaining miles that could be a good option for you.  What if you go over the miles though and the lease is setup where you have to pay $.25 or $,30 a mile for each mile that you go over?  If you go over by 10,000 miles you could be writing a check at the end of the lease for $2,500 or $3,000 to give the vehicle back.   What if you want to buy it out at the end of the lease term, but the leasing company bet wrong and put too high of a residual for the marketplace?  Then you’re in a situation where the best option is to give it back, so you basically just rented the vehicle with a higher level of risk.

If you have good credit and they have  the vehicle you want with a great residual than instead of assuming the lease, you might be far better off buying out the person’s lease for their remaining payments and the residual value.  You could then finance the vehicle or lease it using a used vehicle lease based on the buyout value.  This could work far better if you have good credit, instead of leasing a vehicle based on someone else’s credit.

 

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Auto Consultant – John Boyd: The Cool Car Guy
John is an auto consultant who owns CoolCarGuy.com that is a licensed car dealership in Lone Tree, CO.  He can help you save time and money on any make or model, new or used, lease or purchase – nationwide! Call or email John about your next vehicle! jboyd@coolcarguy.com or Twitter @coolcarguy

Mercedes-Benz, Tesla

Mercedes Benz Billion Dollar Electric Vehicle Investment

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Hey Cool Car Fans,

It started with Tesla getting millions of people fired up about electric vehicles over the last decade and now Volvo is planning to go all electric in the future with their cars.  Mercedes Benz has announced that they are going to be spending a $1 billion investment into their manufacturing hub in Alabama…

“The investment will go both to an expansion of the German luxury brand’s existing plant near Tuscaloosa and to build a new 1 million-square-foot battery factory.

While electric vehicle sales have been tepid overall, Mercedes has watched as Tesla jumped out has become a formidable player in the super-premium segment with its electric Model S sedan and Model X crossover. Now Tesla is threatening the lower, entry-level part of the luxury market with its lower-priced Model 3 sedan. 

The company is pursuing an “anything Tesla can do, we can do better” strategy,” – USAToday reported.

This is for the production of its all-electric EQ SUV.  Which is going to be the first all-electric SUV from Mercedes Benz and it’s going to be a big deal as more car companies are getting into the electric automobile market.

ARE ELECTRIC VEHICLES REALLY THE FUTURE

The consumer is driving the move toward electric vehicles with the success of Tesla in the marketplace and as people want a choice beyond the combustible engine.  What most people fail to realize is that the electric vehicle is the ultimate in planned obsolescence.  Car companies were accused of this tactic for years back in the 1970’s and 1980’s when vehicles would have parts that would break or wear out and have to be replaced.

A petroleum based engine is designed to run on gasoline or diesel fuel and it can be rebuilt.  When batteries wear out they are finished and have to be replaced and it can be extremely expensive.  Some people argue that this is no different than rebuilding an engine that can also be expensive.

THE COMPUTER AND CELL PHONE LESSONS

The problem is that the batteries that work today probably won’t drive the vehicles of tomorrow.  Car manufacturers are in the business of selling new vehicles and not updating used vehicles to the newest technology.  Nowhere is this more true than in the cell phone and computer market.  Is Apple offering an “upgrade” path for your original iPhone?  What about your 386SX computer from the 1980’s?  They are dead.  If you want to upgrade an old cell phone with the latest technology you have to buy a new cell phone.  It’s not any different with the future of the electric vehicle.  The cost to replace batteries are not going to be less, but they are going to be more.

You can see this with the Toyota Prius, but the difference is that your Prius can also run on gasoline, so it just becomes a heavy Corolla if you don’t replace the batteries.  This is a photo of a 2001 Toyota Prius with about 266,000 miles on it.  The cost for a replacement battery after 16 years is more than you would pay for the entire vehicle.  If you do some research you can pick up a used battery pack for about $1,600.  Proving the reality that EV batteries are not a sustainable long term technology nor will they be supported at a reasonable price.

The challenge for electric vehicles is not the new car market for consumers, but it’s actually the used car market.  Most people are afraid of buying electric vehicles that are five years old and having to replace the batteries in the future.  The lifespan of batteries in electric vehicles today is about ten years, like in a Toyota Prius.  It’s pretty difficult to convince someone to pay top dollar for a used electric vehicle when they are concerned about the battery life and the cost to replace the batteries.  In 2015, Autoblog.com had an article titled “Tesla Roadster battery pack replacement will cost $29,000”.  That’s crazy expensive for another 10 years of battery life in an older vehicle.  You don’t hear too much talk about this though from the media and Wall Street darling do you?

Which brings me back to the fact that Mercedes Benz is  making a billion dollar investment into electric vehicles.  Why wouldn’t they?  The consumer is failing to realize that they are helping to sell the car manufacturers on turning their vehicles into a very expensive appliance, like their cell phones and computers.

In the meantime, for all of those petroleum haters out there, this is a 1970 Nova SS Tribute that I spotted on the Manheim Dealer Auction for around $25,000 plus shipping and dealer profit.  You could get this super cool vehicle that is still worth almost as much as those expensive Tesla batteries after 47 years of driving.  And for only about $10.00 in gasoline drive it down the road without having to update anything.  Best of all, this vehicle should be worth about the same or more in another 47 years where that electric vehicle is destined for the crusher.  Which is why classic petroleum based vehicles are the ultimate in recycling!

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Auto Consultant – John Boyd: The Cool Car Guy
John is an auto consultant who owns CoolCarGuy.com that is a licensed car dealership in Lone Tree, CO.  He can help you save time and money on any make or model, new or used, lease or purchase – nationwide! Call or email John about your next vehicle! jboyd@coolcarguy.com or Twitter @coolcarguy

Audi, BMW, Brands, Mercedes-Benz

Why Do Luxury Cars Cost More Money

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Hey Cool Car Fans,

As The Cool Car Guy, I assist people in buying, selling, trading and leasing vehicles on a regular basis.  I work with people from all walks of life, but as you might expect a good portion of my clients drive luxury and high-end vehicles.  I also have clients who drive the no frills “bean can” as well or people who are on a limited budget.  I often am asked by people why they should spend the additional money for an Audi, BMW, Mercedes Benz, etc. than on some of the less expensive vehicles on the market.  Many people think that these vehicles are all created equal, but nothing could be further from the truth.

I decided I should take the time to write an article on why luxury vehicles are more expensive than other brands on the market. Many people assume that it’s all about just selling a vehicle for what the market will bear.  Which is a nice way of saying that they think that all vehicles are the same and therefore they are ripping people off with a brand name.  It’s true that the manufacturer needs to turn a profit, but when you buy a more expensive vehicle you are also getting a product that costs much more to produce.  The components are more expensive to build the vehicle.

I actually run into this even with other people in the car business who don’t like Porsche, Audi or BMW or Mercedes Benz because they are expensive to repair.  It cracks me up because some of these people are Used Car Managers and people who actually sell cars for a living.  It’s as if they have no clue about what it under the hood and like a typical teenager think that just because both cars have a USB port they are the same technology.  They don’t seem to understand that there is a difference in the quality of components being used in the vehicles.  Let me illustrate this fact with just a few components to show the difference in pricing.

LETS LOOK AT THE BRAKES TO START

Brembo brakes are usually found on a vehicle like a Porsche 911 Turbo or a high-end Audi.  You can grab a set of these over at Tire Rack at a discounted price of $1,916 for a kit at the time that I posted this and this particular one fits on a1983 Porsche 911SC Targa.  Those do not include installation time at $150 to $200 an hour at a dealership or even at some of the specialty shops.

Contrast that with a set of rotors for a 2015 Hyundai Elantra GT that you can grab for $122.83 and these are much better than what the manufacturer would put on.  These brakes are not even close to the same in performance or quality which is why they are more 15 to 16 times less money!

ENGINES AND TRANSMISSIONS

Here’s the engine for a 2011 BMW 335xi, which I happen to own and drive as my daily driver here in Colorado.  It’s a 6 cylinder twin turbo engine that produces 300hp.   If you needed to replace this engine it would cost over at CarMonkeys.com close to $11,000 for a used one and that’s a deal.

Contrast that with a 2011 Toyota Camry 3.5l V6 that was their top of the line motor for that year that produced 268hp and it would be about $4,500 for that used engine at CarMonkeys.com.  That’s less than half the price even though they both have six cylinder engines.  Why?  They’re not even close when it comes to performance, components and technology that has gone into the two engines.  It’s not as drastic in price difference compared to the brakes, but it’s 2.5 times the price on the used market for the same six cylinder engine.  Obviously, they are not the same.

As you start to go throughout the vehicles and add up the cost of components like brakes, tires (run flats on the BMW or Mercedes Benz for example), the transmissions, shocks, struts, all-wheel drive systems, sound dampening, the quality of interior, you discover that everything costs more on the luxury vehicle.  You can keep going with this sort of exercise in other aspects of the cars.

If it were truly a case of the manufacturers gaining huge profit off these cars and they were not that expensive to produce than companies like Hyundai would be much more competitive with their new Genesis vehicle.  Instead they have only been able to beat the price of a Lexus by a very small margin in their pricing.  They are focusing on offering a longer warranty as a key buying point.  After all, the cost to surround a person with airbags and have the same quality components to compete with their target market of a Lexus and Acura isn’t any less.

The bottom line is that you get what you pay for when it comes to buying a vehicle.

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Auto Consultant – John Boyd: The Cool Car Guy
John is an auto consultant who owns CoolCarGuy.com that is a licensed car dealership in Lone Tree, CO.  He can help you save time and money on any make or model, new or used, lease or purchase – nationwide! Call or email John about your next vehicle! jboyd@coolcarguy.com or Twitter @coolcarguy

Ford, GM, Suzuki, Tesla

Why Autonomous Cars Are A Pipe Dream

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Hey Cool Car Fans,

Each month there are new articles talking about the benefits of the autonomous car and how Silicon Valley is going to change the automotive industry with cars that drive themselves. They are definitely working on these vehicles and want the world to buy into their fascination of putting everyone into a self-driving taxi cab.   Like this article over at TechCrunch entitled: “Business models will drive the future of autonomous vehicles”.

This is actually a great article on the topic of autonomous vehicles and the challenges facing this new technology.  Including such issues about whether people will buy an autonomous vehicle or just pay for a ride share or who will control the software or if cities will tax them or how they will navigate and not run into a trolley to name a few.

Manufacturers and software giants are all jumping on this bandwagon because they see dollar signs and an amazing future of self-driving vehicles.   Which means it’s going to happen eventually, but does it mean that it’s actually a good idea or that it will be successful?  One article I read was so ridiculous that it said that the car of today would be like the horse of the past.

I for one am not buying into the Wall Street carnival barkers trying to raise the stock prices on these companies investing in this new technology.  It reminds me of when we had video cassette recorders that were going to replace Hollywood.  Remember that amazing technology with the dominating company known as Blockbuster?  You would go and rent a movie and then have to return it or get hit with a huge late fee.  That evolved into BETA that was going to replace VHS and before you knew it we had DVD’s and today we stream Netflix and HBO.  They were all going to replace the movie theater, but the last time I checked Hollywood is still earning billions and people are still going to the movies.  The hype didn’t deliver and most of the previous technology has disappeared because the demand was replaced with something easier and better.

WHY IS THE COOL CAR GUY SKEPTICAL

It’s really simple.  What’s the benefit of “riding” in an autonomous car?  People buy things based on benefits.  Is the benefit that you can get car sick looking at your phone while the vehicle drives you around?  Do your kids like to ride in the backseat of your vehicle today?  Does that car above look like something you want to hop in and have Google drive you around?

An autonomous vehicle simply means that a computer or some programmer in India is driving your vehicle instead of you and you’re just a passenger.  How is this any different than taking a taxi cab today with a real person driving you around, while you get to sit in the front or the back seat?  Seriously.  What’s the additional benefit?  The word autonomous?  Oooh.  It sounds so sexy!  I’m not making this up.  They are all scrambling to create an overpriced and glorified taxi cab.  Michigan is building an $80 million autonomous car testing site according to AutoWeek.  What?  Why?  Do they have an $80 million testing site to train taxi cab drivers?  If someone proposed that the first reaction would be “Are you crazy?”.  Well, that’s what you’re doing morons!

An autonomous car will pick you up and take you where you want to go, like Lyft or Uber, but instead of Lyft or Uber having a driver the vehicle drives itself.  Amazing!  Is it going to get you to your destination faster than an Uber or Lyft driver today?  Will traffic tickets no longer be given since all vehicles go the same speed or are they going to be sent to Google or Uber to pay the fine?  What if it gets in an accident?  Who’s liable at that point for the system failure?  The automobile manufacturer?  The software company?  The “rider”?  Do you have to carry insurance or will it be like when you rent a vehicle from a rental car company?   Will all of these ancillary industries go away, so you no longer can rent a car?  Is the car gong to smell better?  Is it going to cost you less money?  Again, what are the actual benefits?  Is anyone asking this most basic of selling questions?  “I want an autonomous car, so that I can text and drive?”  That seems like the only benefit at this point to me.

And there are actually people who are betting on this and trying to tell investors and the rest of us that in the future autonomous cars will replace all of our current vehicles. Really?  If that is true, couldn’t you just sell your car tomorrow and just take Lyft or Uber wherever you want to go?  Why wait for the autonomous car revolution when you can get a ride from Lyft tomorrow?  I use those services quite often going back and forth to picking up a vehicle, but they haven’t replaced my vehicle.  In some cities people do not own a vehicle and they only take a taxi cab.  I had friends in Chicago years ago who lived downtown and they didn’t own a car.  They took a taxi or a limo everywhere they wanted to go.  That’s the market for autonomous cars.

WHERE ARE HUMMER, SUZUKI, PONTIAC, OLDSMOBILE, SATURN, ETC.

Finally, here is what Google, Uber, Lyft, Tesla and even Ford and the other car manufacturers are apparently forgetting and missing when it comes to selling vehicles.  Hummer was a successful brand for a while, so were Saturn, Suzuki, Oldsmobile and Pontiac.  Don’t forget that Chevrolet and GM needed to be bailed out for their bad decisions in the past and even filed bankruptcy.  Many of these car companies trade hands like a deck of playing cards because the market is saturated from a manufacturing standpoint and the marketplace is extremely fickle.

The automobile industry is crazy at times.  How many vehicles are hot for a period of time and then they stop selling?  And everyone is scrambling to create a self driving car without actually knowing if the market even wants it.

I have yet to have one person tell me that they cannot wait for an autonomous car.  I have had people tell me they are still waiting for a landspeeder!  And you will notice that Luke Skywalker was actually driving the landspeeder in Star Wars and it wasn’t driving itself.
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Auto Consultant – John Boyd: The Cool Car Guy
John is an auto consultant who owns CoolCarGuy.com that is a licensed car dealership in Lone Tree, CO.  He can help you save time and money on any make or model, new or used, lease or purchase – nationwide! Call or email John about your next vehicle! jboyd@coolcarguy.com or Twitter @coolcarguy

Cool Cars

How To Make Money With Lyft And Uber

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Hey Cool Car Fans,

As The Cool Car Guy, I get contacted by people for every kind of make, model and type of vehicle.  I also end up using Lyft and Uber on a regular basis to get from one place to another.  Usually it is after I drop off a vehicle with a client and I need a ride back.  What I’ve discovered is how many people are putting a ridiculous amount of miles on the wrong vehicles for their “taxi business”.

THE ATTRACTION OF LYFT AND UBER

Let’s face it.  Millions of people need a way to earn additional money and turning a vehicle into a part-time or full-time taxi cab seems like a great idea.  The fact that you can download an app on your phone, call up a Lyft or Uber driver and catch a cheap ride from point A to point B for a minimal charge is pretty amazing.  These companies are earning billions off a service business with very little overhead since their drivers are using their own vehicles for the service.  However, it can be costly for a driver if they don’t know what they are doing.

For example, I recently grabbed a ride from an Uber driver in her 2014 Cadillac SRX.  As I usually do, I looked at the odometer on her vehicle and it was clipping away at over 49,000 miles.  I asked, “Did you lease this vehicle or purchase it?”  She said that she had done a one pay lease.  I said, “How many miles did you purchase?”  She said, “My lease is coming up and I purchased 30,000 miles, so I’m over my miles.”  I said, “By almost 20,000 miles and at $.25 a mile if you give it back, you’re looking at writing about a $5,000 check.  I would get out of this vehicle tomorrow if I were  you.”  She turned in her vehicle and wrote a check.

Some of you may be wondering why I didn’t help her to buy out her lease and the answer to that is that based on her buyout with GM, I knew that she would lose more than $5,000 buying the vehicle.  Fortunately, she had leased it and she had a guaranteed buyer which was General Motors, so she could give the vehicle back to them and write a check.  When they sell it at auction they will be losing more than the $5,000 she gave them for the additional depreciation.  Take that Suzy Orman and Dave Ramsey, who tell people that they should never lease a vehicle!  If she would have financed that vehicle she would have been in way worse shape trying to unload it with 49,000 miles.

HOW TO ACTUALLY DRIVE FOR UBER AND LYFT

I could tell you story after story like the one above because most of the people I know driving for Uber and Lyft are “clueless” about cars, trucks, depreciation, let alone running a taxi service.  I’m not trying to be mean, but many people just join these companies and start driving for money.  I’ve taken rides in expensive Lexus, a Porsche, Toyota Tundra’s, Expeditions, Yukons, the list goes on and on and I just shake my head most of the time.

So how do you actually run an Uber or Lyft taxi business?  First off, as some people are trying to do, you can’t copy the taxi cab companies.  They have a fleet of the same vehicles that they can use as parts when they are through putting a million miles on them.  The average Uber driver has one car that they are trying to make some money driving.  However, what you can do is very simple math.

For example, I have a guy who wants out of a 2007 Range Rover right now that has about 105,000 miles on it and they are good for at least another 50,000 to 100,000 miles, but they can be expensive to repair and maintain.  This vehicle sold new with a $76,535 MSRP and you can buy one used for $10,000 or less with 105,000 miles . That’s massive depreciation!  Let’s assume that you earn $.50 a mile on average driving for Lyft or Uber and your vehicle cost after taxes is about $10,000.  I think you can actually find vehicles for under $10,000 and this math works even better, but you need a decent vehicle that people want to ride in to keep your ratings high.

You can see if a vehicle qualifies at this link: UBER Requirements.

Let’s assume that you’re going to drive 50,000 miles at $.50 a mile on average for your taxi service.  That’s $25,000 that you will earn on a $10,000 vehicle, so you will NET $15,000 minus expenses, like fuel and maintenance.  Now, you have a 2007 Range Rover with 155,000 miles and you throw it on Craigslist or trade out of it and get another inexpensive ride that you can earn another $15,000 on.  A 2005 Range Rover HSE with about 155,000 is trading for about $3,500.  So, you should be able to recover most of your maintenance costs and some of your vehicle cost based on putting 50,000 more miles on a 2007 Range Rover.

You can do the same thing by buying a $10,000 Toyota Corolla, Nissan Versa, VW Jetta or Passat, etc.  If you can get 100,000 miles out of a vehicle at $.50 a mile that’s $50,000 minus the cost of the vehicle, interest, fuel, depreciation, etc.  This is a different model than I’m seeing that most people who I’m grabbing a ride from are using for their business.  I’m sure that there are other models that work as well, but this is an idea of how these Lyft and Uber business ventures can work for people who are looking to drive for these companies.

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Auto Consultant – John Boyd: The Cool Car Guy
John is an auto consultant who owns CoolCarGuy.com that is a licensed car dealership in Lone Tree, CO.  He can help you save time and money on any make or model, new or used, lease or purchase – nationwide! Call or email John about your next vehicle! jboyd@coolcarguy.com or Twitter @coolcarguy

 

Cool Cars

Beware Of The Exotic Car Scams

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Hey Cool Car Fans,

I had to write an article about this website that is sweeping the Internet selling people on how they can drive an exotic car, like an Aston Martin DB9,Vantage, Ferrari, or other exotic, for the cost of leasing a Range Rover or a luxury vehicle.  The ploy is that if you pay $300 to take their seminar or series of webinars that you will learn the amazing secrets of how to exploit the exotic car dealers.

I’ve had so many people who have sent me the link on Facebook about this system that I had to write an article about it.  The first part of the gimmick, which you can find by watching some of their free videos, is that there are dealerships that purchase exotic vehicles and they want to turn them in 60 to 90 days.  This is true since all dealerships that inventory vehicles want to turn their inventory quickly.  It’s just not a big deal.

They go on to explain that many of these dealers end up getting stuck with their exotic cars for a number of months and then their only option is to sell it at auction or to another dealer at a massive loss.  You can even use a CARFAX report to see how long the vehicle has been in the dealer’s inventory.

This may or may not be true depending on the dealership because many dealers have the money to pay cash for these types of vehicles.  If they own them outright they may be willing to sit on them much longer, until the right buyer comes along, who is willing to pay all the money for a specific vehicle.  It’s not as though exotic car companies have a massive production line like a Chrysler Town and Country is built on.  Hence the name exotic cars.  Exotic cars can take a long time to sell, just like a million dollar home is going to take longer to sell than a $250,000 home.  This should be common sense.

One year, I sold a DeLorean DMC-12 from the early 1980’s, which isn’t an exotic like a Lamborghini, but it’s still a limited production vehicle for sure.  I remember some of the guys I knew told me that I would never get what I was asking for it.  I had a number of calls from people who wanted me to drop the price on it without even coming to look at the vehicle.

It didn’t take that long though and a guy who owned an oil company and who was a huge John DeLorean fan showed up and paid the asking price.  Not everyone is desperate to move a unique vehicle that they know are limited production cars.  There is something in business called supply and demand and it is really important when it comes to cars.  No two used vehicles are ever the same, so if a dealer is deeply discounting a vehicle, it could be because it has serious issues.  It may also be that they just traded for the vehicle and they don’t want to keep it in their inventory and are blowing it out.  This isn’t usually the case though with exotics.

The main sales pitch of the exotic car webinar guys is that they are going to teach you how to buy exotic cars at a huge discount.  Apparently, the dealer would rather earn a little more money retailing the vehicle than have virtually zero risk wholesaling it to another dealer or selling it at auction.

Often times I will wholesale a vehicle to another dealer instead of selling it retail because I don’t want the potential “heat” of having a customer come back to me on a vehicle with little profit.  It’s not worth the brain damage.  This is part of the business that these guys are failing to realize.  They make it sound like this happens all the time and the dealers are desperate and it really doesn’t. Most dealers that trade in exotics know their market pretty well, certainly better than the average guy who buys one car every few months or years and thinks he’s an expert.

Their pitch gets even better though.  They have their customers believing that if they buy the exotic car for say $200,000 instead of $250,000 that they can drive it for a few months and flip it again for a profit or for what they paid for it to some sucker or another exotic car dealer.  Apparently vehicles only depreciate when they are sitting on a dealer’s lot and not when a student of a $300 webinar is driving them around and putting miles on them.  And don’t forget that most people trying to get one of these at the payment of a “Range Rover”.  They are going to still have to qualify for their financing.  Honestly, do you think a $200,000 vehicle is going to have the same payment as a $70,000 vehicle?  Did someone fail math class?  Do you think the dealers are going to be begging to buy your vehicle three months later because you are such an amazing negotiator?

My favorite part of the video I watched was when he told his viewers that they should always ask for a salesperson who has been around for a long time.  Because these guys want to make a sale and they are not afraid to discount the vehicle.  He even advises people to not ask for the “new guy”, which is comical.  Have you ever talked to a salty and seasoned car salesman who has been around the car business for way too long?  I get talk to them regularly and many of them are nuts.  I’ve been around this business for over 13 years and I’m pretty nuts.  They are often seasoned pro’s at selling with very little patience for people who want to waste their time.

Someone who has been selling cars at a dealership for five, ten or twenty years, everyday is more often than not like a salty old sea captain.  I know one guy who would have people in his office trying to grind him down on a car purchase and he would just tip his glasses down and say, “Get out!”.  He would literally escort them out of his office and slam the door.  That’s the type of guy they’re telling their students to go and negotiate with, which is hilarious.

If someone is going to pay cash they are probably going to want to keep the vehicle and not dump it after a few months.  Which is probably what these guys are actually doing themselves.  After all, if you can sell 2,000 webinar courses on how to buy exotic cars at $300 a pop and earn $600,000, well you can definitely afford to buy a $200,000 Aston Martin DB9 or some other exotic vehicle for your sales “pitch”.

This reminds me of the late night television gurus of the 1980’s that were selling suckers on how to buy real estate with no money down, if they purchased their material.  They would usually get someone who bought one or two homes to get on their show and tell them how great their system worked, so they could fill a room.  The fact was that most of the people taking the class probably never bought one house after they ponied up to the bar to pay their fees.  The same exact concept is happening here by telling people how to do something that sounds too good to be true, while earning a huge profit selling a scam.

I earn my living, buying, selling, trading and leasing vehicles for people and I’ve done it for the past thirteen years.  I only get paid if a sale of a vehicle is made and if I charge people a commission it’s for actually delivering a tangible product.  If it really worked as well as they are saying, why wouldn’t they just keep the idea to themselves and go make money flipping their exotic cars?  The simple answer is because they earn way more money selling their amazing system that nobody else knows how to do than they would just using their car buying system.  And if you were to question them on it they will claim that you just don’t know what you’re doing, you’re stupid and they’re a genius.  Yes they are – at selling the “sizzle”.  Like anything else, it’s buyer beware.  Now people can hopefully quit sending me the link to their website.

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Auto Consultant – John Boyd: The Cool Car Guy
John is an auto consultant who owns CoolCarGuy.com that is a licensed car dealership in Lone Tree, CO.  He can help you save time and money on any make or model, new or used, lease or purchase – nationwide! Call or email John about your next vehicle! jboyd@coolcarguy.com or Twitter @coolcarguy

 

Cool Cars

The Future Looks Bright, But Expensive

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Hey Cool Car Fans,

I was recently reading one of the car magazines that I subscribe to and came across an article about new technologies.  These included things like thin-film solar panels on the roof and new windshield displays, along with five other new whiz bang features

I grew up in the Star Wars and Star Trek era where I hoped as a kid to be driving a land speeder by now. However, I also spend a small fortune each year repairing and fixing used cars.  If you haven’t had to pay to put in a windshield into a Mercedes Benz S550 with rain sensing wipers then you might get excited about solar panels on the roof of a car.  If you have had to fork over $1,500 or more for a windshield than you get where I am going with this article.

THE COST OF NEW TECHNOLOGY

New and improved technology is fantastic, until it is out of warranty and it breaks down.  The labor costs alone on many vehicle repairs are getting obscene.  There are franchise dealers in Denver charging $165 to $200 an hour just for labor and these are not to repair your Ferrari, but your daily driver.  When you add in the cost of expensive parts, suddenly the cost of ownership outside of the manufacturer’s warranty can be crazy high.

One of the new technologies that were mentioned in the article were putting batteries in the body panels.  This sounds like a great idea conceptually and it will probably even work.  Do you want to be the sucker though that buys that vehicle and pay the bill to insure the vehicle?  Think about the added cost when someone runs a red light and plows into the side of the car.  The body shop wouldn’t just be replacing a door or a few panels, but battery packs inside a door and panels. If sellers think they are getting screwed by a bad CARFAX now after an accident is reported, just wait until this new technology hits the market.

How about shock absorbers that turn energy created from a pothole into more miles per gallon?  Let’s be honest because most of the cars on the road today ride like crap because nobody wants to spend the money to replace their vehicle’s existing shocks or struts.  It’s already an expensive repair unless you are a gear head or mechanic and you can do it yourself.  Now add the additional complexity that the engineers want to add for better fuel economy and most used vehicles will need new shocks like they need new tires.  Only the majority of drivers won’t have the extra money to replace them.

Google, Apple and other Silicon Valley companies are investing heavily into the automotive industry.  The big automotive manufacturers are starting to embrace the “geeks” in California and their highly profitable business models.  Let me forwarn you now that you had better grab your wallet and hold on tight!  You may find in the future that leasing a vehicle is the only option that actually makes financial sense.

If you are enamored with the brilliance of Silicon Valley, you apparently haven’t had your kids break their, made in China, iPhone yet out of warranty and have to replace it for $200 or $300?  Have you seen the upgrade Tesla offers on their batteries for the older roadster at $25,000 for 350 miles of juice?  Who is going to flip the bill if you own an autonomous car from Google when it breaks down?  These companies are run by billionaires who know how to earn a buck off of the masses. I see the word “sucker” when I read about sone of these new whiz bang technologies.

An air suspension ride on a Mercedes Benz or BMW is fantastic until it goes out and you have to buy new air bags.  I see first hand how many people have to get out of their expensive vehicles when repair bills start cleaning out their bank account.  If the cars of the future continue adding more expensive technology that can and will fail it will get far worse.  One of the things that made Luke Skywalker’s Land Speeder such a cool ride was the simplicity of it.  It might be time for the car manufacturers to remember the old marketing saying, “less is more”.

Which is one of the reasons why buying older vehicles or classic cars that someone can fix up is starting to make much more sense for many people.  If you’re not going to lease a new one to share in the risk of repairs with the leasing company or the manufacturer with a lower monthly payment, why not drive an older and much cooler car for a far less overall cost of ownership.

I am getting more requests from people to help them find older classic cars, even like a 1979 Mercedes Benz 450SL that you can pickup for under $15,000 most of the time in pretty good condition.  It’s like getting the movie star look on a Wal-Mart budget and people are starting to realize that these vehicles are not going to depreciate in five years like the newer vehicles are doing in a year.  It’s something to think about isn’t it?

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Auto Consultant – John Boyd: The Cool Car Guy
John is an auto consultant who owns CoolCarGuy.com that is a licensed car dealership in Lone Tree, CO.  He can help you save time and money on any make or model, new or used, lease or purchase – nationwide! Call or email John about your next vehicle! jboyd@coolcarguy.com or Twitter @coolcarguy