Monday, March 30, 2009

Why we aren't buying a new car (yet)

I have mentioned earlier this year that we are thinking of buying a car. In fact we are planning on replacing an eleven-year old vehicle with a new hybrid. Last year we bought, for my use, a Camry Hybrid, with which I have been quite happy, both in around the town driving and in trips from Missouri to Maine. It introduced me to the joys of Hypermiling. Motivated by a post from Robert Rapier, this time we decided to look into the Ford Fusion for the Actress. It purportedly gets better mileage that the Camry (so that we could get to Maine in 2 tanks of gas, rather than 3), and promised many of the features that we like in the Camry. We aren’t however there yet, and this is perhaps a message to the Administration about what they are doing to the car buying public.

When we started the process we recognized that there is a difference in price between the pure gasoline model (starts at $19,270) and the Hybrid (starts at $27,270). Some, but not all, of that can be made up by the better mileage (from 34 to 47 mpg on the highway). But if we drive the car for 100,000 miles, even if gas gets up to $5 a gallon (on average over that life) we would only save around $4,000 on gas. (I actually believe that, with the likely impact of Peak Oil being felt within a couple of years the $5 price is optimistic, but I might be accused of padding the argument if I went much higher). There is, however an additional incentive. Because this is a new hybrid, there is a tax incentive or credit, if one buys the Fusion. At the moment it is $3,400. Which, given that there are some other benefits, brings the price of the two models to being sensibly the same. So we get on the phone and chat with a local dealer, or two. Ah, but here is the rub; that tax credit expires at the end of March. Yup! That’s right, tomorrow night! After that, the tax credit drops to $1,700, and in October it drops further, to $850.

So we re-call our closest Ford dealer, a very nice lady, and trying to be very helpful – but she hadn’t heard of the tax credit. (A little odd, but never mind). And so we asked about seeing one. She did some checking on the Internet and there is apparently one in Kansas City, and maybe another in Indiana, but those are the closest two, and one is sold. She will get back to us as soon as she has a model that we can test drive, but has no idea when this will be. So there goes $1,700 through the window – and I suspect that there are several folks in the MidWest, who, like us, never even got a look-in at that particular incentive.

But wait, in today’s New York Times, there is a report of President Obama’s ultimatum to the car makers, in which appears the following paragraph
Other salient features of the latest plan to pull Detroit out of its decades-long skid include a tax break, being started by the Internal Revenue Service at once, for auto purchases made between Feb. 16 and the end of 2009; incentives for people to turn in older, less fuel-efficient vehicles and buy more energy-efficient cars, and government-backed warrants to assure customers that they have nothing to fear by buying a car from G.M. or Chrysler.

The concept of encouraging people to buy more fuel-efficient cars, which has been tried with considerable success in Europe, will require the cooperation of Congress. Mr. Obama said he would work with lawmakers to identify portions of the recently enacted multibillion-dollar stimulus package that could be trimmed to finance the purchase-incentive idea — and make it effective at once.
I commented favorably when I first heard of this as a means of improving German car sales, that Chancellor Merkel had introduced. And noted that Russia had also adopted the idea. In Germany, in February, it spurred a 21% sales increase (y-o-y), while U.S. sales fell 41%. So it sounds as though it is a good idea.

The only thing is, as we sit here waiting, is that we don’t know what the new plan is going to be, and when it is going to be implemented. So, in the meanwhile, we won’t be buying that car after all. And I suspect, as word gets out, that we won’t be the only ones. So if the Administration and Congress want a hint, they might decide one way or another what is going to happen with this, since if it is at the level of the European deal (2,500 euros or $3,284) then it will be worth the wait. Particularly if we can also get the hybrid credit. But until they decide, we won’t.


  1. The tax break portion was passed by Congress in February. The new and temporary deduction covers the taxes paid on new cars, light trucks, motor homes and motorcycles up to $49,500. Individual taxpayers making up to $135,000 can get the full write off, while those who file jointly can have an income as high as $260,000 to claim at least part of the deduction.

    Three scrappage bills have been introduced in the last month, two in the House and one in the Senate. The leading contender, from Rep. Sutton (D-Ohio), is said to have the support of the House Speaker and the President. In its present form it would provide $3-5,000 to buyers who turn in a car 8 or more years old on a new one that gets at least 27 mpg. A potential snag is that Sutton's bill says the new car has to be made in North America, understandable enough but not popular in some quarters and possibly a violation of international trade rules. Another snag is where the money will come from. It will likely take months to get something through - and who knows what it will look like - but waiting could well be worthwhile.