The time value of money (i.e. that a dollar today is worth more than the promise of the same dollar at some point in the future) is one of the most important and fundamental principles of economics. As a society, however, North America has recently been re-introduced to TVM’s kissing cousin, depreciation, which has provided an even more painful lesson indeed.
Homeowners, renters, and squatters alike are, by this point, well aware of what it means to possess a depreciating asset. Should they have borrowed some of the money (financed) to pay for said asset, then the subsequent hardship that followed may have even been enough for them to explore the fine print surrounding the “total loss due to fire clause” of their subsequent insurance policies, but that is another story.
Like homes, automobiles are typically one of the largest purchases someone will make, meaning they often will be financed. Unlike a car, however, homes generally don’t lose 15% of their value the very first time you walk in the door and turn on the lights. And while it is theoretically possible to purchase a vehicle that actually increases in value over time, (think hyper-exotic, limited production collectibles, and/or those owned by Puff Daddy, Pete Rose or Richard Simmons – depending on what turns your wheels) the number of such vehicles is so small that it almost doesn’t warrant mention.
Whether you call it being “upside down,” “backwards,” or “under water,” owing more money on your trade than it is worth is such a terribly disappointing scenario, that Adam Smith himself would’ve, no doubt, called it buzz-kill. Like an IRS audit, foot faults, and acid reflux, this is one of those annoying consequences designed to both keep us honest and punish most those who get greedy, like those of us who just have to have a new ride every year or two.
And once the cycle starts, for many there is really is no end in sight. It isn’t as if you are simply “doubling-down” with some sort of shot at having things magically turnaround. With every trade, you get deeper in the hole and just when you thought it couldn’t possibly get any worse, the bottom drops out quicker than Eliot Spitzer’s career or a credit score in default.
I have a theory that ecommerce itself may be somewhat responsible for the reckless attitude where people feel like debt doesn’t matter any more than a criminal charge against a pop-star. When the payment on that new Subaru WRX is just another line item on your monthly bank statement and it all starts to feel like monopoly money, anyway, than you may already be in the fast lane headed for a sure “finaccident.”
My suggestion on putting some reference back into the equation is stop all that online banking and start using cash, for everything. Start by paying all your largest bills with $100s, and if this doesn’t do it, move down to $50’s and so on until you are regularly at your bank taking out wads of singles. My bet is that counting out all of this paper money, in physical form, will make you think twice about how much we tend to throw away on high interest rates and items we may not actually be able to afford.
The next thing to do is pledge to never again let the dealer bury your leftover debt into another car purchase.
That magical short-lived period, maybe even only a day, at the intersection of equity, equilibrium, and finance where you owe precisely the same amount as your trade is worth, should become your new nirvana. Any utility you can get out of the car after that, even if only to maintain four brown patches of grass in your side yard, should feel like pure gravy. And provided your last dealer didn’t convince you that a loan term stretching across two presidencies was a good idea, you might even be able to make it.
If they did, you might want to check out “total loss by natural disaster.”
This de facto motto that Harley-Davidson had adopted is more than just a tag line. In all likelihood, there is probably as much truth and substance to it as there was to that temporary campaign they once used specifically to target women, which simply stated, "it vibrates." Like it or not, the obnoxious levels of noise emanating from a loud bike (could also be crotch-rocket) makes them hard to miss, and presumably (importantly) more difficult to accidentally not miss, but hit.
Sure, there is probably a sizable number of bike owners out there that simply feel cool or stroke their egos by how loud they can be, but the safety by-product of that has no doubt saved a considerable number of lives.
The noise cars make gets plenty of attention to. The aftermarket has had to deal with all sorts of noise ordinance when it comes to exhaust systems as tuners and hot-rodders go well out of their way to create a custom sound. Even the import market caters to this craving with brands like Tubi and Borla servicing Ferrari, Porsche and other brands.
As far as road-going vehicles go, however, there probably aren't two single vehicles on the road today that are more dissimilar than your average Harley Fat Boy and say, the Toyota Prius. Yet it's the Prius that is at the center of debate in Maryland not for the noise it makes, but rather the noise it doesn't, which apparently is just as much a problem.
And we thought the Toyota Prius emissions issue in Georgia was a problem.
The National Federation for the Blind has recently dug into the lack of noise associated with hybrid vehicles relative to the safety of pedestrians, sightless and otherwise, to see if there is a negative effect to not having any audible clues. This is perceived as a particular risk in urban environments where blind people rely on such clues to safely navigate roadways and their intersections. This is the same environment where hybrids are typically running at their quietest under electric power.
The argument is that a lack of sound from the vehicle puts the onus completely on the driver and less on the pedestrian to keep the two apart. These are the same drivers that are using cell phones, blackberries, food, coffee, hairdryers, books, newspapers, computers, navigation systems, and complex in-car entertainment systems to keep them occupied during the wasted time between traffic lights.
Personally, I don' think it will take a long, formal investigation into the matter to decide whether or not an issue exists. As more hybrids flood the roads, the number of instances where they creep up on people (never mind if they can see or not) is going to increase and the number of unfortunate collisions will as well. The trickier question is what type of standard noise will OEMs adopt that will create a safe atmosphere around their vehicles. You know the thought has crossed their minds and they probably have tested some sounds, but they should take a proactive stance on this or else an industry-adopted "noise" will be forced on them, and you can bet it won't be the whirling turbo effect or V8 rumble they had in mind, but likely a super annoying beeping reminiscent of a reversing cargo van.
You could probably make the argument that they only need the noise when operating under electric power as the combustion engines will produce at least something.
Who knows, maybe there is an opportunity hear. Maybe as long as the noise is of a certain level (volume), then you free to customize it how ever you want. There is huge money in allowing people to download ringtones for the phones, how far off can exhaust notes be?
So what would you have your hybrid sound like, a 1960's Ferrari? a landing 747? or how about a Harley? Or maybe you don't want something mechanical at all, like a roaring lion.
Come to think of it, that might set off a whole new set of issues, especially for those who can't see.
If you traveled at all this past holiday season, it is an unfortunate certainty that you likely ran into some delays or other transportation-related problems somewhere along the way. To be fair, the holidays are an extreme and will burden even the most well-prepared infrastructure, but alas, our current system is anything but well-prepared.
The frustrating part is that you don't even need to specify what type of transport you employed to know there were issues as it really doesn't matter. You flew, ok, so you braved the hordes at the airport, experienced the ever-so-graceful security congo line, and then sat on the tarmac for four hours while you waited for traffic to lighten up heading into O'Hare. Or in our case, for traffic to lighten up heading into O'Hare and the crew to first diagnose and subsequently fix one of the brakes on our brand-new Embraer Jet.
Didn't fly? Ok, so you decided to take your chances on the roads. First cram all those W-Mart and Best Buy goodies in and around your suitcase in the trunk, strategize your route in the hopes of minimizing your wait in traffic, and don't forget to stop at the petrol station and pay $3.50 gallon for fuel. Bah-humbug.
Normally this is where I would start touting the many virtues of rail travel and talk about how cool Europe is with the old-school stations, punctual schedules and 200-mph TGV. It is very easy to sell features and comforts like service to anywhere, anytime, beautiful city-center stations, and comfort to get out of your first-class size seat to take a stroll up to the bar car for a beverage. Unfortunately, this is not Europe, but rather Amtrak.
In actuality, that Amtrak can provide any service at all with is chronic underfunding and the deliberate negligence by this (and other) administrations is quite remarkable. We should not be at all surprised when we see that two of their trains have managed to navigate the same stretch of track, simultaneously, but rather unfortunately, in opposite directions.
So as you can see, we have exactly three major methods of transportation in this country, each with ample opportunity to put a hurting on your day. Our thoughts and prayers go out to those of you that have to transfer somewhere and use two or more of them in combination, or those who are riding the bus in which case are obviously traveling in protest.
Rather than remain the pessimist, I would like to suggest a new year's resolution for everyone who gets behind the wheel, rides the train, or takes to the air in 2008. We know that the system is broken and that arriving at your scheduled arrival time is only possible if it is actually on the day following the one you were supposed to arrive on. As such, let's try to have some fun with it and not get all bent out of shape when we get stuck overnight in Milwaukee. All of our huffing and puffing isn't going to make a difference anyway, so why bother stressing out over it.
Sure, easier said than done. But if you are willing to adopt a relative perspective, then you might just do OK. If you planned your ticket for Monday, assume you will get there Tuesday. Heck, when you finally do get there somewhere in the middle of the night between the two, you still come out ahead, er, "early."
Happy New Year and safe travels.
Well, the holiday season is officially upon us. This is the time of year when people are thinking about travel plans, trendy gifts and dropping temperatures. One thing noticeably off that list is the purchase of a new (or used) vehicle, even with all of the fanfare for end of year and holiday sales events. There is just too much else going on to think about dealing with the typical automotive purchase, which inevitably brings to close a year that a sports team might consider a “rebuilding” one. That’s just the way it is.
A quick scan of daily industry news turns up several items that really shouldn’t shock anyone and serve as a fairly appropriate snapshot of the entire year. Ford is recalling 1.2 million vehicles, and trucks no less, a diesel from VW is running circles around the Prius and the House of Representatives has approved an energy bill destined not for the president’s desk, but rather the oval bin underneath it.
So what’s new?
Rather than just dwell on the low sales volumes or other negatives, we should be looking at the bright spots in the industry, no matter how difficult they may seem to find. After all, this was a pretty incredible year one way or another. Each of the domestics had their own victories in a successful divorce (Chrysler), and major about face (Ford, which lost $12.6 billion in 2006 and has earned +$90 million so far this year) and GM, that has been receiving pretty good reviews on new vehicles. Never mind that pesky $39 billion dollar 3rd quarter tax charge, the company has signed a new labor agreement as well, which really could pave the way to a brighter future.
Across the pond, Porsche has clubbed its date (VW/Audi) over the head and is dragging her back to the cave, while BMW has raised the bar once again with the industry best new 3-Series and Mercedes-Benz is quickly climbing back up the reliability ratings. Similar things can be said with most of the other brands, meaning pretty much wherever you look, there is a silver lining.
And even though we have seen enormous change, some things just tend to stay the same.
MotorTrend car of the Year: Toyota Camry
Bring on 2008!