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Archive for March, 2014

Tesla Beefs Up Model S Shield to Prevent Battery Fires, Federal Probe Ends

Tesla Motors revealed last Friday that it did some updates to its Model S sedan, which would help prevent the car from catching fire due to road debris. The company added more armor to its all-electric sedan that includes a titanium plate, which according to company’s own tests can hold out well against forceful contact even with steel and cement.

The updates were found safe enough by the federal auto safety officials that it has ended the probe on Tesla Motors concerning the episodes of fires on its vehicles last year. It could be remembered that three Model S sedan’s caught fire after apparently running over debris. Two of which occurred in the US, while the other one was in Mexico. While there were no reported injuries, the said incidents raised a concern among Model S owners, prompting the National Highway Traffic Safety Administration (NHTSA) to open a probe into two of the fires.

The government said that Tesla’s revision to the Model S ride height and the addition of protection to the car’s underbody should reduce the frequency of debris striking its battery pack, which in turn could minimize the risk of catching fire.

Elon Musk, CEO of Tesla, noted in a public letter that the Model S remains as the safest vehicle around, noting that since their vehicles went into productions in 2009 there were no reported deaths or injuries to this day. He also added that the probability of a fire in their electric sedan is 1 in 8,000 or five times lower than a fire in the usual vehicles on the road.

Despite such level of safety, Musk said they wanted to ensure Model S owners will have complete peace of mind. So they deem it necessary to bring the risk level down to zero. To make that happen, all vehicles manufactured by Tesla as of March 6 are outfitted with a new triple underbody shield. The same shield may also be retrofitted for free to existing Model S upon the request of owners or as part of their cars’ scheduled service.

The said shield boasts three key pieces: aluminum ahead of the battery pack; a titanium cover to protect the battery; and additional aluminum shield that will push the vehicle up when it comes in contact with debris on the road. Musk said they carried out 152 tests on the armor, including exposing the new armor on hardened steel structures at high speed. The tests prove that the batteries are safe from any type of penetration.

Musk said the changes they made will not have a major impact on the range of Model S. He also added that despite the fire reports, sales for their vehicles continue to grow. Even so, the repairs do not indicate that NHTSA will keep Tesla off the hook. According to the government agency, they still reserve the right to do the necessary actions against the car manufacturer should new circumstances of safety-related circumstances arise.




 


 

Get Preapproved Auto Loan, CFPB Says; Yes Please, Dealers Say

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Arrange financing with a bank or credit union first before heading to a dealership, the Consumer Financial Protection Bureau says. This way, you’ll be able to compare the auto loan you’re approved for with dealership financing to see which offer is better. It also gives dealers a target they can either meet or beat, giving you more negotiating power in the process.

Apparently, dealers see this more as a challenge than a threat. The National Automobile Dealers Association says dealers can actually meet or beat an offer because they send your credit application to several auto lenders in their network. These lenders would then compete for the business.

Aside from that, dealers are very eager to get your business because they would also want you to come back to them for parts and services. Actually, most of the money they make comes from the services they provide and used-car sales. They also make money by selling extended warranties and service contracts.

A report from Forbes.com explains that arranging financing for customers account for only a small portion of a dealership’s revenue. Service and used-car sales make the chunk. New-car sales, if you’re wondering, also account for much but, interestingly, turn in only little profit.

Getting pre-approved for an auto loan before stepping into a dealership is a good idea; especially if it will help you get the best deal. But it does not mean that dealers would not try to talk you into their offer. And if they do, they might be successful more often than what you’d expect.

 


 

U.S. Consumers Take Out Bigger, More Auto Loans

Stories of consumers with bad credit getting approved for low-interest auto loans are becoming more common now. Obtaining credit is easy and consumers are more willing to take on debts.

The February report of the credit information agency TransUnion showed that U.S. consumers have been taking out auto loans in increasing amounts for three consecutive years now. The average auto loan balance per borrower is $16,769 in the last quarter of 2013. It hit low in 2010 at $14,764. It has been increasing since then.

But consumers are taking out not just bigger auto loans but also more.

The loan volume increased from 57 million to 60.5 million in 2013. That happened when auto sales also increased by 7.6 percent to 15.6 million. It is a 50-percent growth from just 10.4 million sales in 2009.

One reason for this trend is the availability of lower interest rates which make auto loans less expensive and more affordable.

As of this writing, the average interest rate for a 60-month new auto loan is 4.24 percent according to Bankrate. Investopedia explained that the same loan had 4.09 percent average interest rate. It is lower than today’s rate. But in 2009, the loan cost nearly 7 percent.

Americans also see the economy positively now.

In the last quarter of 2013, the unemployment rate declined from 7.9 percent in 2012 to 6.7 percent. And according to the University of Michigan and Thomson Reuters, the U.S. consumer sentiment in February is 81.6, higher than the 71.0 average. Consumers are more likely to spend when the sentiment is high.

Interestingly, TransUnion found that fewer consumers were delinquent in the last quarter of 2013 even if they have taken out larger auto loans. The delinquency rate slightly increased to 1.14 percent from 1.09 percent last year. But that is still lower than 1.3 percent, the average for fourth-quarter rates since 2007.

One possible reason is the fewer number of consumers with subprime credit. But today’s subprime borrowers seem to be struggling with their auto loans. The delinquency rate of the group went up from 5.73 percent in 2012 to 6.12 percent year over year.

Investopedia concludes that these days are good for taking out auto loans. But it also reminds consumers to ensure their financial security by not taking on too much debt.

 


 

Should Rising Auto Loans Worry GM, Ford?

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Ford Motor Co. and General Motors have experienced impressive auto loan gains, and they might not lose that tail wind any time soon, analysts from financial services firm Morgan Stanley said.

Adam Jonas and his team explained that financial institutions focused on new-car lending at least two years before moving on to other parts of the economy. The move boosted U.S. auto sales by 60 percent in just a matter of 4 years.

The subprime segment in new-car sales have reached pre-crisis levels, and leasing has also been setting record trends.

Used-car prices look good as well and incentives are rising.

But auto pricing information site TrueCar.com reported that incentives declined by 3 percent in January year over year and 10 percent from December 2013 when dealers worked double time to meet year-end targets. On the other hand, Ford and Honda posted double-digit increments.

Jonas also wrote that their banks team “sees all signs pointing to a stronger consumer, ready to take on more debt.”

The average auto loan amount that a borrower carries has been increasing for 11 consecutive quarters since 2011. The latest report by credit-reporting agency TransUnion showed that the auto loan debt per borrower rose 4.4 percent in the final quarter of 2013 year over year.

The economics and housing strategy teams of Morgan Stanley expect strong job growth with 175,000 to 200,000 additional jobs a month this year. In addition, banks have strong lending capacity.

“If banks and consumers have their way, auto sales can run higher for longer,” Jonas wrote.

But that is not entirely good news for Ford and GM. Even if it means more sales for the automakers, it also implies that “investors might not be willing to pay as high a multiple for Ford and General Motors shares if they believe that the lending will take away from future sales. Ford trades at 8.3 times trailing earnings, while General Motors trades at 13.8 times trailing earnings,” explains a Barron’s report.

Jonas and the other analysts at Morgan Stanley prefer auto-part manufacturers with ties to Europe to GM and Ford, which are more exposed to a “decelerating U.S. market.”

 


 

Late Auto Loan Payments Increased During the Holidays

transunion-delinquencies-decline-for-seventh-straight-quarte_3382_800583878_0_0_7010760_3002U.S. consumers opted to delay auto loan payments as they shopped for gifts during the holidays.

Based on data released by credit-reporting agency TransUnion, the rate of auto loan payments late by 60 days rose to 1.14 percent in the final quarter of 2013. It was more than 1.04 percent in the previous quarter and 1.09 percent in the last quarter of 2012. However, it is below the 1.3 percent average late-payment rate for October-December quarter since 2007.

Most consumers put off timely payments on credit cards, auto loans and mortgages in favor of the holiday shopping sprees that usually bust their budgets.

Late payments also increased among subprime borrowers from 5.7 percent in the fourth quarter of 2012 to 6.1 percent in 2013.

TransUnion predicts that the auto loan delinquency rate will fall to 1.02 percent in the first quarter of 2014 because consumers usually keep up with the payments in January-March quarter or in the first three months after the holidays.

The findings suggest that consumers are able to make timely payments even if they take on bigger auto loans.

The auto loan debt per borrower rose to $16,769 in the fourth quarter of 2013, up by more than 4 percent from 2012. It has been growing steadily for 11 consecutive quarters now since the first quarter of 2011.

Pete Turek, TransUnion’s vice president of automotive, said, “Consumers are willing to take on more auto debt.”

For the latest report, the agency tracked 60.5 million auto loan accounts, up from 57 million last year.

Lenders have responded to the growing number of car shoppers by making loans more affordable and credit easier, even to those with nonprime credit.

The number of new auto loans increased by 11 percent to over 6 million in the third quarter of 2013, and more than 32 percent of new auto loans were made to subprime borrowers. That is below the pre-recession rate of almost 37 percent in the third quarter of 2007, but more than the 25 percent low in 2009.

 


 

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