Aug 6, 2008 | Views: 3,860
Permanent Link to this Blog Post:
Mar 1, 2008 | Views: 473
If you plan to buy a new or used vehicle, there are some things you should do before you make that major purchase.
Here are eight strategies that can help you save money and make the process easier:
Consider buying a used vehicle
The inescapable truth is that any new vehicle loses at least 30% or more of its value the minute you drive it off the lot. Though that loss has less impact if you keep a new vehicle for at least five years, it still should enter your calculations.
A vehicle that's 2 or 3 years old and with low mileage might be a better deal for you. (See "Are certified used cars worth the cost?")
Weigh fuel costs
Although there's no crystal ball to predict where gas prices are going, there's little doubt that prices aren't going to return to $2 a gallon. So look at vehicles with higher fuel ratings and give some consideration to hybrids, even though some hybrids cost considerably more than comparable gas-only vehicles.
Which cars cost less to insure?
Also, be aware that for 2008, the government economy ratings have been revised downward to better reflect the actual mileage you'll receive. (See "Finally, the truth about gas mileage.")
Beware of low-cost lease deals
As manufacturers become more desperate to sell cars -- 2008 looks to be another down year overall, with sales of fewer than 17 million new cars and trucks -- you'll see a lot of offers involving cut-rate lease payments.
Though these appear attractive, they can trap you if you drive more than the allotted mileage. Many of these leases allow only 10,000 miles a year and charge as much as 25 cents a mile for every mile over the allotment. Be honest with yourself about how many miles you drive -- it's likely more than most leases allow.
Get your financial house in order
The last thing most people do is check their creditworthiness before going car shopping. Do you know your credit scores? These are the numbers that can determine whether you qualify for the lowest interest rate on a car loan. (Estimate your score here.)
Also, check your credit reports for erroneous information, and look for ways to raise your credit scores, such as by paying off credit cards. (See "Build a killer credit score in 2008.") Remember, though, that closing credit card accounts after paying them off can actually lower your scores.
Shop for the best loan deal before buying
One way to avoid getting burned on your next car purchase is to have your financing in place before you set foot on a dealer's lot.
A good resource should be your credit union, which typically has the lowest rates. Another place to shop is the Internet, where lenders offer essentially preapproved loan checks that you can take directly to the dealer. (Find the best auto loan rates here.)
Build up your down payment
Too many people these days buy cars with little or no money down and then are surprised that for the first three or four years of ownership they owe more than their cars are worth.
A good rule of thumb is to put at least 20% down on any vehicle, in cash or trade.
Clean up your trade-in
Look at the vehicle you own as if you were a shopper. Is it clean? Does the paint shine? Are there dings that could be cheaply fixed? The difference between a car that looks well cared for and one that looks a little shabby can be thousands of dollars.
Also, if you still owe money on your trade-in, make sure you can get enough to pay off the loan. Don't roll the balance into the loan on your new car.
Widen your shopping list
It's quite understandable that many car shoppers go directly to Toyota or Honda, given the impressive record of reliability that both of those brands have.
But the truth of the marketplace is that the domestic manufacturers have closed the quality gap and have vehicles that favorably compare. Given the push by Detroit manufacturers to regain market share, some of the best deals of 2008 can be found there.
This article was reported and written by Terry Jackson for Bankrate.com.
Permanent Link to this Blog Post:
Feb 29, 2008 | Views: 859
Some simple tips to save money and add life to your ride.
By Tom Wilson
Compared to the family trucksters of a generation ago, modern cars require about as much maintenance as a toaster. This is a real liberation from the oil, lube and tune merry-go-round that ruled not so long ago.
Curiously, many people haven't adjusted their thinking to keep pace with new car maintenance schedules. The preoccupied still run their daily drivers without service until the dash warning lights burn out, while over-achievers fret about running synthetic oil more than 2,500 miles without a change.
Although maintenance intervals are now more widely spaced, even the newest cars require scheduled service to live long, productive lives. Whether yours is the latest model or you paid it off years ago, the trick is giving your car the maintenance it was designed to receive.
Surprisingly, the answer to what maintenance is required is hiding no farther away than the glove box. Every car is supplied with a maintenance schedule — in the owner's manual or in a separate maintenance log book — that details that vehicle's needs. A few minutes assimilating these requirements will help you avoid the following common car-maintenance pitfalls.
Proper Tire Inflation and Rotation
Tires leak naturally and need the occasional check. Figuratively speaking, underinflated tires suck up gasoline. Under- or overinflated tires wear out sooner, and deliver the same emergency maneuver handling as marshmallows. You probably aren't going to check tire pressures monthly, but how about twice a year?
Furthermore, front and rear tires wear differently and should be rotated to even that wear. Your owner's manual will have a recommendation on both pressure and rotation periods.
Here's a news flash: It's much easier to avoid hitting things you can see. Simple as it is, that's the concept behind replacing your windshield wipers before they fossilize into noisy uselessness.
Fall is the ideal wiper replacement time: after the blade-baking summer and before the fall and winter nastiness. Depending on location, wiper replacement may be an annual affair in the Southwest to a biannual chore in northern climes.
There are no more "tune-ups." Valves no longer need adjusting, ignition timing is computer controlled and there are no carburetors to fiddle with. About all that's left of the old tune-up drill are the spark plugs. These are often good for 100,000 miles, so don't change parts just to change parts. Instead, save up for those big 60,000- and 120,000-mile services when the timing belt, spark plug wires and coolant are due for replacement.
"If some is good, more is better" thinking does not apply to octane. Here the rule is to supply whatever octane the engine is rated for and call it done. Higher-than-required octane does not yield more power or mileage, only oil company profits.
Some engines are rated for premium 91 octane fuel but can burn 87 octane regular, thanks to the magic of knock sensors. In that case, run regular gas if puttering around surface streets, and premium fuel if full-throttle driving is part of your daily repertoire.
Oil Change Timing
Oil changes every 3,000 miles used to be required jobs, just like cleaning the accumulated fuzz from record player needles or defrosting freezers. Today, advances in engine design and lubricants make oil changes something to be done when the schedule calls for it, not when granddad says it's time. Some cars call for 5,000-mile change intervals, some up to 15,000-mile stints. Others have a variable timer. Follow the schedule and use the oil called for by the manufacturer.
Tires wear out, but they also time out. The tire industry says tires are toast after five years, but they're selling tires. It all depends on heat, sunlight and ozone conditions. There's little argument from any pundits that after seven years those black donuts are dried and better off holding down a farmer's tarp than carrying your family around. If you're not sure how old your tires are, a tire shop can read the date code stamped into the sidewall.
Dirty Air Filter
Semi-clogged air filters hurt fuel economy for the same reason you don't like to run with a potato in your mouth. The question is, when is your filter dirty? Under a Norman Rockwell schedule of small-town errand running and church duty, an air filter might not see much grit. But grimy city surface streets or just looking at a dirt road on a map are often enough to overwhelm air filters. This one is about conditions. If you go near dirt, the air filter may need changing twice as often as the schedule calls for.
Ignoring Your Brakes
Note to the Wandering Unconscious: If you notice anything different about your brakes — sound, feel or response — they are telling you to visit a mechanic. Now.
Tighten Your Gas Cap
Is the Check Engine light on? Then make sure the gas cap is on tightly before calling the dealer. No joke, this is one of the most common ways of setting off your car's diagnostic system, since a loose gas cap defeats the fuel system's venting arrangement.
The Garage Is for Parking
Let's review. Your house is your most valuable investment. Your car is likely your second most valuable investment. If you're paying all that money, then why are you storing empty cardboard boxes, broken skateboards and plastic holiday wreaths in the garage? Pitch that junk and get the car in the garage!
If it has an engine and moves, Tom Wilson is interested in it. Now a freelance auto writer, Tom tries to ride, drive, fly and float everything he can wiggle into. His credits include a few local racing championships, a decade of magazine editing, three technical engine books and many hundreds of magazine articles. Current interests include new fuels and vehicle technology.
Permanent Link to this Blog Post:
Feb 13, 2008 | Views: 590
As precious metals prices soar, catalytic converters are targets for thieves
By Alex Johnson
updated 3:38 p.m. CT, Tues., Feb. 12, 2008
As prices of precious metals skyrocket, thieves are targeting an obscure component of automotive exhaust systems in lightning thefts that can be accomplished in less than a minute, police and automotive experts say.
The component is the catalytic converter, which has been a mandatory part of exhaust systems since 1975. Police across the country say they have seen a dramatic rise in thefts of the components in recent months.
If you peer inside a used catalytic converter, nothing looks salvageable, much less valuable. But some of the gray gunk in there hides three expensive precious metals.
Catalytic converters have only small traces of the metals — platinum, palladium and rhodium — but there’s enough in them for a thief to resell stolen units for up to $200 apiece. Rhodium is among the most expensive metals on Earth, commanding as much as $6,000 an ounce on the open market.
Scrap dealers “are paying top dollar — platinum, palladium, rhodium inside of them — and they’re getting top dollar” on resale, said Jack Bell of North Shore Towing, which tows vehicles for the Evanston, Ind., police.
“The word spreads real quick about it, what they’re worth,” said Marty Antonelli of Marty’s Welding and Muffler Shop in Pittsburgh. “Everybody is on them now.”
Easy to find = easy to steal
The converters are inviting targets because they’re easy to grab. Mounted on the exterior undercarriage of vehicles, they can be removed in about a minute with any standard metal cutting tool. An enterprising thief in a crowded parking lot or garage can make off with enough converters to clear $2,000 or $3,000 in half an hour.
“These thieves are targeting shopping malls, school parking lots, busy business districts, and they are hitting these places in the daylight,” said Jennifer Krings, a spokeswoman for AAA. “A lot of the large passenger cars — SUVs, trucks and vans — have two, so those are a target.”
Anita Ortez returned to the parking lot after a short shopping run at a supermarket in DeSoto, Texas, to quickly learn that something was wrong with her SUV, a Toyota 4Runner.
“I turned it on, and it made a whoooom noise,” said Ortez, who said she was in the store for only about 20 minutes. “I jumped back thinking it was going to explode.”
She had the right idea. Besides rendering your exhaust system inoperable, a missing catalytic converter can be dangerous.
“On some of these cars, if that pipe gets cut off near some wiring or a fuel line or a gas tank —which in some cases are not shielded — there is a possibility of a fire and/or explosion,” said David Eames of Pittman Automotive Service in Seattle.
Easy pickings in crowded lots
Ortez is just one of hundreds of victims in small-town DeSoto, population 37,000.
“This is a new thing for us,” DeSoto police Lt. Mike Sullivan said. “I think it’s starting to be a trend throughout the United States.”
The 4Runner is the most common target of thieves, said the Los Angeles Police Department, which issued a public warning about what it called a “new disturbing trend.” The 4Runner sits high off the ground, and its converter is attached with four bolts that are easily sawed off, making it simple for thieves to duck underneath, do their business and scoot.
The Kia Sportage, with a similar profile, is also popular, said Ron Baker, general manager of Spitzer Motors in Cleveland.
“They’re the easiest to get under and the easiest to remove,” Baker said.
But any vehicle made after 1975 is a potential target, said Kyle Evans, a spokesman for the Murfreesboro, Tenn., police.
“This is certainly something that could happen in someone’s driveway,” Evans said.
More commonly, it happens in parking lots and garages, where dozens of vehicles are lined up ripe for the plucking.
“I’ve heard of people going into apartment complexes in the middle of the night — just taking a handsaw, getting up under someone’s car and sawing it off,” said Tony Murtell, manager of U-Pull & Pay in Philadelphia. “They collect a few of them and take off somewhere to be recycled.”
“It’s happening everywhere now, you know,” said Trina Stutt, part-owner of Stutt’s Transmission Service in Pulaski, Tenn. “I am shocked at how fast this is growing.”
A hard crime to uncover
The Institute of Scrap Recycling Industries, a national trade association, said there were no national statistics on the pilferage of catalytic converters, which are generally lumped in with other auto-theft incidents. But it said it had seen a sharp rise in reports of thefts, and it urged scrap dealers to be suspicious of anyone walking in with a converter.
As it happens, there’s not much a recycler can do. Catalytic converters don’t have serial numbers, so they can’t be tracked, making a stolen converter all but impossible for a scrap dealer to identify.
“It’s very hard to trace that,” said Sgt. Chuck Zeissler of the Madison County, Ala., Sheriff’s Office. “You would have to go back and see what type of actual catalytic converter was placed on that vehicle and try and trace it back to the vehicle it was stolen off of.”
While police say drug addicts are most frequently found responsible for the thefts, the treasure in the exhaust system is rich enough that it can lure some surprising culprits.
In December, a former member of the Board of Aldermen in Arlington, Tenn., was arrested after Shelby County sheriff’s deputies found him tucked under a Buick station wagon. The man, co-owner of an auto parts store in town, was trying to steal catalytic converters from vehicles in the Tennessee Highway Patrol’s own impound lot, deputies said.
If catalytic converters are so valuable that people will actually try to steal them from the cops, what does that mean for everyday car owners?
“Unless you can garage your vehicle 24 hours a day, anyone can climb under your car and cut off the catalytic converter,” said Sgt. Bob Jagoe of the Baltimore County, Md., police auto theft team.
Harrisburg, Pa., police Chief Charles Kellar acknowledged: “There is not a lot you can do. You have to go to sleep eventually.”
NBC affiliates KHAS of Hastings, Neb.; KING of Seattle; KSND of San Diego; KXAN of Austin, Texas; WAFF of Huntsville, Ala.; WCAU of Philadelphia; WGAL of Lancaster, Pa.; WMAQ of Chicago; WPXI of Pittsburgh; and WSMV of Nashville, Tenn., contributed to this report.
Permanent Link to this Blog Post:
Feb 13, 2008 | Views: 385
With new rules and revised CAFE standards, the days of powerful, fuel-thirsty cars may soon be long gone.
By Lawrence Ulrich
There's only one thing to say about a Corvette that can top 200 mph, or a Cadillac sedan that makes the muscle cars of the '60s seem like a bunch of wimps: Enjoy it while it lasts. This golden age of horsepower may be coming to an end, at least in the gas-guzzling manner to which we've become accustomed.
An initial stroll through the recent auto show in Detroit might convince you that nothing has changed. GM was touting the Chevrolet Corvette ZR1, a 620-horsepower 200-mph monster that's simply the fastest production car in GM's history. Next door at the Cadillac display, the CTS-V sport sedan was flexing its 550-horsepower muscles.
Even squeaky-clean Toyota — ignoring recent environmental backlash over guzzlers such as its Tundra pickup — offered the 500-plus horsepower Lexus LF-A roadster. This Tokyo demon, heading to showrooms next year, should also break the 200-mph barrier.
These hard-drinking machines might convince you that automakers are still partying like it's 1999, when gas cost around $1.20 a gallon. But just under the Detroit show's surface, something else was brewing. And it wasn't high-octane unleaded.
New rules will force the car kings to shift their focus. Revised CAFE standards require automakers to raise the average mileage of their car and truck fleets to 35 mpg by 2020. Proposed pollution standards in the U.S. and Europe may force even more dramatic increases. And if California wins the right in court to regulate global-warming emissions, you might just kiss your super-powered car goodbye — at least those that rely solely on gasoline.
In Europe the government and greens are proposing carbon-dioxide targets so strict that, if passed, not a single gas-burning model on sale today — including hybrids like the Toyota Prius — would pass muster.
The situation recalls the end of the first muscle-car era, which left Boomers shedding tears for their beloved GTOs, Shelby Mustangs and Hemi 'Cudas. In the early '70s, the first-ever tailpipe standards were a critical step toward cleaning up smoggy cities, but they also helped strangle the muscle car. It took two decades and a serious dose of engineering Viagra before cars recovered their potency.
The unfortunate side effect is that the average car today slurps more gasoline than it did 20 years ago. Cars became vastly quicker and more powerful. And of course, Americans switched en masse to SUVs.
For anyone — including myself — with a need for speed, the longtime cliché is that they have gasoline in their veins. But a century's worth of shooting-up has put us where we are now, trying to kick a national addiction to oil.
As a result, the Motown show also featured enough green cars to stock a Sierra Club parking lot. On display was Toyota's hybrid A-BAT concept pickup and General Motors' latest hybrids, including a plug-in Saturn Vue SUV that's coming in 2010. Mercedes, VW and Honda hyped their high-mileage diesel cars that can even meet California's tough pollution rules.
Tellingly, the show also saw carmakers backing away from the thrilling-but-thirsty V8 engine that's as much a part of American culture as rock and roll. GM deep-sixed a $300 million project to develop a new V8, with Vice Chairman Bob Lutz saying that new fuel-economy rules directly sparked the move. Ford plans to drop V8s from several models, replacing them with turbocharged V6 and four-cylinder engines that go farther on a gallon.
If all that doesn't have you seeing the writing on the wall, you'd better schedule an eye exam. Still, if there's a difference between today's golden age of performance and the '60s original, it's the ability of technology to ride to the rescue.
At the Detroit show, I asked Lutz — the GM car czar who famously inspired the Dodge Viper while at Chrysler — whether this was the last hurrah for horsepower. And while Lutz has become a vocal supporter of hybrids, electric cars and alternative fuels, he said that cars like the Corvette would still find their niche. "At the height of the vegetarian craze, the grocery stores are still selling New York steaks," Lutz said.
Lutz's point was that some people will always find a way to go fast. But the future does look bleak for speed machines powered by gasoline. While it's too early to predict which fuels will be winners and losers, it's certain that there will be multiple players. Half the new cars sold in Europe run on clean diesel, and that impressive technology is finally on its way here.
Mercedes showed off a sumptuous diesel-hybrid S-Class sedan that delivers 44 mpg. Audi will almost certainly bring us a diesel version of its spectacular R8 sports car, combining 500 horsepower with a respectable 24 mpg.
Energy experts agree that the transition to alternative fuels will take decades. There will still be gas pumps 30 and 40 years from now. Car lovers will still be able to cruise their classic internal combustion machines, whether it's a '32 Ford Deuce Coupe, a '57 Chevy or today's hottest rides.
But the days of guzzling gas as quickly as you can hose it into your tank are over. Looking back 30 years from now, we'll know it was not only the right move, but the only move.
Lawrence Ulrich lives in Brooklyn and writes about cars. His reviews and features appear regularly in The New York Times, Popular Science, Men's Vogue and Travel + Leisure Golf.
Permanent Link to this Blog Post:
Feb 9, 2008 | Views: 271
Americans want more fuel-efficient vehicles and more hybrid choices.
Facing soaring gasoline prices, American car buyers definitely want more fuel-efficient vehicles but might not be ready to give up size, range, performance, or other amenities to achieve that goal, a new Consumer Reports poll has found.
The Auto Pulse survey, conducted by the Consumer Reports National Research Center, polled a nationally representative sample of 1,804 people on issues concerning gas prices and trade-offs they might be considering.
The survey, taken in late April, came just three weeks before the national average gas price spiked to a record $3.22 per gallon of regular unleaded gas on May 21. That is 32.6 cents more than at the corresponding time last year and nearly as high, after adjusting for inflation, as the all-time record set in March 1981.
Even before the surge, gas prices were already on the mind of the approximately one in five respondents who planned to purchase a new car during the coming year.
Among that group, nearly seven in 10 said they would seek a vehicle with better fuel efficiency than their current model. Nearly half would consider a diesel, hybrid or flex-fuel vehicle (the latter can run on gasoline, E85, or any gasoline-ethanol blend), whereas only one in nine primarily drive such cars now.
Car buyers were wary, though, when asked what they would be willing to sacrifice to achieve more miles per gallon. A bare majority (52 percent) said they would give up vehicle size or capacity. Somewhat fewer would trade off range (49 percent), performance (48 percent), or amenities (44 percent).
Forty-two percent said they would be willing to pay more for a fuel-efficient car, and just 31 percent would pay more for special fuel.
The answers reflect the challenge consumers face in a market filled with large, gas-guzzling vehicles where buyers seeking to improve fuel efficiency often must pay extra—typically about $3,000 to $4,000 more for a hybrid model compared with a similar conventional vehicle. Selection is also limited. In fact, survey respondents in the market for a car but who aren't considering a hybrid said selection and price were the main reasons.
Consumers Union, the nonprofit publisher of Consumer Reports, supports raising automobile fuel-efficiency standards in a manner that makes the auto industry minimize trade-offs between higher mpg and other consumer preferences. "With a meaningful increase in fuel efficiency, consumers can reduce their gasoline expenditures substantially," said Gene Kimmelman, CU's vice president for federal and international affairs. CU recently made public a statement on this issue.
Buyers can maximize fuel economy by considering the most fuel-efficient vehicle in a preferred class. Savings can be significant: midsized sport-utility vehicles, for example, can differ by more than 50 percent in fuel efficiency. (See the best and worst in mpg, available to subscribers.)
Indeed, the survey revealed a desire to be environmentally responsible. Among all car-owning respondents, about 60 percent said they were either concerned or very concerned about the environment, vs. only 6 percent who said they were not concerned. Nearly three-quarters said they would drive slower, or even drive less, to conserve gas because of high gasoline prices.
But consumers also said gas prices would have to go even higher before they would make major changes in behavior. On average, car owners said prices would have to rise to $3.90 per gallon before they would "drastically" reduce their driving. (We believe gasoline demand to be relatively inelastic, meaning that because of work and other commitments, people have to keep buying gas even if the price soars, though they might look for other savings to offset that burden.)
The survey found that drivers in the West and those with incomes of $75,000 or more would resist gas prices longer. For them, it would take a price of $4.50 per gallon to spur dramatic change. Older people and those with incomes under $40,000 were more vulnerable. The majority said they would make drastic cutbacks in driving at an average price of only $3.50.
The Consumer Reports poll was conducted via telephone from April 26 to 30, 2007. Participants had to live in a household that owned at least one vehicle.
To learn how to save at the pump, go to Consumer Reports' complete guide to fuel economy.
Permanent Link to this Blog Post:
Feb 9, 2008 | Views: 270
Consumer Reports' E85 tests show that you’ll get cleaner emissions but poorer fuel economy—that is if you can find E85.
The Bush administration has been pushing ethanol as a renewable, homegrown alternative to gasoline. Now, the auto industry is abuzz with the promise of its flexible-fuel vehicles (FFVs), which are designed to run on either gasoline or the blend of 85 percent ethanol and 15 percent gasoline called E85.
GM's advertising says, "Energy independence? The answer may be growing in our own backyard," and has coined the slogan "Live green, go yellow," referring to the corn from which most U.S. ethanol is made. DaimlerChrysler, Ford, and GM have said that they plan to double production of FFVs and other biofuel vehicles to 2 million by 2010.
A recent Harris Interactive study of vehicle owners found that more than half were interested in purchasing an FFV, mostly for reduced dependency on petroleum and improved fuel economy.
But after putting a 2007 Chevrolet Tahoe FFV through an array of fuel economy, acceleration, and emissions tests, and interviewing more than 50 experts on ethanol fuel, CR determined that E85 will cost consumers more money than gasoline and that there are concerns about whether the government's support of FFVs is really helping the U.S. achieve energy independence. Among our findings:
The fuel economy of the Tahoe dropped 27 percent when running on E85 compared with gasoline, from an already low 14 mpg overall to 10 mpg (rounded to the nearest mpg). This is the lowest fuel mileage we've gotten from any vehicle in recent years.
With the retail pump price of E85 averaging $2.91 per gallon in August, according to the Oil Price Information Service, which tracks petroleum and other fuel prices, a 27 percent fuel-economy penalty means drivers would have paid an average of $3.99 for the energy equivalent of a gallon of gasoline.
When we calculated the Tahoe's driving range, we found that it decreased to about 300 miles on a full tank of E85 compared with about 440 on gasoline. So you have to fill up more often with E85.
The majority of FFVs are large vehicles like the Tahoe that get relatively poor fuel economy even on gasoline. So they will cost you a lot at the pump, no matter which fuel you use.
Because E85 is primarily sold in the upper Midwest, most drivers in the country have no access to the fuel, even if they want it.
The FFV surge is being motivated by generous fuel-economy credits that auto-makers get for every FFV they build, even if it never runs on E85. This allows them to pump out more gas-guzzling large SUVs and pickups, which is resulting in the consumption of many times more gallons of gasoline than E85 now replaces.
We put the Tahoe through our full series of fuel-economy and acceleration tests while running on each fuel (see our test results). When running on E85 there was no significant change in acceleration. Fuel economy, however, dropped across the board. In highway driving, gas mileage decreased from 21 to 15 mpg; in city driving, it dropped from 9 to 7 mpg.
You could expect a similar decrease in gas mileage in any current FFV. That's because ethanol has a lower energy content than gasoline: 75,670 British thermal units per gallon instead of 115,400, according to the National Highway Traffic Safety Administration. So you have to burn more fuel to generate the same amount of energy. In addition, FFV engines are designed to run more efficiently on gasoline. E85 fuel economy could approach that of gasoline if manufacturers optimized engines for that fuel.
When we took our Tahoe to a state-certified emissions-test facility in Connecticut and had a standard emissions test performed, we found a significant decrease in smog-forming oxides of nitrogen when using E85. Ethanol, however, emits acetaldehyde, a probable carcinogen and something that standard emissions-testing equipment is not designed to measure. But that might be a relatively minor evil. "Acetaldehyde is bad," says James Cannon, president of Energy Futures, an alternative-transportation publication, "but not nearly as bad as some of the emissions from gasoline."
FOR MORE INFORMATION
Visit our Guide to Stretching Your Fuel Dollars for gas-saving tips, a list of the most fuel-efficient cars, and a rundown of other alternative fuels.
Test results: E85 vs. gasoline
This chart shows how our 2007 Chevrolet Tahoe performed while running on E85 and gasoline in three fuel-economy tests and overall, in four acceleration tests, and in three emissions tests for gasoline vehicles.
Fuel economy, mpg
City 7 9
Highway 15 21
150-mile trip 13 18
Overall 10 14
0-30 mph, sec. 3.4 3.5
0-60 mph, sec. 8.9 9.1
45-65 mph, sec. 5.7 5.8
Quarter-mile, sec./mph 16.8/84.6 16.9/84.5
Emissions, parts per million
Nitrogen oxide 1 9
Hydrocarbons 1 1
Carbon monoxide 0 0
*Blended with 10 percent ethanol.
Permanent Link to this Blog Post:
Jan 11, 2008 | Views: 321
Posted: Friday, January 11 at 07:00 am CT by Bob Sullivan
You know all about rental car gas roulette: Either pay in advance for gas you'll never use, or bet that you'll have enough time to fill up the tank before you drop off the car. You might even know that some companies insist on a receipt as proof you've filled the tank if you take the second option.
But now, there’s a third possibility: Pay up regardless. Some rental car locations are charging an extra fee to consumers who return their cars with a full tank. This "top-off fee" is being charged even if consumers present evidence they have that the tank is full. In other words, you're dinged if you do and dinged if you don't.
"I couldn't believe it," said Steven Dentali, who was charged the fee in October after renting a car from Dollar Rent A Car in Manchester, N.H. "I said to them, 'You're telling me I'm penalized no matter what? There's no way around me having to pay something?’"
That's precisely what the rental car agreement said. Here's the exact wording he received in his e-mail confirmation:
"Gasoline Policy: Vehicle must be returned with full tank or local refueling charge applies. If car is returned full a $2.00 top off fee will be applied."
When Dentali started asking questions, he said he was told that the fee was being test-marketed by Dollar at select locations in New England.
Dentali demanded a refund and was told he had to talk with a manager, who in turn told him to call Dollar's corporate offices. He did, and said he was promised a refund. But the $2 never arrived.
Dentali, who wins the Red Tape Perseverance Award for this month, made another phone call and sent an e-mail to Dollar. Finally, his complaint landed on the right desk. On Dec. 26, he got a late Christmas gift via e-mail from the rental card company, albeit a measly one:
"I am unable to advise you as to whether or not this is a permanent policy or what the purpose is for it, but in an effort to regain your confidence in Dollar Rent A Car, I have requested a refund check in the amount of $2.16 to be forwarded to you from our accounting office,” wrote an employee of Dollar Thrifty Automotive Group, Dollar Rent A Car’s parent company. “Please allow up to three weeks for processing and mailing."
'Not a widespread practice'Chris Payne, a spokesman for Dollar Thrifty, said the location that assessed the "top-off" fee was a locally owned franchise, which is allowed to set its own policies. Corporate-owned Dollar locations don't charge the fee, he said.
"Franchisees are given some discretion when it comes to the operation of their own facilities, and occasionally they will have different fees,” he said. “This 'top-off' fee appears to be something they have enacted. I can tell you that it is not a widespread practice among Dollar locations."
Rental car companies have been playing games with gasoline prices for years. In fact the games are so common that we don't even question them any more. Why, for example, does the price of gas double between the time you rent the car (and are offered the chance to pre-pay for gas) and the time you return the car?
Fortunately, rental car firms don't get away with everything. Just a few months ago, Budget Rent-A-Car got got the attention of the Federal Trade Commission after the rental company instituted a policy requiring receipts from customers who returned their cars full of gas, and dinging those who returned without receipts with $5 to $10 fees that the FTC said were poorly disclosed.
The top-off fee represents a new zenith in fee creativity. For Dentali, it was just too much to bear. Even though he figures all those wasted lunch hours, faxes, and phone calls ultimately cost him about $200 to get his $2.16 refund, he thinks the fight was worth it.
"My parents went through the Depression and taught me what a buck is worth," he said. "And I have a strong sense of what’s right and what's wrong, a sense of fairness. …You catch a company sneaking a small dollar amount like that on your bill, and if you don’t challenge it, they’ll keep getting away with it.”
Permanent Link to this Blog Post:
Jan 11, 2008 | Views: 248
Americans bought more Toyota Prius hybrid gas-electric hatchbacks last year than Ford Explorer sport-utility vehicles, the top-selling SUV for more than a decade.
The change of fortune, buried in U.S. vehicle-sales data for 2007 and unthinkable a few years ago, will find an echo at this year's Detroit auto show, which starts Sunday.
While Americans' love for powerful gas guzzlers remains strong, a slowing economy and high gasoline prices are forcing buyers to lower their sights.
Pressure on manufacturers to offer more-fuel-efficient vehicles increased last month with a law requiring them to improve vehicles' average fuel efficiency by 40% over the next 12 years.
While Prius sales soared 69% last year, demand for the Explorer was less than a third of its 2000 peak.
Many Americans are replacing truck-based SUVs with crossover vehicles, which are built like cars, thus offering a smoother ride and better fuel efficiency.
Toyota Motor (TM, news, msgs) began selling the Prius in North America in 2000, the same year Explorer sales reached a record 445,000 units for Ford Motor (F, news, msgs).
"It's a combination of an ascending star and a falling star," says George Magliano, director of automotive industry analysis at consultant Global Insight.
An icon faces big challenges
The Explorer led the SUV charge in the 1990s to replace the minivan as the family car. Baby boomers craving space, a protective cocoon high above the ground and the power of a V-8 engine have driven about 6 million Explorers out of showrooms over the past 18 years.
But filling an Explorer fuel tank now costs $70 or more, up from $30 five years ago. The traditional SUV "is a dead market," Magliano says.
Toyota has pushed Prius sales hard in the past year, but in one respect the car has become like most other North America vehicles -- its sales have been buoyed by special promotions.
In Detroit, Ford will unveil a crossover vehicle, Explorer America -- a signal that the traditional SUV's days are numbered. The Explorer America will come with a fuel-efficient engine, and the eight-cylinder version will be dropped.
Toyota, Honda Motor (HMC, news, msgs), Subaru (SBUOF, news, msgs), Saab (SBBRF, news, msgs) and BMW (BAMXF, news, msgs) are among other carmakers showing off new crossover models at the auto show.
Ford will also be exhibiting a four-door version of its Verve hatchback.
Permanent Link to this Blog Post:
Jan 10, 2008 | Views: 258
Cars make us irrational. We call them our babies and lovingly wax them every Saturday -- or we turn up the radio to drown out the sound of a dragging muffler. Either mindset will cost you money, sometimes a lot of it.
Walking the line between obsession and neglect means you never spend a nickel without a good reason -- and good reasons can include spending money on something that’s not broken.
Here, then, are 20 ways you waste money on your car.
Premium gas instead of regular. Buy the cheapest gasoline that doesn’t make your car engine knock. All octane does is prevent knock; a grade higher than the maker of your car recommends is not a “treat.”
3,000-mile oil changes. Manufacturers typically suggest 5,000 miles, 7,500 miles or even longer intervals between oil changes (many car markers now include oil-life monitors that tell you when the oil is dirty -- sometimes as long as 15,000 miles.) There may be two recommendations for oil-change intervals: one for normal driving and one for hard use. If you live in a cold climate, take mostly very short trips, tow a trailer or have a high-revving, high-performance engine, use the more aggressive schedule. If you seldom drive your car, go by the calendar rather than your odometer. Twice a year changes are the minimum.
Taking false economies. Better to replace a timing belt on the manufacturer’s schedule than to have it break somewhere in western Nebraska. Better to pop for snow tires than to ride that low-profile rubber right into a tree.
Using the dealer’s maintenance schedule instead of the factory’s. Of course he thinks you should have a major tune-up every 30,000 miles. Most of the tasks that we generally think of under the heading of “tune-up” are now handled electronically. Stick to the manufacturer’s schedule unless your car is not running well. If your engine doesn't "miss" -- skip a beat or make other odd noises -- don’t change the spark plugs or wires until the manufacturer says so.
Using a dealer for major services. Independent shops almost always will do the same work much cheaper. Call around, owner’s manual in hand, to find out, mindful that the quality of the work is more of a question mark. Some dealers may tell you using outside garages violates the car’s warranty. This is a lie.
Using a dealer for oil changes. Dealers sometimes run dirt-cheap specials, but otherwise you’ll usually find changes cheaper elsewhere. If you’re using an independent shop for the first time, you might inconspicuously mark your old oil filter to make sure it has indeed been changed. And don’t let them talk you into new wiper blades, new air filters or high-priced synthetic oil, unless your car is one of the few high-performance machines built for it.
Not replacing your air filter and wiper blades yourself. Buy them on sale at a discount auto-parts store rather than having a garage or dealer replace them. Replacement is simple for either part, a 5-minute job. A good schedule for new air filters is every other oil change in a dusty climate; elsewhere at least once every 20,000 miles. Treat yourself to new wipers (it’s easiest to buy the whole blade, not the refill) once a year.
Going to any old repair shop. At the very least, make sure it’s ASE-certified (a good housekeeping seal of approval from the nonprofit National Institute for Automotive Service Excellence). From there, look for a well-kept shop with someone who’s willing to answer all your questions. Estimates must include a provision that no extra work will be done without your approval. Drive your car to make sure the problem is fixed before you pay. Pay with a credit card in case there’s a dispute later. Be courteous and pay attention. A good mechanic is hard to find.
Changing your antifreeze every winter. Change it only when a hydrometer suggests it will no longer withstand temperatures 30 degrees below the coldest your area sees in winter. Your dealer or oil-change shop should be happy to check it for free. Every two years is about right. But you also should keep your cooling system happy by running the air conditioner every few weeks in winter to keep it lubricated, checking for puddles underneath the car and replacing belts and hoses before they dry and crack.
Replacing tires when you should be replacing shocks. If your tires are wearing unevenly or peculiarly, your car may be out of alignment or your shocks or struts worn out.
Letting a brake squeal turn into a brake job. Squeal doesn’t necessarily mean you need new rotors or pads; mostly, it’s just annoying. Your first check -- you can probably see your front brakes through the wheels on your car -- is to look at the thickness of the pads. Pads thicker than a quarter-inch are probably fine. If your brakes emit a constant, high-pitched whine and the pads are thinner than a quarter-inch, replace them. If your car shimmies or you feel grinding through the pedal, then your brake rotors need to be turned or replaced.
Not complaining when your warranty claim is rejected. Check Alldata and the National Highway Transportation Safety Administration (NHTSA) to see if a technical service bulletin (TSB) has been issued about the component in question. Manufacturers often will repair known defects outside the warranty period (sometimes called a secret warranty). It helps if you’ve done your homework and haven’t been a jerk.
Not keeping records. A logbook of every repair done to your car can help you decide if something’s seriously out of whack. Didn’t I just buy new brake pads? With a log and an envelope stuffed with receipts, you’ll know who did the work and when, and whether or not there’s a warranty on the repair. And a service logbook helps at resale time, too.
Buying an extended warranty. Most manufacturers allow you to wait until just before the regular warranty expires to decide. By then you should know whether your car is troublesome enough to require the extended warranty. Most of them aren’t worth the price.
Overinsuring. Never skimp on liability, but why buy collision and comprehensive insurance on a junker you can probably afford to replace? Add your deductible to your yearly bill for collision and comprehensive coverage, then compare that total with the wholesale value of the car. If it’s more than half, reconsider.
Assuming the problem is major. If your car is overheating but you don’t see a busted hose or lots of steam, it might be the $5 thermostat, not your radiator. Or it may be that ominous “check engine” light itself that’s failed, not your alternator.
Not changing the fuel filter. Have it replaced as a part of your maintenance -- every two years or according to the manufacturer’s schedule -- rather than when it becomes clogged with grit, leaving you at the mercy of the nearest garage.
Not knowing how to change a tire. Have you even looked at your spare? Make sure it’s up to snuff and all the parts of your jack are there. Changing a flat yourself is not only cheaper, it’s faster, too.
Not keeping your tires properly inflated. Check them once a month; otherwise, you’re wasting gasoline, risking a blowout and wearing them out more quickly.
Car washes. Ten bucks for long lines and gray water? Nothing shows you care like doing it yourself.
Permanent Link to this Blog Post:
Jan 10, 2008 | Views: 240
If you're constantly broke and can't figure out why, the answer may be sitting in your driveway.
Americans are spending more on their vehicles than ever before -- more than $8,000 a year on average -- and it's driving some to the breaking point.
Credit counselor Bill Thompson of Jacksonville, Fla., estimates that one out of every four clients his agency sees has overspent -- sometimes dramatically -- on a car.
"They may be spending 15% to 20% of their (take-home) pay on just the car payment," said Thompson, who supervises credit counseling for the nonprofit Family Foundations, "and that doesn't include insurance, gas, maintenance and all the other costs of owning a vehicle."
And sometimes there's more than one whopping payment. Sandra McGeary, a counselor at Consumer Credit Counseling Services of Western Pennsylvania, says she regularly sees middle-class families struggling with two payments in the $400 to $500 range. The burdens are so big that it doesn't take a major disaster, like a job loss, to send them over the edge.
"This fall they started coming in saying, 'We were doing so well. We don't know what happened,' " McGeary said. "I'll ask, 'Where did you cut back in your budget when gas prices went up?' and they'll usually say, 'What budget?' . . . A lot of times they don't know how much they can really afford, and they didn't cut back elsewhere" when their transportation expenses rose.
Once they've bought, they're stuck.
With most other areas of the budget, you can find ways to trim. You can eat out less and shop more carefully to reduce your food bill. You can lower utility bills by adjusting the thermostat. You can cut your entertainment budget by canceling your cable service and borrowing movies from a library. You can even reduce your shelter costs by taking in a roommate or moving to cheaper digs.
Once you've committed to a car payment, though, your options are few, particularly if your loan is greater than the car's value. Whether you drive it or not, you've got to make the payments, and you've got to insure it.
We're prolonging the agony
The signs of vehicular overspending are everywhere:
Average transportation spending grew more than 12% between 1999 and 2005, according to the U.S. Bureau of Labor Statistics, at a time when median income growth was basically flat. Even when adjusted for inflation, we're spending more: 8.3% more in 2005 than in 1995, with people in the lowest and highest income brackets accelerating their spending the most.
More than 80% of car loans are for terms longer than four years (which, a couple of decades ago, was considered a long loan). The average loan term has grown from just under four years and seven months in 1990 to over five years and four months in 2006. Longer loan terms mean that people build equity in their car more slowly, which in turn means that borrowers will be "upside down" on their vehicles -- owing more than they're worth -- for three years or more on the typical purchase.
One out of four -- 25.6% -- of cars that are financed include debt rolled over from a previous vehicle, according to vehicle research site Edmunds.com. By the end of last year, the average amount of negative equity in these deals was more than $4,000.
Rolling debt from one car to another is, in case you didn't know, a terrible idea. You'll pay higher interest rates because so much of what you owe isn't secured by the car itself.
And being "upside down" can really leave you up a creek if the car is totaled or stolen. You can protect yourself somewhat with so-called gap insurance, which covers the difference between what you owe and what you get from your insurer, but that's another hit on your wallet.
What's going wrong
So why are so many people messing up so badly on such a basic purchase? There are plenty of reasons, including:
Viewing cars as a need rather than a want. Transportation is, indeed, a real need. We have to get to the grocery store and to work. But many of us have plenty of options, from our own feet to public transportation to car pools to shared car arrangements (read "Should you share a car?" for more details).
Owning a car does get pretty close to a need in rural areas without public transport or when your job doesn't allow for car-pooling. But you never "need" a new car. That's a luxury, not a need. There are plenty of safe, reliable, gently used cars on the market.
There's also no requirement that you get rid of your current car once it's hit a certain mileage milestone. Today's cars are better built and more dependable than ever, which means that unless you've got a real lemon you could keep driving it past 200,000 or even 300,000 miles.
Treating cars as a status symbol. You can't watch television for long without being bombarded by car commercials, and many of us have absorbed the idea that we are what we drive. It's complete BS, of course, but some people have been so brainwashed that they literally drive themselves into bankruptcy.
Failing to consider the overall costs. When buying or leasing a car, many people consider nothing more than the monthly payment. They're not seeing the whole picture -- far from it.
Once you factor in insurance, gas, maintenance, repairs, taxes, depreciation and other costs, most cars will set you back at least twice the initial purchase price over five years.
(Depreciation, by the way, is just a fancy word for the steady, day-by-day drop in the value of your car. You don't pay for it as it happens, but you do pay eventually, when you go to trade in your car for another.)
The auto association estimates the typical passenger vehicle costs 52.2 cents a mile to operate, or $7,834 a year assuming 15,000 miles driven annually. The estimate is based on fuel prices of $2.40 a gallon and finance charges of $716 a year, based on a five-year loan at 6%. Your costs may well be higher; for example, bad credit can send your finance costs soaring. (Edmunds.com said the average car loan last year carried a 7.38% interest rate.)
Assuming they can afford a payment simply because a lender approved it. Thirty years ago, there was some truth in the idea that a lender wouldn't let you get in over your head. No longer. Not only are lending standards much looser, but many auto finance companies make loans knowing that a substantial portion of their borrowers will miss payments or default altogether. Lenders count on high interest rates to cover their risks. In short, they don't really care if you can afford the payment or not -- they're gambling on making enough from the loan that they'll profit either way.
Acting like a lamb before the slaughter in car dealerships. If ever a transaction were designed to soak the consumer, it's the typical car purchase. Car dealerships are experts at getting people to pay too much for cars or financing, and often both. The savvy consumer does plenty of research, gets detailed car price reports from Consumer Reports, MSN Autos or other sources, knows her credit scores and arranges financing in advance -- in other words, not at the dealership. She also knows the tricks of the car sales trade and how to negotiate a good bargain. As any car salesperson will tell you, this describes a pretty small slice of the folks who actually buy cars. Many people wander onto the lot with little information, fall for the salesperson's assurances that they're about to miss out on a great deal, have no idea what interest rates they should qualify for and accept whatever payment the dealership gives them.
What to do?
Options? You've got only a few:
You may be able to sell the car if you have some equity in it or can come up with extra cash to pay off the loan -- or if you can persuade the lender to let you pay off the remaining debt over time. Read "How to sell a car you don't own" for details.
You may be able to refinance if you bought the car new, made payments for a few years and have a lender who is willing to extend your loan term. For used cars, you'll need to have some equity in order to be able to refinance.
You can let the lender repossess the car. This option should be avoided if at all possible because repossession, voluntary or otherwise, trashes your credit and usually leaves you with substantial debt besides. You'll still owe the difference between your loan balance and whatever the car brings at auction, plus substantial repossession and auction fees.
You can drive out of the loan. This is usually the best solution for a too-expensive, upside-down car. Trim other areas of your budget so you can make the payments and keep driving the car until it's paid off . . . then keep driving it until you've saved up enough to buy another car or at least make a substantial down payment.
You also can try to reduce your transportation costs by driving less, raising your insurance deductibles and maintaining your car properly to avoid big repair bills.
Next time, think smart
Use a bad car ownership experience as motivation for change. The next time you're in the market for a car:
Rethink the whole thing. Isn't there something else on which you'd rather spend $8,000 a year? With that as your motivator, you may be able to find a way to live without a car, or with one less car if yours is a multiple-vehicle family, or to keep the car you have going for a little longer. Maybe not, but it's worth thinking about the options before you commit yourself to another payment.
Figure out what you can actually afford. Thompson, the Jacksonville credit counselor, says total car costs -- including car payments, fuel, insurance and maintenance -- shouldn't top 20% of net (after-tax) income. McGeary's Pennsylvania agency uses a slightly different rule of thumb: Total car costs shouldn't exceed 19% of gross (pretax) income.
These are only guidelines. If you don't have other large expenses, you might get away with higher car costs. If you've got a big mortgage or child-care bills to pay, you might need to spend less.
I like the overall budget guidelines in Elizabeth Warren's book "All Your Worth." The Harvard University professor and bankruptcy researcher recommends that all your basic expenses -- shelter, food, insurance, child care, transportation and minimum loan payments -- total no more than 50% of your after-tax income. That ensures you'll have enough left over for variable expenses like clothing and vacations (30% of after-tax pay) as well as giving you room to pay off debt (20%) and save adequately for retirement.
You might not be anywhere close to these guidelines, but they're something to shoot for as you get your finances in order. In the meantime, you can simply double your projected car payment and see how well that fits into your budget. If it doesn't, look for a cheaper car.
If you must borrow, stick to loans of 48 months or less. If the only way you can afford a car is with a longer loan -- or worse yet, by leasing -- then you really can't afford the car at all. A loan of four years or less will help keep you from overspending and allow you to build equity in the vehicle faster.
Own your cars longer. This one move can save you literally hundreds of thousands of dollars over your lifetime. Keep your cars for at least a year or two, if not longer, after you've paid them off. Set up an automatic savings plan so that the money that used to go for payments goes instead into a high-rate savings account (ING Direct and EmigrantDirect.com are two options). Use the money to help pay for your next car. The longer you save, the less you'll have to finance.
Try to pay cash for your vehicles. In general, you don't want to borrow money to pay for assets that lose value, like cars, if you can possibly avoid it. You might not be able to pay cash for your next vehicle, but you certainly could for the one after that. Finance it for four years or less, keep it for another four years after you've paid it off, bank the payments and voila: You have cash for your next car.
Permanent Link to this Blog Post:
Jan 10, 2008 | Views: 312
10 things you should know about gas prices
If you believe the experts, the oil companies aren't lying to you; it really is supply and demand. And no, it isn't price gouging by any legal definition; it's just the normal profit taking.
1. Are gas prices truly high, and will they stay that way?
Gas prices have dipped slightly since hitting a record national average high of $3.227 on May 24. When adjusted for inflation, the 1981 price was a bit higher, at $3.29, according to the Energy Information Administration, an independent research arm of the U.S. Department of Energy. Factor in gains in average fuel efficiency -- 21 mpg today compared with 15 mpg to 16 mpg in 1981 -- and we're spending less on gasoline today: less than 3% of gross domestic product compared with 4.6% in 1981.
As U.S. refineries regain operating capacity in the days to come, the domestic supply should improve and cause prices to level off. Any disruption in operations -- from a hurricane or fire, for example -- could cause another bottleneck, however. And analysts don't expect any significant price drop until refinery capacity is added, in 2009 at the earliest.
"We would expect prices to be somewhere between $2.50 and $3.25 for the next several months," said Doug MacIntyre, a senior oil market analyst with the EIA. "Right now it's not in our forecast to see a return close to $2 a gallon anytime soon."
2. Is there something consumers can do now to immediately drive prices down?
On this one the experts generally agree: No.
One-day or one-month boycotts don't reduce the overall demand for gas and so don't affect price. (Economist Steven D. Levitt, author of "Freakonomics," called the recurring one-day boycott idea "a new low in economic thinking.")
As with weight loss, there is no quick fix, and the only answer is predictably not sexy: Consume less. Choose fuel efficiency, car pools, public transportation, your legs. With time, an across-the-board, consistent drop in demand should equilibrate prices.
An increasing number of retailers are offering separate prices for cash and credit. With a 2.5% credit card fee, stations are now paying upward of 8 cents a gallon to the card companies. Customers can't get a cash discount just for asking; stations must have both prices displayed and have their pumps configured to tabulate each.
Lobbying for a release from the nation's billion-gallon Strategic Petroleum Reserve wouldn't do much good; the current crunch is largely a problem of refinery capacity rather than raw supply.
Drivers can also use a fuel-cost calculator and MSN Autos' cheap-gas finder to plan ahead or use MSN Autos' fuel-saving tips.
Consumers who suspect price abuse can file a Web report with the Department of Energy or call the hot line at 1-800-244-3301.
3. If there's a gas "shortage," why can I buy all I want?
In the 1970s, when the government tried to allocate gas to keep prices down, miscalculations did result in shortages in some areas. There isn't a shortage now, say economists, because the free market is allocating supplies based on people's willingness to pay.
"There's an imbalance, and the imbalance is being taken care of through high prices," said Lou Pugliaresi, president of the Energy Policy Research Foundation, an independent research board funded in part by the oil industry. "The market will equilibrate."
That means poor people cut back and rich people pay more. The upside is that if the market is working properly, high prices should entice operators to boost supplies, causing prices to drop back down.
"Given these high prices, every incentive is on," Pugliaresi said. "It may take a few months, but that supply is coming."
Video: The great gas-price nonconspiracy
4. Why don't oil companies just build more refineries?
It takes 10 to 15 years for a company to site, permit and build a new refinery. With relatively flat profit margins prior to 2002 and calls to reduce the use of fossil fuels, analysts say the payoff has been too uncertain to risk a long-term, multibillion-dollar investment.
As a result, no new refineries have been built since 1976. When operating capacity drops from 95% to 89%, as it did to accommodate maintenance shutdowns and other problems this spring, producers are forced to buy refined product at world auction.
"You've got conflicting signals from policy makers," said Bill Holbrook, spokesman for the National Petrochemical & Refiners Association. "On the one hand, they call on industry to expand capacity. On the other hand, the same policy makers are advocating the reduction in the use of gasoline. So if you're a manufacturer, you're going to stop and think about how much to invest in a new factory to build a product that some are calling to limit in distribution."
Holbrook said the industry has built the equivalent of one large-scale refinery in each of the past 14 years in the form of expansions, and that "basically every major company is contemplating an expansion at a facility somewhere."
5. Do oil companies make greater profits during high-priced "shortages"? If so, what would motivate them to satisfy demand?
"Does it translate to profit? At this moment, yes," said Doug Reynolds, associate professor of oil and energy economics at the University of Alaska Fairbanks. "But, as with any company, it never lasts long. It always entices new competitors."
If the market is working properly, high profits do motivate new suppliers to enter the game, "as opposed to giving the profits to the people waiting in a gas line, who won't build new refineries," Reynolds said.
The question, he said, is why suppliers have not yet been motivated to build new refineries, in which case we need to look at the broader market conditions.
6. Are oil companies price gouging? What is price gouging, anyway?
Price gouging is when companies take advantage of consumers by charging an unjustifiably excessive amount during unusual market conditions. It is often associated with emergencies, when supplies have been choked off.
There are no federal statutes barring price gouging. Antitrust statutes make it illegal only when companies collude to keep prices artificially high. Some states have laws against price gouging, and a few examples of gasoline price gouging were found in the aftermath of Hurricane Katrina.
U.S. Rep. Bart Stupak, D-Mich., introduced legislation to make price gouging in the oil business illegal, then narrowed it before passage last month to apply only during a federal emergency, such as a natural disaster. It would not apply to the current situation.
"The sentiment behind that question is, are prices at a fair level?" said the EIA's MacIntyre. "And there are many answers to that."
7. Why does gasoline cost more in some areas than in others?
Tom Kloza, of the Oil Price Information Service, writes that analyzing "average" national gasoline prices is like assessing the average temperature of the "old man with one leg in an ice bucket and one leg in a bucket of hot coals." The price can top $4 in north Chicago and be $2.80 in rural Texas.
Factors that contribute to regional price differences include distribution costs (the distance from the refinery); state and local taxes; unique fuel specifications, such as those required in California; and the kind of cost-of-living variations that influence every market -- rents, property taxes and economic vitality. Wholesalers also engage in zone pricing, charging more for gas in places where retailers are able to fetch more from customers.
Within a region, pump prices vary for the same reasons the price of apples do: different supplier contract agreements; delivery volumes and frequencies; retail locations; and competitive activity. Owners differ in how much risk they're willing to take or how they can compensate. For example, some gas stations barely break even on gas in order to lure customers inside for soda and food.
For more, see this EIA primer.
8. Why do gas stations raise their prices when they still have the lower-priced gasoline in their tanks?
In every market, the cost of an item is the amount needed to replace that item, the "replacement cost."
Retail stations make very little profit on gasoline sales -- an average of 2 to 3 cents per gallon at convenience stores, which sell 80% of the nation's gas. They make less when prices rise, sometimes even losing money, and play a dicey game of chicken to compete for customers.
Gas stations do make money when lower-priced gasoline is left in their tanks. But they lose money when higher-priced gasoline is in the tanks as prices outside drop. With a check to the distributor for 10,000 gallons of product about to clear, they can't wait for the market to improve.
"The thing is, that gas will sit in the ground until we get more competitive," said Ren Gladu, owner of Ren's Mobile Service in Amherst, Mass. "It's dead money. . . . We want to sell that gas as quick as we can."
In the end, it's a wash, said Jeff Lenard, spokesman for the National Association of Convenience Stores. "When prices are going up, people are hanging out of trees with binoculars," he said. "But you generally don't get unsolicited hugs for dropping prices without a shipment."
Video: The great gas-price non-conspiracy
9. Gas is $3.50 a gallon in many places. Surely we're cutting back by now. Are Americans, in fact, buying more gas than a year ago?
Gasoline demand for the four-week period ending May 18 was up 1.2% over the same four-week period one year ago, according to the Energy Information Administration.
That doesn't necessarily mean that individual drivers, particularly in regions with high gas prices, are driving more.
The average demand growth is 1.5% to 2% a year, attributable to the fact that there are more people and more drivers. There are also more people working, meaning more people who can afford to drive.
"There is a demand response to prices, it's just not a large one," the EIA's MacIntyre said. "What we do know is that at $3 a gallon we do start to see demand growth slowing."
10. Can the government really do anything about gas prices?
The free market generally responds more quickly than government controls to equilibrate prices. The government does have a role, however, in ensuring that a free, robust and legal open market exists. The Federal Trade Commission investigates allegations of abuse.
Tyson Slocum, director of the Energy Program at the Public Citizen, a consumer advocacy group, says today's domestic oil market is not adequately competitive.
A flurry of mergers in 1990s have restricted the market, allowing a handful of oil companies to make record profits without any pressure to reinvest in refineries, Slocum said. The companies are "swimming in profits," while captive drivers are left without any alternatives but to pay higher prices.
"Unless people have easy access to alternatives, they're just going to suck it up," he said.
The government could help consumers by imposing a tax on windfall profits, revoking federal subsidies to oil companies and re-regulating energy trading markets, he said,
"We're not talking about the production of yachts or diamonds," Slocum said. "We're talking about a commodity that is literally a fuel for our entire economy. To say that the government should not do anything to regulate this is suicide."
Permanent Link to this Blog Post: