Automobile Protection Association | Annual Review of the Auto Industry

March 23, 2011 – The APA released its annual Lemon-Aid new car ratings today, available free on the APA’s website at www.apa.ca. The APA’s vehicle ratings are among the most complete available for the Canadian market, and include information on the options that offer the best value for each model, price comparisons between popular models, and the APA’s unique reliability ratings based on consumer complaints and the accumulated knowledge of the APA’s experts in the field of automobile service and repair.

APA says the spring of 2011 is a good time to buy

Uncertainty in the supply of both new and used vehicles in the North American market is likely to result in higher prices beginning in June 2011. The natural disasters in Japan have interrupted the production of automobiles and some components for autos, and will complicate the shipping of vehicles, due to damage sustained to ports and other transportation infrastructure in northeast Japan. New vehicle inventories are currently large in Canada, but supply constraints could see some of the generous rebates on Canadian-market vehicles disappear as spring turns into summer. APA expects the supply of North-American- built vehicles from Nissan, Mazda and Subaru to continue to be good. Japanese-sourced vehicles like the Lexus EX 350, Infiniti G37, and Acura TSX are the most vulnerable.

Although reduced in April, spring rebates are still running at relatively high levels on many models, as the manufacturers are involved in price wars in several market segments. Many APA-recommended models are currently subject to substantial price discounts and interest-rate rebates. Here’s a look at some rebates in effect for April 2011:

• for the Toyota Corolla, $1,500 to $2,000 in cash and equivalent finance savings for a 60 month loan

• Kia is offering $3,000 off on the Rondo people carrier with a rebate and low- interest-rate financing.

• on the Santa Fe SUV, a $4,000 to $4,500 rebate or an equivalent interest rate discount

• $3,000 to $4,000 savings on the excellent RAV4 AWD compact SUV

The APA believes this level of support from the factories will not last into the summer. For example, as of April, Toyota withdrew a $750 rebate on both the Highlander and Prius and the Matrix rebate fell from $1,500 to $250.

The APA says the used car market is entering a period of more restricted supply that will see prices rise. The abundance of lease-returns over the last three years resulted in low prices for late-model used vehicles; these are now likely to rise. Ford, GM and Chrysler virtually stopped leasing new vehicles three years ago as of July 2008; consequently, the supply of late-model lease return vehicles for their brands will dry up. This will drive up prices across the used car market, as dealers look at import brands to close the gap. Also, while new cars sales have recovered to a certain extent, the predicted new “normal” will be far below the peak levels of 2006 and before. This means relatively fewer trade-ins available for resale on used car lots.

Auto advertising: improved, but confusion and deceptive practices still around

As of July 2010, advertised prices for all consumer goods and services in Quebec are supposed to be all-in, including all the extras except for taxes and government fees. This amendment to the Consumer Protection Act marks a significant improvement in the integrity of advertising in Quebec. Ontario introduced a similar requirement in January 2010, but it applies only to car ads placed by dealers. As a consequence, dealers and automakers began including transportation charges in their advertised prices, as well as the $100 air conditioning federal excise tax reimbursement. However, the APA has discovered that some new car dealers and manufacturers are finding creative ways to get around all-in pricing.

APA mystery shoppers discovered that some dealers are adding fees to their advertised prices once buyers have made it into the showroom. This is now illegal in Quebec, as the fees must be included in the advertised price.

Mazda dealers are advertising a price of $14,490 for a Mazda3. That price is all-in only for current owners of a Mazda vehicle who receive a loyalty discount. Other buyers have to pay $250 more than the advertised price.

Many ads use the wrong photo. In some cases, the lavishly equipped model in the photo costs up to $10,000 more than the advertised price of the base model featured.

In order to make payments look smaller, dealers are now advertising bi-weekly payments and are pushing very long 84 and 96 month financing. APA says a bi-weekly payment is not half a monthly payment, because a month includes about 4.3 weeks. APA recommends consumers limit their car financing to 72 months if possible. With very long repayment periods, the new car will likely be worth less than the balance of the loan for several years, meaning the owner will be handcuffed for several years.

Luxury brands like Mercedes and BMW are advertising monthly lease payments like $388 and $550 for their less expensive models – that’s the sort of monthly payment charged for a mainstream sedan from Honda or Toyota. However, these ads almost always feature a large down payment, from $3,000 to $8,000, to make the low advertised monthly payment possible, and sometimes it’s buried in the fine print.

The APA says misleading advertising hurts not only consumers, but other dealers as well. The APA has learned that Quebec’s Consumer Protection Office does indeed consider all-in pricing to be important… but its attention is focussed on the airline industry, whose extra charges are even more outrageous than the carmakers! As a consequence, the APA is asking consumers who were charged extra fees above the advertised price to contact the association.

A new service from the apa.ca

The APA has introduced a new feature on its consumer website. Consumers can now request the confidential dealer cost price and rebates for most popular models. The service is available 24/7 and can help level the playing field during negotiations.
The service costs $25 for the general public, and APA members are entitled to five price quotations with their membership.