Honda Civic Still Most Popular Car ... to be Stolen

The Insurance Bureau of Canada publishes an annual list of the Top Ten Most Stolen Cars. The latest tally for 2008 shows that models of Honda Civics retain the two top spots, a place they have held every year since 2005. Not only that it is the same two model years 1999 and 2000. They are followed by another repeat offender, the 2004 Subaru Impreza. Huh? Don't thieves update their cars too? Don't want to have your car stolen? Apparently the least stolen cars are 2003 Cadillacs,, 2002 Lincoln Continentals and 2001 Lincoln Town Cars.

The Lowdown on the Most Popular UK Financial Comparison Websites

Just came across a fabulous report - Compare and Contrast: How the UK Comparison Website Market is Serving Financial Consumers - released by the Resolution Foundation on October 11, 2007.

The report assesses the eight most popular financial comparison websites serving the UK market along with that of the regulatory agency itself, Financial Services Authority:

• www.moneysupermarket.com
• www.fool.co.uk
• www.uswitch.com
• www.moneynet.co.uk
• www.moneyexpert.com
• www.moneyextra.com
• www.moneyfacts.co.uk
• www.kelkoo.co.uk
• www.fsa.gov.uk/tables
• 
  
• www.themoneypages.com - not on the report list but another one I think is worth a look
  

The areas assessed include: mortgages, credit cards, loans, savings and car insurance. From reading the report it seems that mortgages and car insurance are especially tricky areas to get accurate and complete quotes online as many questions need to be asked to get it right and the various websites vary in how well they do it.

Though it specifically states that the aim of the study is not to determine which is the best, the detailed and impartial comparisons give a consumer a pretty good idea of which one is good or not so good in which area. I really like that the comparison dimensions used in the study are all of critical importance to a consumer: accuracy, completeness and impartiality of the information provided, explanation of technical terms, relevance of fact finding to provide an accurate quote, consumer ease and flexibility in searching and sorting results of the website and facility to contact the providers directly. Interesting factoid: not all providers participate in the comparison websites - Royal Bank of Scotland does not, per the report.

The report does conclude, however, ''there was no “all round best performer”''. It does say the websites perform a very valuable service (i.e. they are not slimy, evil things to be avoided), a re-assuring statement since so many people use them and since the number and complexity of financial choices keeps rising. In fact, some of the sites were found to provide better information on secured loans than the providers themselves! The main criticism is that some of the websites don't properly disclose when their editor's choice or best buys are actually the result of commercial sponsor ties and not the objective best value product.

Here's my summary (caveat emptor, it may not be 100% the way you would read it or the way the authors would say it) of the results:
1) Accuracy of product info - the best: moneysupermarket and MoneyExpert; FSA and uSwitch the worst
2) Accuracy of product quotes - the best: MoneyExpert and Moneyextra; Kelkoo is awful
3) Completeness of info - varies between products more than sites; info on mortgages ''generally poor''; Kelkoo weak across the board
4) Relevance of fact finding - generally poor across all sites for mortgages, credit cards and savings; Motley Fool, MoneyExpert and Kelkoo miss key info in every product
5) Terms explained - moneysupermarket best due to forums where people can ask experts; Motley Fool, uSwitch and FSA explain all terms while Kelkoo explained none and has no product guides
6) Consumer experience - MoneyExpert the best by a lot; Kelkoo is c-r-a-p
7) Flexibility - Moneynet the best, Motley Fool not far behind; MoneyExpert the pits, while moneysupermarket is not much better
8) Market coverage - no one wins but Kelkoo loses with ''low coverage''
9) Impartiality - Motley Fool and uSwitch exemplary by being ''frank and open''; moneysupermarket, Moneynet, MoneyExpert and Kelkoo are completely unforthcoming about their editor's choices as being based on commercial relationships
10) Ability to act on info - Motley Fool, MoneyExpert and FSA are the leaders; the others all only give contact info for affiliated providers (is it so hard to look them up yourself if you have their name?)
About my only overall conclusion is to not bother with Kelkoo; it scores lowest on too many dimensions and is really good in none.

Now that you be aware, you can also beware.

Well done to the Resolution Foundation, an organisation devoted to improving the financial capabilities of the low and medium income person.

Update October 29 - we used moneysupermarket today to get car insurance quotes and found one that has saved us several hundred pounds for the coming year. It was very slick, we were even able to complete the deal directly with the provider by phone after generating the quote online using a quote. There were no less than 26 different quotes and there would have been more except a bunch of providers don't want to insure recently arrived Canadians. Very impressive, took about 30 minutes from start to finish.

UK Car Loan Tricks and Tips

I've just finished helping a family member buy a car here in Scotland. The experience has been uncannily similar to that which occurs in Canada, a disagreeable negotiating process in which one feels taken advantage of, no matter how much of a price reduction one manages to negotiate. The less one likes cars, the better one is likely to do in negotiations since the dealers prey on our emotions - liking a particular car - to extract the most from us. There are a couple of things that arose in the buying process which I found especially dangerous to the consumer and which may save others lots of money. In our case, buying a car of around £8000, it made a difference of £650 in financing costs.

Tip - Get Prepared before Going Shopping
Duh? Perhaps this is too obvious to say, but doing a few hours research before leaving the house will save you money, will give you a car that satisfies your needs and should make the whole business much less stressful. That means figuring out things like:

• a target price to pay, both in total and on a monthly repayment schedule
• current financing rates available in the market - consult websites like MoneySaving Expert.com,
• which cars fit into your price range, the comparative pros and cons of those cars - buy What Car? magazine.

It also means reading up on the car dealers' sales tactics and how to counter with some of your own - e.g. how to do the good guy/bad guy routine to the dealer. Doing this stuff can actually start to turn the whole anxiety-ridden negotiation process into a kind of fun game, once you begin to feel on even terms with the dealer. Check out Car Buying Guide for some advice in that regard.

The above websites have a lot more detail and cover other important car-buying topics that really helped us.

Trick - Beware of Flat Rate Interest Calculations
Caution!! When we asked for financing rates at the dealer, the salesman initially offered us 6.0%. This sounded quite good, especially since bank loan rates currently start around 6.3%. This happened at all of the dealers we visited. One offered 5.25% and that sounded wonderful ... until we came home, did a little research at the above websites and discovered that UK car dealers will quote a so-called ''Flat'' interest rate on the loan that sounds reasonable but is actually about half the rate really being charged. In fact, car dealers are obliged by law, as regulated by the Financial Services Authority to tell the car buyer the real interest rate being charged, called the Annual Percentage Rate (APR). If we had gone through with a loan from the dealer we would have found out the APR but during discussions with the salesman, he was unwilling to tell us the APR. Note that APR is simply a normal amortized loan formula, whereby the interest is charged only on the declining principal balance as each month's payments reduces the principal over the term of the loan. APR is the only way to properly compare the cost of loans of differing terms and amounts. The same Flat Rate, on the other hand, will have a slightly different APR depending on the term or the amount (see my little comparison table image for an illustration of this).

This page of the Car Buying Guide shows step by step how the Flat Rate is calculated. It turns out that the Flat Rate charges interest on the total initial amount of the loan for every month of the term. If you borrow £8000 at 5% for 3 years then you get charged interest of 0.05 x £8000 = £300 / 12 months = £25/mo. each and every month for 3 years. A good graphical illustration and explanation of what is happening can be found here at MoneySavingExpert.com. What an unfair and deceptive way to charge interest!

Car dealers live in the real world too and they make more or less money on the basis of APR - more if the APR on the loan to the buyer is higher, less if it is lower. But their financing profit on a loan that is close to double the going best loan rates is perhaps more than the profit on the mark up of the car itself. So maybe they don't care about the fact that they make a slightly lower rate of profit (as measured by APR) on a five-year loan than on a three year loan.

Maybe they don't care but I think the real reason is that few car dealer sales people probably realize what they are doing and how the rates work out. Apart from the devious way it presents a seemingly lower rate of interest, the main characteristic of the Flat Rate method is its simplicity in terms of doing the calculation. No more than a calculator with big buttons and arithmetic functions is required, a definite plus when it comes to training sales people who may not even have finished secondary school (at one dealer we visited, the trainee salesman was a bricklayer who had decided to change occupations). By contrast the proper APR method requires calculating discounted cash flow (see the Wikipedia entry for the amortization calculator ). Ask yourself whether the average car sales person you have encountered could work out an APR payment. In fact, even the Flat Rate method seems to challenge some car dealership personnel as we were told by one sales manager a monthly payment amount for a supposed 5.75% Flat Rate that came out at 19.5% APR, which is not possible if done right. By the way, this reinforces the advice on those car advice websites cited above that one should always check the dealer's calculations for errors. Probably the sharp car dealership owner who invented the Flat Rate method realized that the combination of calculation simplicity and subtle consumer deception makes for a really useful sales tool.

In retrospect, we should have been suspicious of being offered financing on the spot without any credit check whatsoever by the dealer. The high Flat Rates likely more than offset the dealers' costs of bad loans to poor credit risks and give them the leeway to use this sales tool willy-nilly.

Tip - The Bank Won't Give You Its Best Deal Unless You Ask
Once we had figured out what was going with Flat Rate financing and that the rates at dealers were much too high, we visited our local bank branch of a major UK bank, where the car-buying family member has had an account for years. In other words, she has been a loyal customer with a stable job and a high credit rating.

So what was the initial offer - this time quoted in APR terms, hooray! - from the bank when we enquired? Answer: a measly 9.9%! Then we asked why we should not borrow from one of the on-line offers of other major banks on the MoneySupermarket website, whose range started at 6.3% and where the majority seemed to be around 6.9%. We left the bank and the manager promised to ''see what he could do''. Within a few hours he called back saying that lo and behold, the bank would now match the 6.9% rate because she was such a good customer and such a good credit risk. As they say, ''get me a bucket, I'm gonna be sick''.

After declining the bank's solicitation to also take out repayment insurance in case of accident or job loss - i.e. to pay more so that the bank could be sure of receiving the money, it was a done deal. The attached chart shows the net saving of £652 in total interest costs during the 3.5 year term of the loan over the dealer's initial financing offer, £470 over the bank initial offer and £442 over the dealer's best offer. That's a lot more than the £250 we managed to obtain as a reduction on the actual price of the car.

Bottom line, it's worth spending considerable effort on financing when buying a car.

Car Ownership vs Rental vs Sharing

As I am not full time in Canada these days, I decided to take a look at alternative ways of having wheels aka a personal vehicle available for my use. Everyone is familiar with the traditional ownership and commercial rental methods of having a car but a friend and neighbour had mentioned trying out a car sharing club membership so I decided to compare the three alternatives.

In a car sharing club, one pays an annual or monthly membership fee to get access to a fleet of cars scattered at locations across a city. Reservations are made for a time and day, one pays an hourly rate and away one goes. The car must be picked and dropped off by the member at the same place at the promised time.

My table of comparison of the advantages and disadvantages of owning vs renting vs sharing shows that the best option depends on individual circumstances, primarily the frequency, duration and distance of driving.

Car sharing is best for infrequent, very short trips of a few hours to a few days within a local area and when one lives in a city core, i.e. close to a car pick-up point. Several of the car sharing websites I came across ( see links in the table) stated that car sharing is cheaper than ownership for anyone driving less than 12,000 km per year. Ownership is best for lots of driving, anything over 18,000 km per year or more than about 120 days of driving. Renting seems to be superior for longer distances up to 18,000 km and up to 120 days driving per year, though I'm not sure if car rental companies would impose punitive disincentive rates for an extended rental of something like a two-month continuous rental. It's interesting that the cost advantage of renting is not dependent on kilometers driven (at least up to 18,000 km per year), it's entirely related to number of days of rental and the number where renting is better than owning - at 120 days per year - is quite high (see my chart).

Part of the decision as to which option to pursue certainly has to consider local factors. For instance, there is a local branch of Enterprise car rental close to my house and they offer free pick-up and delivery services, along with special month or longer rental rates. Also, my credit card offers some form of insurance protection for car rentals though I have to admit I don't really know the details of how good/ useful that is ... material for a future blog post!

The company that operates Car Sharing in Ottawa is vrtuCAR. One of my neighbours has used them and found it worked reasonably well, though collecting and dropping off the car from our suburb required taking public transit, which he said somewhat defeats the purpose.

Another benefit of car sharing and rental is that there are fewer cars on the road overall and people who use these methods of car transport tend to drive less, reducing road / parking congestion and emissions, both good for our environment. Local governments tend to like car sharing in particular and some offer preferential treatment like reserved parking, which can be a big plus in congested big city core areas. Check out the local car sharing websites of your city from links in my tables, or just Google car sharing like I did.