Definition of Insanity

Definition of Insanity – Repeating the same behavior and expecting different results. 

 

That is now the definition of the American auto makers. 

 

Having faced (and received) government bailouts in the 1970’s, one would think that they would have taken all steps necessary to prevent that catastrophe from occurring again. 

 

But complacency, arrogance and greed are  deadly sins that corporations cannot afford. 

 

Management refused to plow back profits into the company to make their products more efficient and cost effective, and their plants more flexible to react to change.  Labor maintained a high level of pay which then required that Chrysler products must be sold at minimum prices. After building vehicles that were not what people wanted, that evidenced lower quality then competitors in an effort to boost profits, and refusing to make affordable vehicles, companies like Chrysler found themselves staring at bankruptcy, shutting down plants and laying off workers.  Hat in hand, they went to the Federal Government and the state of Michigan. 

 

After weeks of rising pressure for a federal fix for the multiplying problems of Chrysler Corp., Treasury Secretary G. William Miller produced—and Jimmy Carter approved —a Government bailout. It was designed to prevent the nation’s No. 3 automaker (1978 sales: $13.6 billion) from sliding into a bankruptcy that could have put many thousands out of work and sent a shudder through U.S.

 

Under Jimmy Carter, the federal government and Michigan approved the bailout, in the form of loan guarantees. However, the loans required concessions from the Chrysler workforce, in the amount of more than $400 million. Under the slogans, “We are all in this together to save our country,” and “Buy American,” the UAW leadership approved the concessions.

 

Days later, the state of Michigan cut welfare grants, insisting that the state budget was hit by the Chrysler bailout. The following year, Chrysler closed more than 30 plants in the US, laid off about 45% of both its blue collar and white collar workforce, or about 65,000 people. What happened to the brilliant plan to bail out Chrysler? It cost those same workers their jobs anyway, lined the pockets of top management and top union officials with large profits, and actually cost low-income persons not involved in the automotive industry their welfare subsidies. 

 

The Chrysler subsidy violates two political principles that have been highly important in this country: the principle that individuals are responsible for themselves and the principle that the government should treat people equally. It violates individual responsibility by making Chrysler stockholders and employees into wards of the state and taxpayers into servants of the state. It violates equal treatment by bailing out a particular firm.

 

Here’s a thought: Repeal the laws that force employees to join unions. Individual employees might be willing to work for less than they are now being paid in order to keep their jobs, but they are not allowed to make that kind of bargain because the United Auto Workers (UAW) union has a monopoly on bargaining for most Chrysler employees. It is illegal for any worker to work for less than the wage the UAW has bargained for. If compulsory unionism were repealed, Chrysler would not be in as serious shape as it is in once again.

 

Should the government force taxpayers to subsidize a company whose products do not meet the market test? The answer becomes clear: No. Why should taxpayers have to pay to keep a firm in business? As consumers and producers, they have shown that they do not want to keep it going. Consumers are not willing to pay enough for Chrysler’s products to cover the company’s costs; producers–including suppliers to Chrysler and Chrysler employees–are not willing to sell their goods and services at a cost below Chrysler’s projected revenues. Consumers and producers have spoken, and that should be the end of it. 

 

Tell your government representative that those who do not learn from history are destined to repeat it.  And we cannot afford to do so this time around. 

 

Much of the history of the original bailout can be found at the Cato Institute.  

Donate Your Car To Charity

You have received these offers in the mail and seen them in the newspapers.  “Donate your car to charity and receive a tax deduction!”.  Are they for real?  For the most part, yes.  Many not-for-profits would be thrilled to have a donation which will further their mission.  A donation worth possibly several thousand dollars is a windfall to many charities.

 

Is it really tax deductible? Again, yes, for the most part.  If you itemize your taxes.  There is some figure that is the correct amount to enter on your tax return as the value of your donation.  But what is it? 

 

Originally, the IRS allowed a taxpayer to donate a car to charity and deduct the “fair market value” of the vehicle.  As you can imagine, this got a bit out of hand.  The taxpayer’s interpretation of “fair market value” seemed to be a bit higher than the IRS’s interpretation.  People were deducting the full amount that a car dealer “might” get reselling the vehicle at full retail.  Not quite what the government had in mind. 

 

The charity certainly did not get the benefit of anything near to the taxpayer’s estimate of value.  Most charities use a service or “middleman” to sell the vehicle, and after paying a commission, the charity is left with a small portion of the originally intended donated amount.  This method usually results in the lowest percentage of the sales price to the charity – sometimes as little as 20% of the sale price.

 

In January 1995 the IRS changed the rules so donors need to do some research and paperwork before figuring the value of their donation. 

 

1)                   The charity must have a valid 501 (c)(3) tax status with the IRS. Any qualified organization should be happy to provide you with a copy of their certificate verifying this tax status. 

2)                   Speak with someone at the charity to see if a donated vehicle fits with their needs.  Some will actually use the vehicle for their operations instead of selling it for the funds.  A maintenance van for a charity which operates subsidized housing, a hatchback or mini-van for a program which delivers meals to home-bound residents, etc.  Some will prefer to sell the vehicle for the cash to further their operations.  Some may prefer not to go through the steps necessary to sell a vehicle.  Find out what their needs are to ensure that your donation makes the most positive impact. 

3)                   If your car is valued at more than $500 your deduction is limited to the charity’s Actual Selling Price.  The charity is obligated to provide the donor with a statement of sale, which the donor is required to attach to their tax return (the donor is not entitled to know the deduction amount prior to donating the vehicle).  This will almost always be substantially lower than the donor’s intended donation, especially if a “middleman” service if involved.

4)                   If the charity decides to keep the vehicle and use it for their own needs (maintenance, delivery of goods and services, etc), the donor must determine the fair market value of the deduction.  But be warned, the government believes that the fair market value will likely be substantially different (read, “lower”) than the “Blue Book” value.  If your vehicle donation is valued at over $5,000 you must obtain a written appraisal by a qualified appraiser no more than 60 days before you donate the car.  Most donors don’t take into account the condition of their vehicle, and the value of any repairs necessary, which will lower the deductible value.  Edmunds TMV Used Vehicle Appraiser is a good tool for estimating the value of your donation. 

5)                   For any donation over $250 you must receive from the charity a written acknowledgement, detailing the services given and received for this donation.  See IRS Publication 4303 for detailed information on this statement, which should be retained for tax purposes. 

6)                   State law requirements for vehicle titles – check with your state DMV about the process of transferring the title of your vehicle to the charity.  And don’t forget to remove your license plates, unless state law requires otherwise.

7)                   Check with your CPA about the validity of any deductions.  It’s not just as simple as claiming a charitable donation.  Before filing an erroneous tax return, get professional, qualified advice.  Doing good should not hurt!

 

Of course, if you are so inclined to make a donation to charity, there is another route – sell the car yourself and donate in the form of a check.  You are more likely to get closer to “fair market value” through this sale method. It’s more straightforward for your taxes as well. 

 

Whichever route you choose to take, we wholeheartedly encourage and applaud your community spirit!

Auto Theft - A Costly Crime for All

The Federal Bureau of Investigation Uniform Crime Reports disclosed that in 2006, a vehicle was stolen every 26.4 seconds in the United States (based on the data for the 1,192,809 stolen vehicles reported).  How much did that total in losses to the insurance companies and the vehicle owners?  Estimates exceed $7.9 billion.  That’s Billion with a “B”.   

Besides the emotional feeling of violation, anger, frustration, the total inconvenience and time loss of filing reports with police and insurance agencies, arranging for a temporary rental and the likelihood of having to purchase another vehicle, there is sometimes the surprise that the insurance coverage was not appropriate for the value of the vehicle or the event.  Now you are looking at a large, unplanned cash outlay. 

First, take a look at your current vehicle insurance policy.  Does it cover the cost of a rental car until your vehicle is either found or the insurance check is issued to purchase another vehicle? This coverage is included in the comprehensive section of your policy, but is not automatic.  Often it is an option that usually costs a few dollars per month.  The total annual cost of this coverage is about the same as a one or two day rental cost. 

If you have dropped comprehensive coverage to save money you are likely not covered for theft.  Many owners of older cars believe that they will not be target for theft as their older vehicles are not as desirable to thieves.  Think again.  In 2006, the top five model years stolen were 1995, 1991, 1989, 1997 and 2005 respectively, according to the National Crime Information Center.  Many older vehicles are stolen for parts which are no longer available and are too difficult or expensive to obtain.  Many go to “chop shops” and the parts are sent overseas to countries with large populations of older vehicles in service.  Almost one-half of stolen vehicles were not recovered at all and only 12.6% of thefts were cleared by arrests in 2006.  Those that are recovered usually have significant damage or are completely totaled. Weigh the replacement cost of a vehicle with both the deductible you have chosen and the annual cost of the comprehensive coverage.   

New cars with limited production and several months’ waiting list for delivery are also high on the vehicle theft list for their limited availability.  

 So what can you do to reduce the chances of being a victim?      

1)       The obvious first step is roll up the windows, lock the doors, and don’t leave anything of value in plain view through the window.  This means purses, cell phones, laptops, IPODs, mail, bank statements, tools, etc.  This not only prevents the car theft, but unnecessary break-ins which result in other uninsured losses and the inconvenience of repairs and replacements.  Sounds ridiculously simple, but surprisingly not a sound practice widely followed.  A recent rash of vehicle break-ins in South Florida revealed that valuable personal and electronic items were taken from vehicles parked in driveways and residential streets, during evening hours, from unlocked cars! How much effort does it take to push the lock button vs the potential loss of your personal items, data, and even the entire vehicle?  Only 79% of people surveyed said that they lock their vehicles(!)  Oh – and don’t leave your car running while you dash up to the ATM.

2)       Use a visible theft deterrent such as a steering wheel locking device or alarm (usually flashing red light in view).  While these types of devices are not fool proof, they will certainly discourage the thief looking for a “fast” target. Steering wheel locks also deter Airbag theft, a prolific crime which costs the owner about $1,000 to replace the airbag.  If you are driving a car on the “hot” list for stolen cars, and you are targeted by a professional, these devices will naturally be less effective.  But by consistently using them, you have already decreased your likelihood of becoming a victim. 

3)       Anti-theft devices are complicated mainly due to the complexity of today’s computerized vehicles.  Don’t look to save pennies and ignore the big costs of car theft.  Go to a professional for installation, and look for certified technicians (Mobile Electronics Certification Program).  Make sure that you will receive a written warranty and ask for training on how your system works to use it effectively.  Many after-market systems are usually more sophisticated than the manufacturer-installed system, making them less vulnerable. Ask your insurance agent about discounts for having various anti-theft and tracking/recovery devices installed. That discount may offset part of the cost of the system. 

4)       Park in well-lit areas, and give preference to shopping centers and parking garages with security cameras installed on light poles and building exteriors.  While it may seem more convenient to you to park closer to the exit of a lot or garage, these are higher-targeted theft areas for the same reason you parked there – ease of exiting quickly.  Is being first into traffic at rush hour more important than knowing your vehicle will still be there at the end of the day?

5)       Don’t leave your registration and insurance information in the glove-box – keep it in your wallet (make photocopies for other drivers in your house).  It is essential to notify police immediately with as much information as possible, including license plate number and Vehicle Identification Number (VIN).  This extra step helps you to assist in your vehicle recovery. 

6)       Roadside assistance – if your vehicle is broken into, how much will it cost you to get a tow truck to a repair shop? Again, check your insurance policy and shop the other vendors’ services available for roadside assistance, including AAA.

  

General safety tips for walking to your vehicle: 

• Put away the cell phone/IPOD and pay attention to your surroundings – is anyone loitering near your car? Is the same car “cruising” around the lot? If so, walk back to the store or office fast.  Ask security to escort you.
• Have your key and alarm button in your hand – don’t fumble around in your purse or pockets searching while you are standing at the car door.
• Moms (and Dads, too) – children are distracting.  Hold their hand in the parking lot but still be aware of your surroundings.  Keep lookout while strapping the child in the car seat or loading packages in the trunk.
• Don’t get out of your car and THEN put your purse or laptop in the trunk (a typical move at the gym) – put it there before you leave the house or office.  Thieves just saw that action and you created a reason for the theft.
• Give up the keys or purse if confronted – it is NOT worth your life. 

  For your own peace of mind, safety and financial security, take the time to safeguard your large investment and yourself.  Don’t be a victim.

 

 

 

 

 

 

Safe Cars for Teens

Many of our friends and acquaintances purchased new cars for their newly-licensed and very eager teen drivers. And some of those very inexperienced drivers wrecked the new vehicle. Not just a fender-bender, I mean rolled/crunched/wrapped around a tree. Miraculously injuries were minor, except to the wallet of the parent.

There is no way to avoid these accidents except by totally preventing the teen from driving. That, you may know if you have a teen, is not realistic. So you do the next best thing – buy your most precious possession something safe, to maximize the protection of both the driver and any passengers from serious physical harm.

I know that some of you are thinking, if you choose safe, your child will rebel because “safe” does not usually translate into “cool ride”. But you will be surprised to learn that the safest cars for teen drivers are also some of most desirable by the teen and their peers.

Many safety features in vehicles have become standard equipment, not upgraded options, in the past several years. The Insurance Institute for Highway Safety crash-tests hundreds of cars annually to point out weaknesses to the manufacturers and lawmakers, resulting in the mandatory installation of these safety features in all of our vehicles.

So how do you choose the best vehicle for your teen driver? Here are some tips to narrow down the search:

1)     Choose a late-model vehicle – 5-years old or newer. These vehicles are usually equipped with both front and side airbags, anti-lock brakes, options for other safety features, and have higher front/side impact and rollover ratings in the National Highway Traffic Safety Administration and the Insurance Institute for Highway Safety crash tests.

2)   Consider the experience level of your teen, and the overall driving needs. Will your teen drive to school and work? Will he or she also transport others?

• Bigger is not necessarily better! Studies show that the more passengers in the vehicle, the more distracted the driver. A lower-horsepower, mid-size sedan would be the optimum choice over a larger, higher-seating capacity SUV. SUVs are larger, higher and heavier than other vehicles, require longer “stopping distance” and in some cases have a greater propensity to roll over due to a higher center of gravity.
• The temptation to drive faster and engage in dangerous driving habits increase with horsepower, so a sports car would also not be an ideal choice as a first car.
• Convertibles tend to have a larger “blind spot” created by the necessary design of the cloth convertible top. Anything with less visibility is not a great choice for the inexperienced driver.
  The mid-size sedan will allow the teen to transport others appropriately, haul sports or band equipment for school functions, or carry tools and other work-related items comfortably.

3)   Insurance costs – this is going to be an eye-opener for most parents. Different model vehicles and various engine sizes will be assessed differently for the same teen driver by the insurance company. New cars will cost more to insure than used cars. 16-year olds have higher crash rates and fatality crash rates than drivers of any other age (boys are still slightly higher than girls). Ask your agent if there are any insurance discounts if your teen completes a driver-training program. Also inquire if certain safety and theft-deterrent/recovery features on the vehicle will lower your insurance costs.

4)   Warranties – many used vehicles carry the remainder of the factory warranty. Most used cars less than 5-years old will be eligible for an after-market warranty. This reliability will cut down considerably on the expense of repairs and maintenance, as well as increase the safety factor for the teen driver. As for the parents’ costs, did you know that most new cars depreciate 30% or more in the first two years? In the first year, some vehicles lose 15% to 20% of their value. So let someone else take the depreciation “hit” and consider a 2 or 3-year old vehicle.

Now that you have some criteria in mind, let’s look at some models that consistently do well in all of the tests and consumer ratings for safety and reliability, as well as popularity with teens for looks and features like handling, sound systems, and opportunities to customize with cosmetic upgrades. We put together this list based on the results of the safety crash tests done annually by the National Highway Traffic Safety Administration, and for the affordability of the vehicle’s cost as a 2- or 3-year old pre-owned vehicle (2005 and 2006). Most are recommended in the 4-cylinder model (sounds sluggish, but they are actually quite peppy and handle well). If your teen is paying the bills he or she will appreciate the fuel savings of the 4-cylinder choice! Try to choose a car with side airbags if available. At SaferCar.Gov you can look up the NHTSA safety testing results for most vehicles each year. There are many highly rated vehicles each year (but would your teen rather walk than be seen driving a Mercury Grand Marquis? Puleeze!). And the larger vehicles will also be a strain on whoever pays the gas bills.

1. Honda Civic – Honda consistently tops these lists of safety and reliability. The 4-door model received 4 and 5 star ratings. The 4-door Civic can easily be found with a 4-cylinder engine. Comfortable, reliable, sporty-looking, and affordable (which is a relative term). Honda is a mid-ranged priced vehicle as compared with the others on this list.
2. Honda Accord – Also available with a 4-cylinder engine, a perennially well-rated car for safety and reliability in both the 2- and 4-door models. Sporty looks have improved considerably over the years.
3. Toyota Corolla – The 4-door model is well-rated and affordable. The Toyota Avalon (also 4-door model) is also well-rated but cost about $7,500 or more than the Corolla.
4. Mazda 6 Hatchback – with Side Airbags, this is also a highly rated model for safety. The hatchback gives it a sporty look with a bit of interior room. Usually costs slightly less than the Honda Civic.
5. Acura TSX 4-door with side airbags – 5-star driver front and side crash test, 4-star rollover test (2-wheel drive model). A higher-priced choice, over $20,000 for the 2005 model.
6. Scion tC – very roomy coupe, 160-hp 4-cylinder, with other standard features like sunroof, 17-inch allow wheels and many safety features. A 3-door hatchback. Well rated, and reasonably priced. A Toyota product in the $12,000+ range for a 2005 model.
7. Volvo S40 – Volvo has always enjoyed a reputation for safety. On par with the Hondas for pricing. If cost is not an issue, the Volvo S80 is one of the highest safety-rated passenger cars, but easily over $20,000 for the 2005 model.
8. Pontiac G6 – the 4-door model is well-rated for mid-size cars. A 4-cyl model was available in 2006. Surprisingly, average cost is over $16,000 for this car (not the GT model which is more).
9. Subaru Forester AWD – well-rated SUV, 4-cylinder turbo. A bit on the pricy side for a first vehicle, pushing $19,000 for a 2005 model.
10. Honda Pilot – Highly safety-rated, with Honda reliability. Good visibility, roomy interior without excessive exterior size. But again, over $20,000 for the 2005 model.

All of the vehicles that we chose to include on this list are the 2006 models, and none have any crash or rollover ratings less than 4 stars, which we feel is an important criteria for the inexperienced driver.

You can also print the NHTSA annual publication “Buying a Safer Car” which provides great detail about each model tested for that year, including safety features (the 2006 brochure is still available). This will give you a condensed list on which to make notes at home with your teen while narrowing down your search for the perfect vehicle for your needs.

Well. That’s a lot of data to digest. But considering the startling and sometimes tragic teen driving statistics disclosed annually by the Insurance Information Institute, it is definitely worth the time investment. Do the research because it is one of the most important decisions you will make in your life and the life of your teen.

Happy motoring!