Car Insurance

You want a great car at a great price. The dealer wants to make as much profit as he can. Consumer Reports’ annual April auto issue helps you resist the dealer ploys that squeeze you for more cash than you should pay. Here are 10 common traps to avoid.

(1) The False Credit Score - The dealer checks your credit report

but lies about your score, telling you it is lower than it

really is and saying you don’t qualify for the low-interest

car loan that drew you to the dealership in the first place.

You’ll have to pay a higher rate. This practice is illegal.

Consumer Reports recommends you know your credit score before

you shop for a car loan. If the dealer says your credit score

is lower than you know it is, buy your car elsewhere and

report the dealer to your state attorney general.

(2) 0 Down, 0 Interest, 0 Payments for One Year - But when the

year is up, you owe all the monthly payments you’ve

delayed–sometimes plus retroactive interest. You end up owing

much more than the sticker price on a vehicle that is now a

used car. In some cases, the contract states that the buyer

owes the dealer X number of monthly payments at a high

interest rate, then must refinance the balance of the loan.

Don’t fall for this gimmick. A “0-0-0″ deal costs more in the

long run than a conventional loan. Also, remember to check the

contract fully.

(3) “We’ll Pay Off Your Loan!” - Ads suggest that the dealer will

assume your old-car debt or lease to get your business. But

whatever you owe on your old vehicle is rolled into your new

loan. Consumer Reports’ advice? Stick with your current lease

to avoid early-termination fees, and don’t trade in a car if

you still owe more than the car is worth.

(4) “Pay More or We’ll Say You Stole the Car.” - The salesperson

says you can drive home today in your new dream car. And you

also qualify for a better rate than you expected–if you

finance your purchase with the dealership. You sign the papers

and away you go, but a week later the salesperson calls and

says you didn’t qualify for a low rate after all; you now have

to pay more for the loan, or the salesperson may threaten to

report the car as stolen. If you want to cancel the deal, he

may say you can’t; the dealership has already sold your

trade-in, and you signed a contract.

Fitch rates Capital One Auto Finance Trust (COAFT) 2004-B as follows:

– $287,000,000 class A-1 floating-rate asset-backed notes ‘F1+’;

– $440,000,000 class A-2 2.51% asset-backed notes ‘AAA’;

– $284,000,000 class A-3 2.96% asset-backed notes ‘AAA’;

– $489,000,000 class A-4 floating-rate asset-backed notes ‘AAA’.

The ratings are based on the terms of the financial guaranty policy of MBIA Insurance Corp. (MBIA), whose insurer financial strength is rated ‘AAA’ by Fitch. The ratings are also based on the transaction’s sounds legal and cash flow structure and the strength of Capital One Auto Finance, Inc. (COAF) as an originator and servicer of nonprime and subprime auto loans.

The initial credit enhancement for the class A notes is 11.75% and consists of 9.75% in overcollateralization (OC) and a 2% non-declining reserve account. Enhancement is expected to grow through the application of available excess spread to amortize the notes until a target OC of 16% of the outstanding pool balance is reached. If cumulative net losses are below a specified schedule, OC will step-down to 13.50% of the outstanding pool balance.

As of the statistical cutoff date, the receivables had a weighted average APR of 13.47%. The weighted average original term of the pool was 65.67 months and the weighted average remaining term was 62.38 months resulting in approximately 3.29 months of seasoning. Approximately 40.09% of the pool consists of loans secured by new vehicles, versus 59.91% used vehicles. Loans have been originated from various channels, including indirect, direct, refinance, and internet originations, representing approximately 65%, 7%, 6%, and 22% of the pool, respectively.

With all the talk about people cashing in on lower interest rates by refinancing their home mortgages, I was wondering: Would I save by refinancing my auto loan?–SAMUEL FRITTS, Cary, N.C.

Probably not. Although new-car loan rates have fallen slightly–from an average of 9.7% in September to 9.3% in March–refinancing would mean switching into a used-car loan. And used-car loans normally carry a higher rate, about one percentage point higher for three-year loans right now, according to Greg McBride of Bankrate.com. Even if you could slip into a lower rate than the one you are currently paying, fees on the transaction could devour your savings.

Most banks don’t charge penalties for paying off an auto loan early, but loan-initiation fees could run as high as $150, says Andrew Trainor, president of Community Bank of Southern Colorado. Changing the lender’s name on your title might add $15 or so to the cost. You need to compare such costs to the savings you could reap from a lower interest rate over the life of the loan. And speaking of the life of the loan, be careful not to stretch out the time over which you’ll be paying for your car. If you’re halfway through a three-year loan and refinance with another three-year loan, you’ll wind up paying interest for an extra 18 months. That’s almost sure to cost you more interest even if you find a significantly lower rate.

J.L. French Automotive Castings Inc. derived a 14-percent gain in operating income from a 6.6-percent gain in sales in the first quarter–but nonetheless suffered a setback due to a major refinancing at the end of 2002.

The company’s net loss widened to nearly $5.6 million from a year-earlier $105,000 after filtering out the 2002 impact of an accounting rule change affecting intangible assets. With the accounting change factored in, the year-ago loss was more than $202.7 million.

The company, a major user of aluminum scrap, maintains a worldwide smelting capacity of 50 million pounds a month to support its auto parts activity. The company describes itself as based in Sheboygan, Wis., with its corporate office in Minneapolis.

Cutbacks at Dearborn, Mich.,-based Ford Motor Co. have begun to affect J.L. French’s production levels. “We expect revenues in the second quarter to be in the neighborhood of 3 to 3.5 percent less than last year’s level. Most of that volume decrease is a result of volume off at Ford in North America,” said Mark Burgess, the company’s chief financial officer and executive vice president. “North American sales volume was down on a net basis by roughly $4 million” in the first quarter.

The company, which has publicly traded bonds but closely held equity, fell behind schedule on debt payments in December. This was fixed by a refinancing that deferred some heavy repayments until mid-2006 but hiked the interest rates.

New York City Industrial Development Agency chairman Andrew M. Alper announced that Potamkin Development Co. LLC has been approved for NYCIDA financing assistance to build a multi-dealer auto mall in East Harlem* its June meeting, the NYCIDA Board also approved assistance for two bakeries to help them expand their manufacturing facilities, and a liquor importer seeking to expand and renovate warehouse space. Two private schools in Brooklyn will also receive assistance to refinance or rebuild facilities.

“The transactions approved today represent nearly $62 million in private capital investment and more than 1,000 jobs for the City of New York,” said Alper. “The jobs created by the Potamkin project are particularly significant because they are highly-skilled positions with excellent training and potential for advancement. I am also pleased that we were able to assist two highly regarded private schools to increase enrollment and expand curriculum and services for their students and communities.”

Potamkin Development Co. LLC was approved for $21 million in tax-exempt Empowerment Zone Facility Bonds for the acquisition of 101,000 SF of city-owned land on the block bounded by 127th and 128″‘ Streets and Second and Third Avenues. Potamkin plans to construct an approximately 200,000-SF auto mall. The total cost of the project is estimated to be $25.3 million. It will create 500 jobs during construction and 125 permanent jobs. A portion of the facility, to be called the Potamkin Harlem Auto Mall, will be leased to Potamkin automobile dealerships. Potamkin plans to lease the balance of the space to other auto dealerships. With 63 franchises, the Potamkin family owns one of the 10 largest automobile retailing companies in the United States.

Dufour Pastry Kitchens Inc. was approved for about $946,000 in real estate and sales tax benefits in connection with the purchase of 7,500 square feet of land and construction of a 15,000-SF building at 12 1St Street and Park Avenue in Harlem. The company may also qualify for energy benefits valued at about $70,000 from the Business Incentive Rate and the City’s Energy Cost Savings Programs. Cost of land acquisition and construction is estimated at $2.3 million. The company faces a steep increase in rent at its current location in Manhattan and has looked at several sites in New Jersey that offer lower operating costs and convenient access to its clients, but prefers to remain in the City. With NYCIDA assistance, the bakery will be able to relocate to Harlem. Dufour specializes in frozen hand-made hors d’oeuvres, tart shells, sweets and pastry dough which it supplies to restaurants, hotels, gourmet shops, cafes and caterers in New York City and 41 distributors nationwide. The company estimates that it will a dd nine employees at the new location in addition to the 35 workers it currently employs.