What to Expect From the Automobile Industry

Various trends in the automobile industry are having an impact for car owners which may include car prices, auto loans, auto loan rates, taxes and manufacturer’s incentives.  Some of these trends are positive, allowing car buyer’s access to better deals.  Others are more negative.  Many of these auto cost and auto finance trends occurring in the automobile industry car buyers need to be aware of.

Tax Advantages

Almost every year the IRS increases the standard mileage rate, allowing workers more deductions for work-related transportation expenses.  Currently, tax payers can deduct 55 cents per mile.  The reason why the IRS has allowed this is because transportation in general has become more expensive with rising gas costs and insurance rates.  The rate generally continues to increase because gasoline is a significant factor in the mileage rate, but other fixed and variable costs, such as depreciation, enter into the calculation as well.

The IRS publishes the rates used to calculate the deductible costs of operating a car for business, charitable, medical or moving purposes.  The most recent announcement was to cover expenses beginning on Jan. 1, 2009.  At this time the standard mileage rates for the use of a car which also includes vans, pickups or panel trucks will be:

55 cents per mile for business miles driven
24 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations

Car Loans and Leasing Has Become Less Affordable

Car manufacturers used to encourage more car sales by offering generous financial incentives for auto loans and auto leases.  Leasing was placed on the backburner in 2008 as the profitability of leasing transactions began to diminish.  Now the trend has shifted, as the economy turns and auto loans also turning into a less than lucrative arrangement for the manufacturers these incentives and deals are also being curtailed.  Consumers can expect to get fewer car loan and leasing deals, particularly on sport utility vehicles.  Why is leasing even cheaper for SUVs?  It’s because sales of these types of vehicles have gone done.  Rebate incentives may change or continue to push the products that are not moving, such as the SUVs.

More Incentives

Car manufacturers are trying everything they can to boost car sales.  To encourage more sales without having to provide long term car loan rate discounts the manufactures boost sales through increasing the amount of incentives they offer.  Incentives generally rise for those cars that have the biggest inventory.  Some incentives remain in the traditional realm, such as cash back, expensive gifts, (such as add-ons or other services), or even attractive auto financing.  Others are more creative, such as offers to pay for a purchaser’s gasoline use for a year.

Certified Pre-Owned Cars are More Expensive

Supply for certified pre-owned cars has gone up and down due to previous increase in the popularity of leasing.  Often certified pre-owned cars are more expensive.  This means used car buyers can expect to pay more for these types of vehicles with or without a car loan.  The certified pre-owned cars have some legitimate increased costs such as a more thorough inspection and an extended warranty.  Car buyers can try to circumvent these costs by getting a used vehicle that is uncertified or buying a car from an individual.

Increased Insurance and Gas Costs

Insurance costs cannot be avoided, (though one can try to shop for better deals).  Insurance costs have steadily increased over the years and there appears to be no economic forces that will push the numbers in the opposite direction.  As far as gas costs, people need to consider investing in smaller vehicles touted for gas conservation.  Gas prices will certainly swing up and down in price but the long term forecast calls for higher gas prices overall.

Car Donation is Not as Profitable

If a car is worth more than $500, car owners must determine their deduction based on how much the charity sells it for.  Car owners are informed of this price by a receipt given to them by the charity, (which is legally mandatory).  Higher deductions can be obtained if a car owner donates their vehicle to an organization that uses the car for their business.

Tax Break Not as Generous for SUVs

Beforehand a tax break had been initiated so that small businesses could benefit from buying an SUV.  Now that tax break has been changed.  The maximum a business can deduct for an SUV is $25,000, and this is for specific models.  While this may sound like a lot to the average person, one must consider that the original deductible was $100,000.  Consequently, the drastic change in the SUV tax break caused the sales of SUVs to drop quite quickly.  Congress is also trying to increase tax incentives for car purchases on hybrid vehicles and high gas mileage vehicles in general.

Tags: auto finance, auto financing, auto leases, auto loan rates, auto loans, Car loan, car loan rate, loan

This entry was posted on Wednesday, July 15th, 2009 at 8:43 am and is filed under Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.