Car Insurance and Financing

The National Transportation Safety Board (NTSB) has released its preliminary report on the recent fatal crash of a 2019 Tesla Model S in the Houston area. 

On April 17, two men in Texas were killed after a Tesla Model S left the road on a curve and eventually crashed into a tree. The impact damaged the car’s lithium-ion battery, which started a fire. 

Shortly after the crash, police told reporters that they were “100 percent certain that no one was in the driver seat driving that vehicle at the time of impact.” However, the NTSB said in its report that the car’s owner was seated in the driver’s seat and his companion was in the front passenger seat. 

“Footage from the owner’s home security camera shows the owner entering the car’s driver’s seat and the passenger entering the front passenger seat,” the report said. 

The agency said the car traveled "about 550 feet" from the owner’s home before leaving the road at the curb, going over the curve, hitting a drainage culvert, a raised manhole, and then a tree. A fire ensued when the vehicle crashed into the tree. 

The agency also said in the report that Tesla’s Autopilot driver-assist technology couldn’t have been engaged at the time of the crash because it couldn’t be enabled in that location. 

Tesla CEO Elon Musk previously insisted that Autopilot couldn’t have been active at the time of the crash, tweeting out data logs indicating that Autopilot was not enabled and that the car in question didn’t purchase the full self-driving feature. 

Investigation ongoing

The NTSB described the road being traveled prior to the accident as "a concrete two-lane road with one westbound and one eastbound lane and mountable concrete curbs on either side.” The road was level with no line markings, and the speed limit was 30 mph. There was a curve to the south where the Tesla crashed, the agency said. 

Although the infotainment system in the car was destroyed by the fire, the "restraint control module" was recovered (albeit in damaged condition) and handed over to the NTSB to evaluate. The component stores data that includes how fast the car was going, acceleration details, whether seatbelts were in use, and more. 

The NTSB’s investigation is ongoing, and it hasn’t yet decided on the probable cause of the accident. The agency is still looking to glean insights on several issues, including seatbelt use, crash dynamics, and whether the passengers were intoxicated at the time. 

Once a probable cause is determined, the NTSB plans to issue safety recommendations to prevent future crashes.

With the average family of four recently receiving thousands of dollars in government stimulus money, thoughts may turn to a new family car. But which one?

It all depends on your budget, the size of your family, and your automotive preference. Kelley Blue Book (KBB) is out with its annual list of the best new family cars with a wide range of choices.

"When it comes to buying a car for a new or growing family, parents understandably want assurance that their vehicle has outstanding safety and technology features to help protect their precious cargo," said Matt DeLorenzo, senior managing editor for KBB. "We also know budget factors are top-of-mind for families, so we place a heavy emphasis on overall value including purchase and ownership costs.

KBB’s rankings by category

Below are KBB’s rankings for what it considers to be the best vehicles by category. Be sure to click the links to access thousands of verified vehicle reviews by ConsumerAffairs readers.

Best two-row SUVs

2021 Honda CRV

2021 Hyundai Santa Fe

2021 Toyota RAV4

Best three-row SUVs

2021 Honda Pilot

2021 Hyundai Palisade

2021 Kia Telluride

2021 Toyota Highlander

Best full-size SUVs

2021 Chevrolet Tahoe

2021 Ford Expedition

Best minivans

2021 Chrysler Pacifica

2021 Honda Odyssey

2021 Toyota Sienna

Limited inventories create challenges for car buyers

You can check out three of the vehicles on this list with one trip to a Toyota dealer and another three by visiting a Honda dealership. Hyundai placed two models on the list, while Kia, Chevrolet, Ford, and Chrysler had one each.

KBB says its annual list is based on in-depth testing with a focus on safety, overall value, connectivity, technology, and driver-assist features. The team uses proprietary evaluation criteria and data from the National Highway Traffic Safety Administration (NHTSA) and Insurance Institute for Highway Safety (IIHS) to ensure recommended vehicles have top safety ratings.

Finding a large selection of any of these popular vehicles may pose a challenge since nearly all automakers have faced inventory shortages because of a scarcity of computer chips. When consumers do find the car of their choice, automotive experts say they may have to pay more to drive it off the lot.

“Low inventories have not had a material effect on aggregate sales results,” J.D. Power and LMC Automotive reported in a recent joint April forecast. “Instead, they have enabled manufacturers and retailers to reduce discounts and consumers are demonstrating a willingness not only to buy vehicles closer to MSRP but also to buy more expensive vehicles."

The Insurance Institute for Highway Safety (IIHS) released its list of the safest 2021 vehicles just a day after golf legend Tiger Woods survived a horrific highway crash in his Genesis GV80 SUV.

Hyundai Motor Group, which makes the Genesis -- as well as Hyundai and Kia -- drove off with 12 regular Top Safety Picks and five pluses, the most of any manufacturer. Woods is recuperating in a Los Angeles hospital with serious leg injuries while his SUV is a twisted pile of metal.

IIHS says its annual awards demonstrate that the cars and trucks on American roads are getting safer. This year, 41 vehicles earned Top Safety Pick designations, bringing the total number of 2021 award winners to 90, compared with 64 in February 2020.

“With these awards, we want to make it easy for consumers to find vehicles that provide good protection in crashes, sufficient lighting, and effective front crash protection,” said IIHS President David Harkey. “Manufacturers have stepped up to meet the challenge, and the list of great options has grown to an impressive size this year.”

To receive either award, a vehicle must earn good ratings in all six IIHS crashworthiness tests: driver- and passenger-side small overlap front, moderate overlap front, side, roof strength, and head restraints. 

Vehicles must also be available with front crash prevention that earns a superior or advanced rating in both vehicle-to-vehicle and vehicle-to-pedestrian evaluations. Finally, Top Safety Pick winners must be available with good or acceptable headlights.

Honda makes a strong showing

Besides Hyundai, Honda also made a strong showing. Six Honda models earned a Top Safety Pick rating or better with three -- Accord, Insight, and Odyssey -- achieving the coveted Top Safety Pick+ rating. 

In addition, the 2021 Accord, two Civic models, CR-V, Insight, and Odyssey each achieved a "Good" in all six IIHS crashworthiness tests. 

Two minivans, the Honda Odyssey and Toyota Sienna, qualified this year for the Top Safety Pick+ award. A pickup truck, the Ram 1500 crew cab, is also a Top Safety Pick and is the only winner from Stellantis, the company created by the recent merger of Fiat Chrysler and Peugeot. A year ago, there were no minivans or pickups in the safest categories.

IIHS noted that Mitsubishi failed to earn a single award so far and that General Motors recorded only two.

If you’re in the market for a new or used car and plan on financing it, it may pay to wait a little longer before making a purchase. Already-low auto loan rates are set to go lower.

In its 2021 auto rate forecast, Bankrate.com predicted loan rates would drift lower over time. The Federal Reserve’s interest rate policy is aimed at keeping interest rates stable and low.

“The fed funds rate is pinned to the floor of 0 to 0.25 percent until 2023 or so, but an equal part of the Fed’s strategy is keeping longer-term interest rates low,” said Greg McBride, CFA, Bankrate’s chief financial analyst.

McBride said that while the Fed has primary control over short-term rates, it has a number of tools at its disposal, including purchasing debt, which can help keep nearly all rates to where the Fed wants them to be.

It can help current owners too

RateGenius, a fintech company, says the trend not only helps car buyers but also car owners who refinance their loans. Refinancing is mostly associated with home mortgages, but the company’s analysts say it can also save money on car loans.

"Last year was a difficult one for consumers across the country," says RateGenius CEO Chris Speltz. "While it's not surprising that borrowers who refinanced saved money on their auto loans and lessened their overall debt burden, what our analysis found was that changes in consumer behavior as a result of the pandemic — such as fewer miles driven and choosing to purchase used cars over new — had an overall positive impact on vehicle collateral values, loan approvals, and savings in 2020."

In fact, the company’s report on auto loan refinancing in 2020 found the monthly savings to be the highest on record. The study found:

• Consumers saved an average of $989.72 a year on refinancing their car in 2020, the largest amount since 2016.

• 42 percent of refinanced loans saw annual savings of $1,000 or higher.

• With an average interest rate of 10.5 percent on their existing loans, the average interest on the refinanced loan was 5 percent — the greatest interest rate reduction in eight years.

The trend should continue

For borrowers hoping to refinance their auto loans in 2021, the forecast is promising. Scott Markland, vice president of business development at RateGenius, says 2021 is shaping up to be another year for record savings.

He says the trend is likely to continue throughout the year, providing opportunities for consumers to save money and for lenders to land new business.

ConsumerAffairs has collected hundreds of verified reviews of auto loan companies. You’ll find them here.

Waymo -- the autonomous driving technology development company that’s a subsidiary of Alphabet Inc., the parent company of Google -- has released its first round safety numbers for its operations in Phoenix, Arizona.

Overall, the company seemed pleased with the results and feeling good about the future of driverless vehicles.

The scorecard shows that company vehicles were involved in 18 accidents and 29 near-miss collisions during all of 2019 and through the first nine months of 2020.

In Reuters’ shakeout of the data, Waymo vehicles in Phoenix were involved in minor incidents once out of every 339,000 miles driven, adding that an additional 29 incidents were avoided with the intervention of a safety driver. 

Applying the metrics to a real-life scenario, Waymo equated the number of miles traveled by its vehicles represents over 500 years of driving for the average licensed U.S. driver.

The company couched the majority of incidents into the category of “typically unreported minor collision or contact,” but admitted that there were eight incidents it considered “most severe or potentially severe” where airbags were deployed. 

Good news or bad news?

Whether Waymo considers those results a glass half-full or a glass half-empty, it didn’t say. But Phoenix-area residents have been rather vocal about the 300+ vehicles operating driving around the Phoenix metro, calling them a hazard. 

Undaunted, the company remains confident about the technology saying it believes that it could prevent thousands of lives from being lost to traffic crashes every year. The Waymo team defended its extensive efforts, writing, “The more miles we travel on public roads, the more opportunities to monitor and assess the performance of software.”

“We take our responsibilities to the communities we serve seriously. Now that we’ve opened up our fully autonomous ride-hailing service to the public, we’re also sharing in detail the safety framework that guides our progress.”

Worries about the economy in 2019 are keeping Wall Street traders up at night, and a new report from automotive publisher Edmunds won’t help.

The experts at Edmunds expect new car sales will continue to go down next year after peaking in 2017. Their report forecasts 16.9 million new vehicles will be sold in 2019, compared to an expected 17.2 million vehicles in 2018.

But put in a historical context, next year’s numbers might not be that low. Auto sales have surged in the early part of the decade and are only now tapering off. At the same time, a solid job market and low gas prices could increase consumers’ confidence to buy.

Because there was such a large number of auto leases in 2016, millions of three-year-old vehicles will come off lease in 2019, and chances are those consumers will choose another lease, which could actually boost new car sales.

Impact of expiring leases

"Since we reached 'peak lease' in 2016, more than four million consumers are expected to turn in their vehicles and come back to the market in 2019, which will have a major impact on new vehicle sales," said Jessica Caldwell, executive director of industry analysis for Edmunds.

But there’s a catch, she says. Consumers are returning to a very different automotive market. Prices of new cars have gone up, and so have interest rates. That means leasing a new car in 2019 may be more expensive than it was three years ago. Right now, however, there appear to be plenty of deals.

Wantalease, an online lease marketplace, says it might be more expensive to lease a truck or SUV, but lease prices on some sedans and compacts have gone down in December.

Current lease deals

Right now, the lease payment on the Chevrolet Cruz is down 13.31 percent. You can lease a Ford Focus for 8.44 percent less and a Toyota Corolla for 7.29 percent less.

But some truck leases are even lower. Wantalease reports the lease payment on the Dodge Ram 1500 Crew Cab is just $129 a month. That’s lower than the Volkswagen Jetta, which carries a monthly payment of $139.

That means a savvy car buyer will need to shop carefully in 2019 to select a vehicle which the dealer is highly motivated to sell. Edmunds expects new cars will sell for an average of $3,000 more than in 2018. Because of rising interest rates, financing a new car purchase will cost an average of $1,800 more over the course of a 60-month loan.

More car buyers are making the mistake of stretching out their payments beyond the length that personal finance experts say is prudent.

An analysis by automotive publisher Edmunds.com shows the average auto loan length reached an all-time high of 69.3 months in June — up 6.8 percent from five years ago. For those of you without a calculator within reach, that's five years and nine months.

It's also no surprise that Edmunds found consumers purchasing a car in June took on more debt to do so. The average financed amount hit nearly $31,000, up $631 from the month before. The average monthly payment in June was $517, no doubt why more consumers felt the need to extend the payments.

"Stretching out loan terms to secure a monthly payment they're comfortable with is becoming buyers' go-to way to get the cars they want, equipped the way they want them," said Edmunds Executive Director of Industry Analysis Jessica Caldwell.

Why it's risky

But Cardwell says that's risky, and here's why: it leaves borrowers exposed to owing more for the car than the vehicle is worth. After all, a car starts losing value as soon as you drive it off the lot.

Maybe that's not all that bad if you have no loss of income or other financial setbacks. But it pretty much guarantees you cannot sell the car or trade it in for a while, unless you find a dealer willing to take the loss. These days, that's getting harder to do.

Meanwhile, the interest rate on car loans has come up in the last 12 months. Today, Edmunds says the average is 4.96%, up 5.7% from a year ago and up 13.6% from five years ago.

Consumers are choosing more expensive vehicles

It's not that all car prices are going through the roof. There are plenty of attractive vehicles in the $16,000 to $26,000 price range. Transaction prices have risen primarily because consumers have chosen expensive cars and trucks, loaded with expensive options. That's why many vehicles now cost what a condo did just a few years ago.

Personal finance experts advise that new or used vehicles should not be financed for longer than 60 months. Actually, 48 months -- four years -- is optimum.

Buyers should also put up a healthy down payment. The resulting monthly payment should then fit comfortably into the household budget.

Maybe because of the dip in auto sales, the cost of leasing a new car is going down this month.

A report by Wantalease.com, an online car lease marketplace, finds the average monthly lease payment declined in June, pressured by three cars with payments under $150.

According to the website, the Nissan Sentra SV can be leased for as low as $109 per month. It says 15 vehicles carry a lease payment of $199 per month or less.

The average monthly lease payment so far this month is $340.37, down from $352.80 in May. Wantalease.com says it keeps tabs on the monthly payments on 60 of today’s most popular makes and models.

Small SUVs

Small SUVs are the hottest vehicles in the marketplace at the moment, and three of them are currently available with payments of $199 a month. They are the Chevrolet Equinox 2WD LS, the Honda CR-V LX 2WD, and the Nissan Rogue S FWD.

Among luxury vehicles – traditionally where most vehicles have been leased rather than purchased – the the Acura ILX is currently the lowest-priced vehicle in that category, at $219 per month.

As for the biggest drop in lease payments from one month to the next, the Chevrolet Cab LT drives away with that honor. Its payment fell 16.8% this month, to $289. The Chevy Equinox 2WD dropped nearly as much and can now be leased for $199 a month.

Aggressive pricing

“With monthly vehicle sales struggling a bit to maintain momentum of the last few years, we’re seeing a continuation of aggressive lease pricing on many of today’s more popular cars and trucks,” said Scot Hall, Executive Vice President, Wantalease.com. “Yesterday’s lease deals were largely confined to luxury makes and models, but today we’re seeing low prices on a wider variety of cars and trucks, including utility vehicles.”

But whether a lease makes sense is determined by more factors than simply a monthly payment that fits into your budget. All leases have mileage limits, and going over them will carry additional changes at the end of the lease. If you drive more than 1,000 miles per month, you might consider purchasing a less expensive vehicle.

You may also owe additional money when you turn the car in if has dents and scratches, beyond normal wear and tear.

Coming out of the Great Recession, the auto industry was one of the first areas of the economy to get back on its feet.

While mortgage lenders became a lot more difficult to deal with, there was plenty of credit for car buyers, often with generous terms. Interest rates were rock bottom, and if you had a job, it wasn't hard to qualify for a loan.

As a result, car sales posted records year after year and consumers purchased and leased increasingly expensive vehicles. The average transaction price (ATP) on a new vehicle now fluctuates between $33,000 and $34,000.

To afford the monthly payments on a loan of that size, lenders have increased the lengths of the loans. Five year loans soon because six year loans. Now, a report by Automotive News, based on data from Experian, finds that loan terms of 73 to 84 months -- seven years -- made up nearly a third of new car loans in the fourth quarter of last year.

Industry concern

The automotive industry publication cites that as a concern for the industry, as well as consumers, because consumers are trading in vehicles still owing a lot of money. The average negative equity on a trade in during the first quarter was $5,195, according to Edmunds.com.

At the same time, the record sales of new cars has produced a glut of used cars -- a glut that is making used cars worth less, accelerating the increase in negative equity. It puts consumers who purchased expensive automobiles and financed them for six or seven years in a precarious position.

While a house can be expected to gain value over time, an automobile loses value the minute you drive it off the lot. If you aren't paying down the loan fast enough, you soon find yourself underwater, just like those homeowners who purchased houses with subprime loans more than a decade ago.

Carmakers and dealers have encouraged consumers to purchase more expensive vehicles by extending the time to pay for them.

More bells and whistles

"Buyers want pricier cars with more bells and whistles, leading to the troubling trend of trading longer loan terms for lower monthly payments," said Edmunds' analyst Jessica Caldwell. "But now that interest rates are also on the rise, something has to give."

The takeaway for consumers is to only purchase a vehicle that can be paid for while you're still driving it. If you plan to trade in the car in five years, only finance it for five years. That way, you still have some residual value that can be used for a down payment.

An even better plan is to finance the vehicle for a year less than you plan to drive it. That way you get a year of ownership without a car payment.

Of course, to do that you may need to look at vehicles you can purchase for $18,000 instead of $34,000 -- vehicles without so many bells and whistles.

Whether you buy a new or used car, the cost of getting it off the lot is not the only part of the price you need to consider. There are maintenance and fuel costs – and insurance.

Some cars get better fuel economy than others. That information is on a window sticker so it's easy to see. Less obvious are maintenance costs, but some makes and models have better reputations than others when it comes to staying out of the repair shop.

All cars must be insured and insurance underwriters have their own way of measuring the risk one vehicle carries over another. What you pay for the car isn't nearly the factor you might expect.

Wide variance in premiums

A study by personal finance website WalletHub found that insurance premiums for cars in the same price range can differ by as much as 39%, with the gap increasing as vehicles get more expensive.

The premiums you pay for your car insurance are driven by a number of factors. They include your driving record and experience, where you live, what kind of other drivers live around you, and what you are driving.

For its study WalletHub said it reviewed premium data from the top 5 auto insurance companies in the U.S. – State Farm Auto, Geico, Allstate Corp. (Esurance for New York), Progressive and Liberty Mutual Group.

It then analyzed the insurance premiums for the three largest states — California, Texas and New York, zeroing in on urban neighborhoods.

Small part of premium tied to cost of car

It concludes that a correlation between the price of a car and the cost of insurance can't be assumed. When the cost of an insurance premium went up, only 22% of that increase could be tied to the price of the car.

The remaining 78% was influenced by body type, age and make of the vehicle. Key findings in the report include the fact that consumers who purchase a new sedan will pay almost $150 less to insure their car than if they bought a 3-year old sedan in the same price range. New cars can be cheaper to insure than even fairly recent models because of improvements in safety features.

Sports cars are the most expensive body style to insure – no surprise there. Their premiums run 24% more than crossovers and SUVs, which cost the least to insure.

Camry vs. Accord

When comparing the annual insurance premiums of some top-selling cars, the study found a 2015 Toyota Camry L cost $2,787 a year to ensure while the Honda Accord LX cost $2,550 for identical coverage.

The Toyota Corolla L, which costs $6,000 less than the Camry, costs about the same to insure.

Whether you are buying a new or used car, it's always a good idea to check with you auto insurance company about what it will cost to insure it before you take it for a test drive.

The Mercedes E-Class sedan is the safest car on the highway, while the least safe is the two-door Chevrolet Blazer, according to a study by the Insurance Institute for Highway Safety (IIHS).

The institute reached its conclusions about the Mercedes, Blazer and 197 other relatively popular vehicles by studying driver death rates of 1999 to 2002 model cars and trucks from 2000 to 2003.

Among four-door midsize cars, the Volkswagen Passat performed best, with an average of 16 driver deaths per million registered vehicles annually, but the Chrysler Sebring had 126 driver deaths.

Among midsize sport utility vehicles with four-wheel drive, the Toyota 4Runner had 12 deaths per million registered vehicles annually, compared with 134 for the two-door Ford Explorer.

The study focused on the rate of driver deaths in various types of crashes, including both single- and multiple-vehicle accidents.

The overall driver death rate, for 199 models studied during the 2000-2003 calendar years, was 87 per million registered vehicles annually, the institute said. The Blazer had an average of 308 driver deaths per million. It also had the highest rate of driver deaths in rollover accidents at 251 per million.

"Large cars and minivans dominate among vehicle models with very low death rates" while those with the highest fatality rates are "mostly small cars and small and midsize SUVs," the study said

The Results

Lowest Rates of Driver Death
Fewer than 30 driver deaths per million registered vehicle years (1999-2002 models during calendar years 2000-03)

Highest Rates of Driver Death
More than 160 driver deaths per million registered vehicle years (1999-2002 models during calendar years 2000-03)

Enterprise Rent-A-Car will pay $2 million in restitution to tens of thousands of consumers who purchased unnecessary liability insurance.

Enterprise consented to a court order resolving three years of litigation in a lawsuit bought by New York Attorney General Eliot Spitzer. During the case, the courts confirmed Spitzer's contention that Enterprise has an obligation to provide minimum liability coverage to its renters and to defend them when they are sued by third parties.

"This litigation resulted in a significant change in the practices of this rental car company that benefits consumers," Spitzer said. "The court order compensates consumers who were deceived into purchasing liability insurance through Enterprise even after the states highest court held that rental car companies are required by law to provide coverage for their renters."

In May 2000, the Attorney General sued Enterprise, alleging that it was failing to provide its renters with the minimum liability coverage required by state law. The minimum amount of personal liability coverage is $25,000 - $50,000 for bodily injury, $50,000 - $100,000 for death, plus $10,000 for property damage. Instead of providing the insurance mandated by law, Enterprise would sue its renters to recover any liability incurred by Enterprise while the renter was driving it.

In addition to not providing insurance, Enterprise profited from the sale of supplemental insurance. By telling its customers that it provided no insurance, according to the lawsuit, Enterprise induced consumers into purchasing liability insurance, known as Supplemental Liability Protection, or SLP, at an extra cost of $6.95 to $7.95 per day of rental. The supplemental liability insurance provides consumers with $1 million in coverage.

In fact, most customers are covered by their own auto insurance policies and do not need the supplemental coverage.

Under the terms of the consent order, each of the more than 105,000 consumers who purchased SLP from Enterprise in New York between April and August 2001 will receive a check from Enterprise within approximately 60 days. The checks will range from a minimum of $5 for someone who purchased SLP for only one day, to a hundred dollars or more for consumers who purchased more than 40 days worth of SLP during the five month period.

In addition, Enterprise will pay $200,000 in costs to the state.