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Anne Lutz Fernandez
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Entries by Anne Lutz Fernandez

Volatile Gas Prices: Public Anger, Secret Panic

(204) Comments | Posted June 19, 2011 | 4:13 PM

Rich enough to buy a Bentley on a whim or poor enough to be set back by a simple traffic fine, Americans are angry about gas prices. That anger has a long list of targets -- oil companies, politicians, speculators, foreign oil producing countries, local station owners. This upsurge of...

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Driving While Human: Is Car Safety an Oxymoron?

(1) Comments | Posted April 4, 2011 | 4:14 PM

The National Highway Traffic Safety Administration just released its estimate for 2010's motor vehicle crash fatalities -- and it was great news. With 3 percent fewer deaths last year, 1,020 fewer American families woke up today mourning a mother or father, sister or brother, daughter or son.


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Why Is Our Automotive Future Always Better Than Our Automotive Present?

(4) Comments | Posted January 18, 2011 | 9:50 AM

Want to see the future? There is no better place than the North American International Auto Show, which opens to the public in Detroit this week, and as always, has on display an array of dream vehicles whose new technology and innovative features rev the imagination.

That tomorrowland vision...

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The Re-Inflating Car Bubble

(8) Comments | Posted December 6, 2010 | 1:28 PM

Car Crash from Watson Institute on Vimeo.

Just a few short years ago, Americans were buying new cars and trucks at the remarkable clip of 17 million units a year. The auto companies got that many people into shiny new vehicles -- with an average price of over $25K -- by selling them a massive load of debt. They accomplished this, in part, by pushing loans with little money down and terms extended to 6, 7, and even 8 years and by obscuring the total cost of ownership by turning us into payment shoppers (just $199 a month!). With fewer than one in ten cars purchased with cash, car loans grew to become a larger component of national household debt than credit cards, itself a crushing $800 billion dollars.

Like the home mortgage market, the similarly bloated car market was not sustainable at that level. The car bubble couldn't expand forever, with a national personal savings rate approaching zero, but one good banking panic and millions of job losses later, it burst spectacularly. Vehicle repossessions mushroomed, car sales cratered to 9 million, and GM and Chrysler cried, "Bailout!"

But as 2010 draws to a close, car sales are rebounding, up 13 percent in October and 17 percent in November. GM's IPO was oversubscribed because we started buying cars at a faster clip, induced by the year's tremendous increase in car advertising. It would be more appropriate, though, to note that it is car loans that are on the rebound and that the car bubble is inflating again. In fact, the much-touted improved profitability of many car companies is not based on earnings from manufacturing or selling the vehicles but from charging interest to those buying them. In other words, we're only reducing our national debt through recouping bailout funds by increasing our household debt through buying heavily-financed new cars. And the automakers will be under increased pressure in the coming years to increase financing profits as rising gas prices and tightened environmental regulations lead to fewer of the high-margin SUV sales that fed the industry's last boom.

Never mind that, though. There are more people on the assembly line churning out cars again, right? And aren't there jobs to be had in car loan offices? Perhaps. But the real jobs growth will likely be seen in a few years in the car repo industry. Because this newest car bubble is no more sustainable than the last.

Households are taking on new car debt while unemployment and underemployment still plague or loom on the horizon for huge numbers of families. We are taking on new car debt when our education and retirement accounts have not emerged from the pit into which they fell in 2008. When dealers, with a straight face, tell us to "invest" in a rapidly depreciating minivan or promise that a new electric vehicle will repay itself with the environmentalist virtue accrued in heaven, and it works, it's because we've been watching too many ads and listening to too many in the political class and automotive press tell us, yet again, that what's good for GM is good for the nation. And although the new Consumer Financial Protection Bureau is in place to protect us from some other credit abuses, it won't be there to help us with our car loans -- because the auto dealers that account for so many of these loans exerted their considerable political influence to elude its oversight. But it's not hard to imagine this next bubble bursting. How ready will we be to save the industry again with another bailout?

Mobility is a crucial public good. It's a human right, even. Our families and our government shouldn't have to go broke getting...

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The Financial Burden of Being Mobile

(9) Comments | Posted October 1, 2010 | 7:00 AM

Rowena learned about the true cost of cars the hard way. Raised in a happy if car-less California home, Rowena marveled upon getting a steady job after college that, for a small down payment and $199 a month, she could afford a beautiful new Honda. When her lease was up,...

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After the Hummer: 10 More Vehicles We Can Do Without

(5) Comments | Posted July 20, 2010 | 12:37 PM

GM's spring announcement that it would close its Hummer division produced cork-popping among environmentalists and probably even sighs of relief from auto enthusiasts tired of having to defend or apologize for it. It was obscenely big, horribly polluting, belligerently designed, and for a military vehicle, an ironically easy target. So,...

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A Triple-Dipping Auto Industry at the Public Buffet

(17) Comments | Posted July 13, 2010 | 5:21 PM

Like an ill-mannered guest hovering over the salsa and tortilla chips, General Motors and Chrysler have been triple dipping on the American taxpayer. Year in and year out, we replenish the buffet with over $75 billion for road building and repair, with billions more on top of that in crash...

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Why Your Car Dealer May be a New-Fashioned Sexist

(10) Comments | Posted June 23, 2010 | 5:33 PM

Women account for just over half of automotive buys and play a big role when the family chooses a car. So, auto industry outsiders wonder why women continue to receive discouraging treatment in many showrooms. In a recent article, marketing expert Maddy Dychtwald shared one woman's encounter with...

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The Answer to the BP Mystery: Yes, We Can Drive Less

(9) Comments | Posted June 14, 2010 | 4:23 PM

The BP whodunit, which has more suspects than an Agatha Christie novel, only some of them British, has pundits from the Beltway to the barbershop busy at armchair detective work. Some have already reached the conclusion, as does the plot of Christie's Murder on the Orient Express, that there is...

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From Upstream to Downtown: Car Ads Head to the City

(12) Comments | Posted June 3, 2010 | 4:03 PM

The Frontier on the craggy rim of a desert canyon. The Escape alongside a forest creek that cascades over glistening rocks. The Explorer traveling an endless and empty rural road. For several decades, the automakers have been transporting us to the country with images like these, but their fantasy wildernesses--much...

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No E-ZPass for Auto Dealers

(7) Comments | Posted May 26, 2010 | 2:51 PM

While the angry eyes of the public and the media have been trained on possible crimes and misdemeanors at Goldman Sachs, on wild loans made by mortgage companies, and on usurious rates charged by credit card companies, the group that makes more loans to more people than almost any other...

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