When dealers chase incentives and sell at a loss, used car prices take a dive soon after.

Certain incentives from automakers, called stair-step incentives, are coming back in a big way. For consumers, that means good deals are available, or will be soon, on many new and used cars. For dealers, it can mean significantly less money if the gamble to offer discounts doesn’t generate enough sales.

Stair-step incentives artificially depress the price of vehicles while targeting certain models the automaker hopes to boost sales on. Do they work? That depends, of course, on who you ask.

Typical incentives from automakers are directed at consumers in the form of cash back offers. We’ve all heard those advertisements! Stair-step incentives are aimed only at the dealers, and pay escalating bonuses as sales targets are met. For example, if a dealer has a target of selling 100 vehicles in a month, he might get anywhere from $100-$750 from the automaker for each vehicle sold within a few percentages of the target.

Graphic from Automotive News

Automotive News says,

But many dealers say stair-step programs wreak havoc on local retail markets. Dealers gunning for their sales bogeys in the final days of a program often slash prices well below cost — willing to sustain, say, $30,000 in losses in hopes of a $100,000 volume-based bonus at the end — and drag down other dealers’ prices in the process.

Consumers, of course, only care about getting the lowest price. Once one dealer in an area offers a drastically low price, other dealers are hard-pressed to not make the same offer. Eventually those lower prices trickle down to the used market (keep an eye on the CarGurus used listings for that).

It’s hard to see how lower prices hurt the consumer, unless, of course, dealers sell at a loss and don’t earn their bonuses. Do that enough times and pretty soon there is no more dealer. That translates to less competition for other dealers and, ultimately, higher prices.

I’d rather see consumers negotiate a fair price on a car than have a dealer take a large loss in hopes of receiving a bonus. How about you?

-tgriffith

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Steve Jobs achieved world domination in his life.

There’s no doubt, through Apple, he changed the way we interact with our world and each other. The iMac, iPod, iPad and iPhone were all game-changing inventions from Apple. Could it be that Jobs wasn’t done with his world-changing ideas before he died in October 2011?

According to Apple board member Mickey Drexler, in an interview with Fast Company, Jobs had his sights on bringing his intuitive style and innovative technology beyond the computer industry and into the automotive industry.

“Look at the car industry; it’s a tragedy in America. Who is designing the cars?” Drexler said. “Steve’s dream before he died was to design an iCar.”

It’s hard for me to agree with the term “tragedy” when describing the state of the car industry here, but the thought of an “iCar” is pretty tantalizing. With Jobs’ passing, though, it’s unlikely an iCar will ever be a possibility. Should it have happened, there’s a good chance it would be like nothing anyone expected, but at the same time we’d all wonder why cars weren’t always designed that way.

As we all know, though, Apple is now in the hands of other people. So instead of some kind of genius iCar from Apple, all we are going to come close to getting is this:

Apple has been granted a patent for a steering-wheel-mounted remote control.

The patent describes a device that looks like the control wheel from an original iPod but mounted to a clamp that grabs your car’s steering wheel. Once attached, it would put control of your iPhone, iPod touch or iPad right at your steering-wheel-gripping fingertips.

Brilliant idea? Ummm…no.

I can’t imagine this is real, or that Apple would seriously consider an outdated, bulky clamp-on controller like this, especially considering there are so many iPod-capable technologies already incorporated in cars. It would be easier, and safer, to just use the controls on your device while driving. Plus, I’m pretty sure it’s illegal in most states to mount anything on your steering wheel.

If this is the kind of new product we can expect from Apple in the era after Jobs, I’m not impressed! A sleek, interactive and intuitive iCar could have been amazing. Since that’s not coming, though, I think it’s best for Apple to stay out of our cars.

Could Apple ever get into the automotive business? Should it?

-tgriffith

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Wisconsin introduced seat belt legislation in 1961. Not until 1984 did the U.S. mandate seat belt use. The same protracted battle is taking place with infotech in cars, and by most accounts, the safety guys are losing.

Audi has proudly announced it was the first luxury brand to offer Wi-Fi and Google Earth access in its cars. Nissan, GM and Ford have followed suit. Web-enabled cars are going to be a fact of life (and death), so get used to them.

The industry is loving it.

Vehicles are now viewed by automakers as entertainment and technology platforms; not transportation. The transportation part is now a given; THAT you get there is far less important than HOW you get there…

That statement is almost outrageous enough to be true. Last year, 3,092 people (9.4 percent of all road fatalities) didn’t get there at all—they were victims of distracted driving—and the total is in fact “considerably higher,” since many distracted driving crashes aren’t counted. The National Safety Council thinks 24 percent of crashes are caused by mobile-phone use.

Naturally, the auto, phone and software companies want to convince us that their distracto-tech stuff is safe, but people in the know were questioning its use as far back as 12 years ago.

Smartphones and Wi-Fi, Facebook and Twitter were never designed to be used in a car, and the regulators know this. But the Department of Transportation is holding still more hearings with inane discussions about how long a driver’s eyes can be diverted from the road.

Agency Director Ray LaHood (right) is a phony (that’s not a pun). After the NTSB late last year announced that all mobile-phone use should be banned in cars, good ol’ Ray claimed that hands-free use would actually be okay, which left the NTSB pantless and legless.

Many of us are disgusted with such delaying tactics. Even the blog writers who offer solutions point out that they are really non-solutions. See “6 Ways to End Distracted Driving.”

Let me repeat what I said the other day: All phone use should be jammed in cars unless the vehicle is parked. In addition, all in-dash displays should be turned off, and all Web connectivity terminated unless the car is off the road with the transmission in Park.

I know. There is about as much chance of that happening as global warming dissipating.

One answer to the problem of distracted driving is for sensible people to buy cars that do not have web-enabled techno-junk. Do you agree?

—jgoods

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The world of auction cars, and the ones that hold the record for the most expensive ever, is cloudy at best.

News sources like to flaunt a 1957 Ferrari 250 Testa Rossa as the most expensive car ever sold at auction. With a $16.4 million bid when the final gavel fell, it is certainly on the list of most expensive cars ever. But does it really hold the record? Let’s take a look.

Not surprisingly, vintage Ferrari cars consistently bring a lot of money into auction houses.

A Wikipedia list (always trustworthy, I know) has the top 3 most expensive cars as Ferraris: A 1961 Ferrari 250 GT sold for $10.8 million, a 1957 Testa Rossa for $12.4 million and another (or possibly the same) 1957 Testa Rossa sold in 2011 for the “record” $16.39 million.

For the most recent sale, the car was touted as the

very first Testa Rossa – the original prototype and rolling testbed for the 250 TR (Testarossa) line, one of the most successful sports racing cars ever.

Even at $16.4 million, it seems like something else has sold for much more than that. Like, almost double. Ah yes, now I remember. The 1936 Bugatti Type 57SC Atlantic, which brought in somewhere between $30 million and $40 million. As far as I know, that car was sold at auction, too. In fact, both the Testa Rossa and the Bugatti sales were handled by the same auction house, Gooding & Co.

Plus, there’s another Ferrari, a 1964 250 GTO, which sold for $31.8 million earlier this year.

So, I have to raise my hand and say, “No, guys, $16.4 million isn’t a world record.”

It’s a heck of a lot of money, and I have no doubt the real record will be broken soon (again), but not yet.

At this level, these cars are purchased as investments only. If I had the money and bought one, I’d still drive it to the grocery store every now and then. Would you?

-tgriffith

Find Used Cars in Your Area at CarGurus

There’s big noise about the fact that General Motors recently pulled $10 million worth of ads off Facebook. Ford made it clear that its advertising would continue, and the two companies are squabbling.

GM says half its Facebook ads never get clicked on; Ford reached millions when it launched the new Explorer. The jury will be out a long time on this one.

While the food fight was going on, more important things were happening. Warren Buffet’s Berkshire Hathaway announced it had bought 10 million GM shares at well below the initial IPO price. That gave the stock a 2.3 percent bump.

Auto sales are on a roll, predicted to top 14 million units this year. Car sales accounted for fully half of the 2.2 percent U.S. economic growth in the first quarter. Take that, Mr. Romney.

And, of course, the Facebook IPO is coming. In our bubble-based economy, many are enticed by such things. Yet GM’s withdrawal was good timing for people to consider the effectiveness of Facebook’s heavy reliance on ad revenue ($3.7 billion last year). Other advertisers may well begin to question whether paid ads work (and just how they work) in the buzz of social media. Facebook’s effectiveness for advertising is particularly being questioned.

The $10-billion IPO is causing a frenzy, and, says Jim Cramer, “this deal is going to be fraught with everything that is wrong with the IPO process.” If the insiders are getting special prices to sell their stock, as reported, a lot of people will be “shocked.” And Internet IPOs have a terrible record.

Facebook corporate pages (top of story) seem to be working for the carmakers, GM included. But I’ve always thought this was a weird way to sell cars. There is no question that social media moves opinion. The question is how that translates (or not) into car sales.

One hopes it is time, finally, for the Silicon Valley boys and girls to get serious and put aside their iPhone apps and social media algorithms to “transform the really big things: transportation, energy, electricity, food production, water delivery, health care and education.”

Forbes publisher Rich Karlgaard thinks along those lines and believes Silicon Valley is in fact moving beyond social media to address these issues. I hope he’s right. Maybe GM already got that message. Or maybe it just bungled with its Facebook ads.

The auto industry has always been very conservative. Can it learn to sell its products differently?

—jgoods

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Used Ford Explorer

“We didn’t put all of the investment into this product and put in all the features with an expectation to be No. 2.”

That’s the kind of brash, confident talking I like to hear from an auto exec. It might sound like something you’d expect to hear from the head of VW or Chrysler, but in this case the quote is from Bill Krueger, vice chairman of Nissan Americas, in reference to the 2013 Nissan Altima.

Yes, Nissan is serious about its latest sedan. Not only does it want a larger share of the market, it thinks it can take down the perennial number one, the Toyota Camry.

The new Altima is about 80 pounds lighter than the outgoing model, which, in addition to a 2.5-liter 4-cylinder engine, helps the Altima to achieve best-in-class fuel economy of 27 mpg in the city and 38 mpg on the highway. Output is rated at 182 horsepower and 180 lb-ft of torque. In some sad news, a manual transmission is no longer available, replaced by a continuously variable transmission (CVT).

The optional engine is a carryover 3.5-liter V6 that produces a more satisfying 270 horsepower and 258 lb-ft of torque. Like the four, the 6-cylinder comes only with the CVT, and mileage is rated at 22/30 mpg.

Inside, buyers get redesigned “zero gravity” seats that are supposed to mimic the position the human body takes in zero gravity, which reduces fatigue and soreness. I’m guessing that alone will put American butts into a new Nissan. There are also some cool tech bits, including steering-wheel-mounted buttons that allow for quick texts that say things like, “Can’t text—driving.” It’s hard to believe we’ve come to the point in society where we need such buttons, but so be it.

The new Altima, as cool as it may be, faces stiff competition from Ford, Honda, Toyota, Hyundai, Kia, Mazda and more. What’s more, there won’t be much in the way of extra financial incentives to buy, either.

Krueger says,

I’m willing to build demand by putting value out in the market place. But I’m not willing to cut and trim profit margin to try and beat a number that one of our competitors is doing. We don’t have any intention of piling incentives on it to try to chase a number.

Would you buy a 2013 Altima over any of its competitors?

-tgriffith

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Used Nissan Altima
Used Toyota Camry

BMW makes great automobiles—and some very strange marketing decisions. Consider the 1 Series. The company announced a couple of years ago that there would be no M1 nameplate, because that moniker was taken by a car no longer produced.

So they built something they fumblingly called the 1 Series M—terrific car, priced to beat the competition ($47,010 to start), though production of 2,700 cars ended in December 2011. Reviews were outstanding.

The 1M (as some have called it, and so should have the factory) “really was an M3—light with a unique looking bodykit and the bi-turbo N54 powerplant.” And it performed as well as the M3 at the Nürburgring (see video here).

Now comes the introduction of the M135i abroad and the 135is (above) in the U.S. The M135i seems to be not really a BMW M car; it simply pushes in that direction.

2013 BMW M135i

It’s a three-door hatch, truly ugly in my view, and has the same engine performance as the 135is (320 hp, 317 lb-ft of torque). A five-door sedan may be coming; no prices yet. The only reason to want this pseudo-M car is that it’s a hatch, but you can’t get it here.

And so America gets the 135is, which is a bit different in terms of equipment and choices. You can buy it as a coupe ($44,145) or convertible ($48,845). Standard is a 6-speed manual; optional is a 7-speed dual-clutch automatic.

Or you can buy the basic 135i coupe for $39,300; it has 20 hp and 17 lb-ft less zap than the 135is. Car and Driver concludes that what BMW has done is to make the 135is “more like a 135i with existing off-the-shelf upgrades.” It sure sounds that way. Yet, compared to the M135i, the 135is, even with its parts-bin approach and expensive as it is, would appear to be the better deal.

The basic problem for buyers is that BMW is really muddying the waters of its M concept, taking a very good thing and milking it for its rebadging possibilities. Once again, too many models, too many choices, too many markets.

It appears that there won’t be any more true 1M cars, at least in the U.S., for a while. Is that a wise decision on BMW’s part?

—jgoods

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Used BMW 1 Series

Two recent developments from Dearborn could be used to make the case that Ford has gone crazy.

Or to affirm the fact that the people running Ford are geniuses.

If a company decides to eliminate its name from advertising, well, why bother advertising, right? Naturally, if someone brought up that idea in a marketing meeting, he or she would be labeled as crazy and promptly fired.

“You know, Mr. Mulally, I think for our next corporate ad campaign we should avoid the word ‘Ford’ and quite possibly not show our logo, either.”

Right.

That same guy is probably the one who recommended a motorcycle engine for the next Fiesta, too.

But, you know, both ideas kind of make sense.

Bloomberg says,

Ford Motor Co. (F), seeking to overcome negative perceptions, debuted a new corporate advertising campaign last month that showed new models stripped of the Ford blue oval badge and that never mentioned the automaker by name.

The article went on to quote Matt VanDyke, the company’s U.S. director of marketing communications, who explained the situation,

The reality of the quality of our products is just ahead of where the perception of the brand is, still, here in the U.S.

As a former ad man, I can translate for you what this means:

There are too many cartoon drawings on the back of Chevy trucks of kids peeing on Ford logos. Some people hear the name “Ford” and still think of a 1997 Escort. Naturally, the solution is to separate the new product from the old logo, at least in marketing. It could work well enough to get people past any initial hesitation and willing to check out the Blue Oval. For that reason, I give this an idea an A+.

What about the motorcycle engine? Well, of course, it’s not actually a motorcycle engine. It’s just not much bigger than one. Officially, the new mill is a 1.0-liter 3-cylinder EcoBoost for use in the 2014 Ford Fiesta. Its actual displacement is slightly less: 999 cc. Crazy low numbers for a car, right? Yes, but its performance numbers look like they will stack up. Expect 123 hp, 0-60 in around 10 seconds, a top speed of 120 mph and, most important, fuel economy somewhere in the neighborhood of 32 mpg city/41 highway.

That’s all achieved with direct injection, turbocharging and variable timing for both the inlet and exhaust camshafts.

Yeah, both ideas are kind of crazy and certainly unconventional. But they are also genius and should propel Ford into a day when no one wants to pee on its logo.

Could you see a 1.0-liter 3-cylinder engine in your future?

-tgriffith

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Used Ford Fiesta
Used Ford Escort

Design study for the F70

We have written about the incredible Porsche 918 hybrid before, with details here and here. Now, 918 Spyder prototypes have been spotted testing, looking a little like the old 917 race cars (see pix here).

The 918 will produce some 770 hp from a V8 and “two independent electric motors, one on the front and one in the drive line, acting on the rear wheels.” All this with decent fuel economy. Production is expected by the end of 2013, so you have time to save up the $850K it will cost.

The new Ferrari F70 is expected to replace the Enzo and may come to market around the same time as the 918, according to Automotive News. The F70 will probably cost more than the Porsche, but has some amazing technology, which we will illustrate below.

Why are these companies building such monster cars?

1. Because they can sell them (anywhere but in Italy, where taxes on such toys and the economy in general are killing sales). But in China and Asia and the Near East (and even the U.S.), Ferrari is doing swimmingly—first-quarter profits were up 13 percent this year.

2. Celebs and the very rich want the exclusivity and performance of the best, at any cost. There are a lot of these “.01-percenters” around.

3. The technology required by tightening emissions standards forces new solutions to get increased power output—with less carbon input and output.

4. These are super-halo cars and provide bragging rights that are worth a lot.

The F70′s powerplant derives from Ferrari’s HY-KERS system, which has been raced successfully, and uses a midengine layout. It uses two electric motors in an unusual configuration and a 6.4-liter V12 that produces 920 hp and should get from 0-62 mph in less than 2.5 seconds.

What interests me more is how Ferrari has achieved this.

It all appears very complex, and so it is. But these cars aren’t built for the street, actually. They are technological test-beds—and just maybe some of that complex tech can be made to work in future cars that some of us may someday buy.

I still think cutting-edge hybrid technology will pay off sooner and (eventually) for more people than pure battery-powered EVs. Unless, of course, we get some kind of breakthrough in battery technology fairly soon. For which I am not holding my breath.

Shelby’s Cobra performed that kind of payoff for a whole new class of cars, and I wonder whether hybrid technology—once it gets simplified and producible at a price—can do the same for more environmentally friendly cars.

Do you laugh at these hypercar hybrid beasts, or do you take their technology seriously?

—jgoods

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A friend wanted to show me her new car.

“It’s a 2004 Subaru Outback,” she said, “and guess how many miles it has on it?”

I looked at the car, which appeared to be in pretty nice shape. No visible dings or dents, clean paint, newer tires. I figured anything under 100,000 miles on the clock would be acceptable. I assumed, since she asked me about the mileage, it must be low. So I guessed low.

“Sixty thousand,” I said confidently.

She shook her head and smiled.

“Nope. Just under 10,000.”

I gasped.

“It was my grandma’s.”

And there, friends, is the barn find for the everyday person: Grandma’s car. Instead of being a perfectly restorable split-window Corvette, these modern everyday driving cars belonged to an elderly family member who owned them since new, had them serviced regularly by the dealer and drove them only to the nearest buffet or pharmacy.

Sure, they may smell like Oil of Olay face cream inside, but they are the Holy Grail of any used car search.

Sometimes, as in the case of my friend, the cars are given as gifts. Sometimes family members are given special deals. Usually, though, you’ll pay a pretty penny for such a low-mileage gem.

How can you find such a car, and how do you know it’s not too good to be true?

You might try starting with CarGurus used listings, but if you see something with exceptionally low miles, act fast! At the same time, though, keep an eye out for scams. If you don’t know the seller, look for signs of an odometer rollback or visible wear and tear that doesn’t coincide with low miles. Ask for service records and, of course, have the car checked out by a trusted mechanic.

That’s sound advice for any used car, but in the case of buying from family or being on the receiving end of a generous gift, count your blessings and take care of the car as well as the previous owner did.

In 2009, I bought a 2004 vehicle with only 24,000 miles on it. Have you ever done better?

-tgriffith

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Used Subaru Outback
Used Chevrolet Corvette