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FAST FACT

The largest note ever printed by the Bureau of Engraving and Printing was the $100,000 Gold Certificate, Series 1934. Today the largest bill the BEP prints is $100.

AMERICAN CARS VS. FOREIGN CARS

by David Tarlo
8/20/2006

Are you thinking about buying a new car but you’re not sure which car is the right car? If you pick a foreign car, will you contribute to the collapse of General Motors or Ford? Does it matter if you are patriotic, or not? What about the quality and dependability of the car? If you pick an American car, how do you know you’ll get your money’s worth? What about getting a Mercedes–Benz, like your neighbor, or a Lexus, so everyone thinks you’ve made it? Maybe a Mustang? What to do???

Most people want a dependable, economical yet stylish car that will carry them from here to there in relative comfort. A car that won’t break the bank yet a car they are proud to be seen in. Is an expensive luxury car better than an ordinary sedan? How do you pick the best car for you? And how can you choose from all the different brands and models, especially foreign cars versus American cars?

Let’s clear the air a little and then give you information that will help you answer all your questions and help you with your decision.

The first “automotive” patent was granted in the United States to Oliver Evans in 1789 for an “amphibious digger”, a harbor dredger which was built in 1804, powered by a steam engine, with wheels attached to the bow. It was the first self propelled automobile and the first amphibious vehicle, but became an unsuccessful venture, and was sold for its parts. The automobile, as we know it, began in France (1769), with a steam powered, three-wheeled vehicle. The first ‘bona-fide automobile’ is credited to Karl Benz, built 121 years ago in Germany, and patented 120 years ago (1886). At the same time, Gottlieb Daimler and Wilhelm Maybach were building motorized vehicles in Stuttgart, Germany, and patented the first motorbike. In 1892 Rudolf Diesel improved the internal combustion engine, and in 1897 he built the first diesel engine... That was the start of an international, industrial revolution and a struggle between automobile manufacturers for commercial success and dominance that is still fought every day! In those days, foreign was foreign and American was American!

Foreign cars versus American cars

In 2005 there were 63 million cars and light trucks produced worldwide. The USA produced 11,524,000, Japan produced 10,064,000, Germany produced 5,543,000, followed by China. Would you be surprised to know that many of the vehicles manufactured in the USA are designated as “foreign” while many vehicles manufactured in Mexico or Canada are designated as “domestic” (American)? That’s due to federal regulations that require a “domestic” vehicle to be made of at least 75% domestic parts (content). So, US manufacturers send parts to Mexico or Canada where the cars are built, but are legally sold as “domestic”. Toyota, Honda, Nissan, BMW, Mercedes-Benz, and Hyundai manufacture cars in the USA, with American workers, in American plants, with American research facilities, that are “foreign” because they contain less than 75% domestic parts (content). The picture gets even murkier if we take a closer look at the major manufacturers. They are multi-national corporations with operations and manufacturing arms and partners world-wide. General Motors owns or has a percentage stake in Saab, Opel, Holden, Fuji Heavy Industries (Daewoo), Suzuki Motors, and Isuzu Motors. In 1998 Daimler-Benz A.G. of Germany, took control of Chrysler to become DaimlerChrysler A.G. Ford owns Volvo, Land Rover, Aston Martin and Jaguar, and has a significant stake in Mazda. Let’s see, BMW owns the Mini and Rolls Royce; Volkswagen owns Bentley… Ok, not withstanding ‘automotive nepotism’, for the purpose of this article, foreign means the vehicle has a foreign name-plate and American means the vehicle has an American name-plate!

How to get information

Vehicles build reputations for reliability and performance, and in our ‘information-overload’ world there are statistics and surveys covering just about everything these reputations are built on. Consumer Reports, Edmunds, and J.D. Powers & Associates are the three gold standard research sites you should check out. These sites are objective, in the business of testing and reporting, not selling, and have been monitoring and testing automobiles for decades. You can find information that manufacturers may not want you to know or that you were not aware existed!

Asking people you know about their experience is also helpful, or people you don’t know who drive the car you’d like to buy. Ask mechanics, yes, especially mechanics, don’t be embarrassed… they know which makes and models are more reliable and which ones need constant repair. Keep in mind that “lemons”, those notorious problem cars, tend improve or to disappear from the market-place over time, so with a little effort, you can avoid them. As a matter of fact, all cars have improved. Let me repeat: all vehicles have improved… regardless of their cost, make or model, and are much more reliable and longer lasting than they were ten or twenty years ago. We owe that to competition.

Consumer Reports releases yearly top ten vehicle lists after investigating some 200 vehicles. This year, all top ten are Japanese! Starting with first to tenth place, they are: Honda Civic, Honda Accord, Acura TL, Infinity M35, Subaru Impreza WRX/STi, Subaru Forester, Toyota Highlander Hybrid, Honda Odyssey, Toyota Prius, and Honda Ridgeline. Some of these vehicles will fetch up to 10% over manufacturer’s suggested price because of demand.

Don’t forget your newspaper. All major newspapers print business news and news releases that are informative. Recent local examples: 8/ 7/ 06: The 2007 Toyota Camry and 2006 Toyota RAV4 earned top marks in front and side crash tests… 8/ 11/ 06: GM hopes to appeal… when it brings back the Chevrolet Camaro muscle car… have you been waiting for this car?

Determining Factors to keep in mind

Your choice is the bottom line. The best, most popular cars will cost the most. If you look at the various lists, you see that most foreign cars, including those built in the US (five of the top ten were manufactured in the USA), are more reliable, more fuel efficient and more popular. As it turns out, however, some European brands have declined in overall standing compared to American brands this year. There are American cars (including those built in foreign countries) that are of good quality, reliability and appeal. Consider that in their model categories, foreign cars tend to be more expensive to buy. A foreign brand will cost more to insure as parts and replacement will tend to be more costly than American cars. Also consider that popular cars and luxury cars tend to be stolen more often, and that too will increase the insurance and replacement cost. Maintenance for foreign cars will also tend to be slightly more costly.

Safety may or may not be an issue for you. But if it is, the safer cars will definitely merit close scrutiny. As it turns out, many of the top selling cars are also the safer cars, as in Toyota Camry.
Another factor to keep in mind, although it might seem irrelevant, is the location of and reputation of the car’s dealer. If your dealer is on the other side of town, consider your discomfort when it’s time for maintenance or repair. But more than that, some dealers have a better reputation taking care of customer complaints, while others, sometime brand-specific, like Honda, have a poor reputation for customer care.

Bottom line

Ask several mechanics what vehicle brand they recommend and most will recommend Toyota and Honda (and their luxury brands Lexus and Acura), likely followed by Nissan and Subaru. These brand names are popular and have a solid reputation. But other brands are moving up. The 2006 Hyundai Sonata, built in the US, is compared favorably with Toyota Camry in size, equipment and price comparison. However, the Toyota Camry is the best selling brand in the USA! But as stated earlier, American brands are also improving. According to J.D. Power and Associates’ 2006 Vehicle Dependability Study (based on customer response), Lexus was first, followed by Ford Motor’s Mercury (2nd) and General Motor’s Buick (3rd) and Cadillac (4th), and in fifth place Toyota. Domestic manufacturers are beginning to respond to the competition and they are getting better. And yet, Toyota and Lexus placed at the top in eight categories.

Strictly speaking, American cars are cheaper to buy at comparable size and equipment, but over the life of the car a Japanese car remains the most economical. But this is changing. Tuesday, August 15, 2006, University of Michigan just released the American Consumer Satisfaction Index. After questioning 5,440 car owners who purchased cars in the last three years, the overall (all brands) mean score for car quality improved by a point. Toyota placed first with 87 points. Buick… wow! Buick tied at second place with Honda and Lexus at 86 points; BMW was at 85 points; Cadillac moved to fourth tied with Hyundai at 84 points; Lincoln/Mercury in fifth with 83 points; Mercedes Benz, Nissan, and GMC tied for sixth with 82… Chevrolet, at 81 was seventh, one point above Daimler Chrysler’s Chrysler and Saturn who scored 80 points; followed by Pontiac and Mazda at 79, Daimler Chrysler’s Dodge and Volkswagen at 78, and… sorry folks, Ford tied for last place with Daimler Chrysler’s Jeep and Kia Motors at 77. Buick and Mercury scored high with their owners. This study showed owner satisfaction compared to their expectations, and a high score meant that the car’s performance and reliability was closer to owner expectation! If I were buying, I would consider a car I could afford from one of the cars on this list or other top ten lists like it.

Let’s not forget to factor in fuel efficiency. You think that oil is going to become cheaper? It will not, it’s going to become more expensive! It is going to cost more and more, there is no doubt in my mind, nor should there be any doubt in yours. Your car should reflect the type of driving you do and the distances that you drive. If the driving you do is minimal, you may not need the most efficient vehicle made. On the other hand, if you drive great distances, fuel efficiency will have to be factored in. Unfortunately, American brands are lagging behind foreign brands in fuel efficiency.

For more information on choosing a car, you can check out more articles at the Auto Section of our site.

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