End of the new-car hunt

At the end of the last month, I had to replace my eighth-generation Honda Accord V6, which was coming off lease on December 6. I had narrowed the choices down to two hybrids with very similar technology, the brand-new Accord Hybrid, and the Ford Fusion Hybrid. Both cars had fairly limited availability, although the Ford had a few years of history on the road, not to mention much better lease rates. The Fusion Hybrid has a horrible selection of interior colors (in keeping with Henry Ford’s famous dictum, they are all black on the inside, cloth or leather, unless you get one that’s black outside and red-and-black inside); the Accord Hybrid has a good set of colors, except that they’re essentially hand-built and Honda is only releasing a couple dozen of them to dealerships each month, so you’re pretty much stuck with whatever the dealer can get. On the plus side for Honda, it’s a lot easier to go from one car to another if you keep the same lessor, and you can transfer the registration; more significantly for me, Honda service is available at reasonable hours (i.e., on weekend afternoons), whereas Ford dealers close early.

I got to test-drive both the Fusion Hybrid (albeit in SE trim, not the Titanium that I would have wanted) and the Accord Hybrid, although unfortunately not on the same day. I thought the Honda was just slightly smoother and noticeably quieter; the shifts from EV to hybrid to regenerative braking were less perceptible; and the interior fit and finish was just nicer than the Ford. The only issue was the terrible leasing deal on the Accord, and that fact that the dealer only had one, it was white (not a color I would ever choose), and it was the “Touring” trim, which has several extra-cost features I would not have paid for. But in the end, the comfort of the Accord Hybrid won out, and that’s what I got, on the same three-year lease as I have had all my cars since 1999. I probably won’t use the navigation system much (I prefer to use the one in my phone, which allows me to look up radio tower locations using a browser) but it does have all the fancy technology features Honda offers (except, inexplicably, HD Radio, which Honda only sells on one trim of the Odyssey minivan). It’s been an interesting experience, looking at everything from serious sportscars to hybrids, diesels, and entry-level German and Japanese luxury nameplates.

The implied interest rate on the Honda lease works out to about 2.8% APR, which is comparable to their regular financing, so I concluded that the Accord Hybrid’s much higher lease payment must be the result of overly-pessimistic residual value assumptions. The lease paperwork seems to bear this out; the residual value on the new car is only $1000 more than the old car, even though the new car lists for $5000 more than the old one. I can only understand this as being Honda’s way of avoiding getting burned if this new Accord Hybrid turns out as poorly as the old one did, and the residual value is the same as a comparably equipped conventional I-4 Accord sedan. But this car has a California warranty (10 years/100,000 miles) on the electrical components, so after three years, if Honda has done the engineering as well as it appears, there should still be a substantial “hybrid premium” left on the car. If it turns out well, then I’ll probably get back most of those higher payments when I turn in the car. (Closed-end auto leases have a guaranteed purchase price at the end, so you can either buy the car for yourself, or the dealer can buy the car from you and share the profit from selling it if the resale price is higher than the residual value on the lease. Obviously, if the resale price is lower than the residual, then you just turn the car in and the lessor takes the loss. Thus, it is to the automakers’ financing arms to make the residual value as accurate as possible, but the car companies depend on leasing deals to sell cars, so they often provide various kinds of subsidies to make leases cheaper.) I’m guessing, since the two cars are very similar, that Ford Credit is assuming a much higher residual value than Honda Finance is, and I know from reading Ford’s financial statements that they do have a subsidy mechanism whereby Ford the parent company assumes some of the residual-value risk on leases.

I picked up the car on Wednesday evening after work — my salesman, Dennis Young at Boch Honda, stayed late to help complete the process — and I finally got home and ate dinner around 10 PM. Because I picked the car up after the normal close of business, I had to go back today (Sunday) to pick up my new registration and get an inspection sticker (something I couldn’t have done at any of the Ford dealers around here since they aren’t open for service on Sunday afternoon). Since I was transferring the registration, I had seven days’ grace period to get insurance and inspections taken care of, but it only took a day to straighten out the insurance — when I spoke to my agent, they had not yet received the paperwork from the dealer, so I let them photocopy the window sticker — and make the transfer official.

At this point I’ve only had the new car for a few days, so I can’t offer any meaningful thoughts about driving it. Since I had a V6 for so long, it will take me a while to get used to the way the hybrid power train behaves, and in particular the different sound the car makes. It will also take a while to find the weak points of the electronics and fancy safety features — I already don’t like the radio, and the adaptive cruise control requires a bit too much following distance for Massachusetts highways — but I’ll report back after a few months of winter driving with my impressions.

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