Friday, December 14, 2018

Why you cannot buy a stripped down vehicle


Reader RDB commented:

Do you think that automakers will ever make it possible to buy a car with fewer features as opposed to cars that continue to have more features? The basics like PS, PB, power windows, AC, cruise are a given and I prefer these things on my vehicle. But I can live without bluetooth, a nav system, 42 sensors telling me I am about to run over something, tire pressure sensors and the list goes on and on. By this rant you can probably tell I'm 50+.

I know manufacturers have tried some stripped down models or more inexpensive versions, but I wonder if they were marketed correctly.

We haven't bought a new car in almost 15 years. It's hard to justify the cost of a new one...
The short answer is "No."

Many of those "luxuries" like tire pressure sensors are federally mandated. The reasons given for mandating TPS were underinflated tires disintegrating and causing accidents and to help improve fleet fuel economy.

Other luxuries were driven by "customer voices" like Consumers Reports and the Insurance Institute for Highway Safety.

The growth in vehicle complexity and cost is a four-strand braid composed of the consumer's willingness to pay for features, the industry's pricing models, the economics of production and external mandates.

I am going to detour into the price of housing because I think it is more intuitive.

Consider a person who wants to build a small cottage in the country. The prices I throw out may be completely unrealistic in your part of the country but understand this is simply to illustrate a concept.

Suppose the lot cost $40,000.

Suppose the well, the driveway, the garage and the septic/drain-field cost $10,000 each.

The builder will have $80,000 into the project before he pours the foundation.

From the buyer's standpoint, the price he is willing to pay is primarily based on the square-footage. Imagine the buyer wants a thousand square-foot cottage. Looking at existing structures of that size he might expect to pay $100k-to-$120k.

The builder cannot build that cottage for $40,000 ($120k-$80k). He will lose money.

Suppose the builder quotes $160k and the buyer agrees. The builder starts the cottage as planned and the buyer finds an existing property for a better price. They buyer bails out on the project. The builder is screwed. He cannot unload the property for what he will have into it.

If, on the other hand, the "cottage" was 2500 square-feet, the builder is protected even if the buyer bails out because 2500 square-feet offers the builder enough pricing power.

In the case of autos, those hidden costs analogous to septic, driveway, etc. are the content forced into the product by stakeholders who are not paying for the vehicle.

What ends up happening is that golf carts and ATVs and gators evolve to "look" like primitive cars and small trucks and fill that niche. When there are enough of them running around on public roads to attract attention you can expect legislation to be written that will impact them.

7 comments:

  1. Artificially low rates of interest also bear some of the blame, people think less about how much those leather seats cost when they're 0% interest over 72 months.

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  2. I like your analogy. As the 'base' gets more expensive, all of the 'options' become standard to keep a profit for the manufacturer.
    I'm with the OP - I'd rather a basic car, but the manufacturer's are more focused on their regulatory and legal requirements, so they keep adding stuff the consumer doesn't need. One example is the recent announcement that all major manufacturer's have agreed to add automatic braking to their vehicles starting in 2020.
    As far as utility vehicles/ quads/ 4 wheelers: Some states already allow those vehicles on the streets, titling them as long as they have mirrors, turn signals, certain tires, etc. Many states have 'low speed vehicle' laws that allow small cheap vehicles with a governed maximum speed that are only allowed on roads with limited maximum speeds.
    To me, the problem with either subgroup of vehicles is the limited (legal) usability of them.

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  3. Can you say "fleet sales"? I knew you could. My son recently bought two work trucks. Roll-down windows, no radio, stripped as it could be. Cruise control is an optional item. Fleet sales have basically, sedans, pickups, and vans. Generally one color (white). But the price is very attractive, and they'll sell you one or a hundred.

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  4. Would still like a base truck. Hard to find where I am.

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  5. Thanks for addressing this ERJ. I do like your analogy.

    Low interest rates and easy lease terms certainly make the car a your dreams a reality.

    I did not consider the cost that government mandates add to the cost of a car. I suspect it is higher than what I realize.

    The .gov will keep places like Rock Auto in business! My '04 daily driver Nissan Titan will survive until the world goes dark. Then the 91 F150 comes out to play! She's a beast!

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  6. In my Texas county, you can get a limited registration for a slow vehicle, like one of the ones you've shown. It just needs to be capable of a minimum speed and is only used on secondary roads. Quite a few people in my country neighborhood do this.

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  7. God bless Texas.

    They recognize the issue and made accommodations. Not sure if I would want to drive that in city traffic but it is a cheap way to travel dirt roads.

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