More Reader Qs (6/22/2017)

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Here are some more reader Qs – along with my answers: 

Berl asks:

I was wondering what you think is the cost impact to consumers of the state laws that prohibit auto manufacturers from selling vehicles directly to the public.

Hi Berl!

It’s at least several hundred dollars per car – the “destination and delivery” fees tacked on to every new car purchase, which reflect the cost of shipping a vehicle from its point of assembly to the dealership. If one could pick up a car directly, at the plant, these costs would be eliminated or greatly reduced.

Of course, you’d have to “prep” the car yourself – which means removing all the protective plastic and so on that is installed by the factory – as well as (for some cars) install parts such as air dams and so on that are typically put in the trunk  for safekeeping until the car reaches the dealer.

Beyond D&D, there is also the cost of the mark-up. That is, the difference between what the dealer paid for the car and what the dealer charges you for the car.  So-called “invoice” pricing doesn’t always reflect the actual number, because there are hidden manufacturer-to-dealer incentives and other such that the buyer isn’t aware of.

I agree with you that it ought to be possible – legal, at least – to simply buy a car directly from the manufacturer rather than have to purchase it from a dealership.

Berl also asks:

You pointed out on a recent Tom Woods episode that there were a multitude of sub-compact models that all look like. 

Can you comment on the impact of federal standards that influence the look of vehicles?

I wonder if, absent these standards entirely, there would be more innovation and more variation in styles.

I have always thought that standards interfere with innovation.  An excellent example of that is in the public schools: the more that education is standardized, the less risk taking you get, and hence you get less innovation.  Very evident in school playgrounds:  they all look alike because of the strict codes.

My answer:

There is no question that the need for each car to pass federal crash tests and meet bumper impact and other “safety” standards has homogenized car design. These standards have had the effect of creating a kind of design template, which tends to make cars look more and more alike.

It is very difficult to create – as an example – a radically different front end shape that also passes muster with the Feds. It can be done, but the cost is higher – which is why it is rarely done.     

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  1. The uniformity of design has more to do with fuel economy standards than anything else. Car designers talk in terms of “box” design to describe a certain overall pattern, as viewed from the side. For example, a “three box design” refers to a sedan because you have a small box in front and rear for the engine compartment and trunk respectively and a larger box in the middle for the passenger compartment. A “one box” design is a minivan. SUVs are generally “two box” designs.

    Within any given overall layout, there will always be a most aerodynamically efficient shape. This must be tweaked to permit things like useful door openings, sight lines, etc, and features such as safety refs will also play a role, but there’s only so many ways to vary a design within the aerodynamic limits of tolerance. As gas mileage demands increase, the wiggle room decreases, and every vehicle of a given design begins to look more and more alike. This is also true, mostly, regardless of the size of the vehicle. The same aerodynamic rules apply to a full sized SUV as to a subcompact, thus they tend to look similar, just dimensionally different.

    As for dealerships vs. direct sales, this is one, perhaps the only, thing I appreciate about Tesla. They are sold direct, without middlemen. Of course they’re doing it because they want to maximize their profit, not to help the consumer, as they can cut out the middle man and keep all that money for themselves. That’s a perk of being a government-funded effective monopoly. Tesla doesn’t have anyone to compete against to drive down prices and improve quality, which is partly why they are so expensive and poorly manufactured. Despite this, they still need huge government subsidies to even be almost economically viable with otherwise half-baked technology. It’s also how they get by with environmentally raping tech in the form of their battery packs, the production of which entails far more environmental damage than buying and running a heavy duty diesel pickup for 300,000 miles.

    Back to the subject, the car industry has had dealership middle men for so long that it’s established and ingrained. They provide zero benefit to the consumer, but because every brand has them (except Tesla), no manufacturer is at any disadvantage to any other. It’s a burden and expense wholly borne by the customer. Thus the manufacturers have no real incentive to care. You’ll note that even if you have a friend or family member that can get you a discount on a particular make of car, that discount comes off the invoice price and doesn’t touch the dealer markup or profit at all.

    However, the dealerships have every incentive. Their very existence is what is being challenged. Because they have a lot of our money to spend, they are the source of most state regulations mandating there be dealership middlemen. It’s pure anti-consumer kickback-driven politics at the state level. When Tesla started direct sales, several states’ dealerships started lobbying for even more restrictive laws against direct sales, and they won without even hearing a whimper from politicians.

  2. So frustrating dealing with a stealership; in the age of the internet you should be able to go directly to the manufacturer’s website and order the model you want with with only the options you want and pick it up at a designated location. No added on BS you don’t want and probably thousands less by eliminating all middleman markups.

    • When I bought my last new car the problem was finding someone who would just order it the way I optioned it and not try to sell me something not even remotely close out of their inventory.


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