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But by that time, there will be new management to worry about it.
I've been that "new management" that had to pick up the pieces.
However, things you have to factor in for the average worker/consumer are:
(1)Increased local/state income taxes. Not sure how many states actually had income taxes in 1965, but it was probably fewer than today, and I would be willing to bet that the states that did have one, the rates were lower than what we see today.
(2) Higher FICA (payroll taxes) both businesses and employees. I believe a worker's portion of FICA now is 7.5%, in 1965 it was probably half that I would guess. I would need to look that up.
(3) Higher sales tax rates now compared to 1965.
(4) Tremendously higher gasoline tax rates now compared to 1965. In my state, about 23 cents of every gallon is tax. I know, I know some of you live in states where it's much higher than that.
(5) Either new or higher property taxes now in contrast with 1965. There was NO property tax at all where I lived in 1965. In that same place, there surely is one now. And in some states it's a big chunk of change.
So, while I will agree that perhaps Federal income taxes (as a % of income) are not higher now than in '65; the total tax burden on the average worker is tremendously high. If you make $40,000 per year, you are paying around 40% to 45% of your income in taxes of various sorts to Federal/state/local agencies, depending on the state in which you reside. That's a big hit from consumer's wallets. And that has certainly had a major impact on the afford ability issue regarding cars.
If you think things are rough now, Just wait until the Chinese start exporting cars. From all of the projections that I have seen they will be a major sales impact starting in about 8 years.
Tax Rates:
If you think taxes are rough now just wait until the baby boomers start to retire. From all of the projections that I have seen the federal government needs an extra 2 trillion (current dollars) just for social security obligations. Let alone medicare and other entitlements. It is inevitable that tax rates will continue to increase.
The train wreck coming down the tracks started with the social security system in the 1930's. It was working ok until they added on Medicare in the mid 1960's. When baby boomers begin to retire, all the flaws will readily visible. Alas, by that point it will be too late.
Gee... maybe I shoulda saved some money instead of buying a BMW every 3 years, and vacationing in the Caribbean every year.
Nah... If I had saved, they'd just tax it back outta me.
jocko---what will SS and medicare be like 50 years from now? The amount of people paying in and the amount taking out is cyclic. 50 years from now most boomers will be dead and we will have more people paying in than taking out. If we cannot get past the first negative cycle, then we do have a problem.
I appreciate that $400 check I am getting from Mr. Bush, but hey I am not getting a raise this year, and my benefit costs went up about $50 a month. So my net effect is a loss for the year, even with the big economic stimulus package. Did I forget to mention that I, nor anyone I know, has any stock dividends to benefit from this package?
A $30K car for $25K attracts many more buyers than a $27K at $25K car.
'11 GMC Sierra 1500; '98 Alfa 156 2.0TS; '08 Maser QP; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '11 Mini Cooper S
I meant keep the invoice to MSRP spread the same ($2000 in your example) but lower the invoice AND MSRP by $4000. So if the car sells for invoice, it is cheaper by $4000 than if the car sold for invoice before they started doing this. Of course they would have to advertise the new lower prices with price comparisons to previous year models. Toyota did this on the camry a few years ago. They highlighted all of the new features and then added that the price was reduced by $1000 that model year.
An example: MSRP 30K, invoice 28K, rebate 4K. Total paid would be 24K.
New MSRP 26K, new invoice $24K, new rebate 0K. Total paid would be 24K.
The buyer pays the same, but there is no rebate in the second example. I know there are many reasons why there are rebates; psychological, financial, etc. All I am saying is that in effect all the rebates do is set a 'real' market price for the vehicle and since almost all vehicles have some kind of rebate or low financing (that saves thousands) the effect is that the market price is too high for almost every vehicle unless a rebate is offered.
In the example above the true market price of the car is 24K, whether you get to it with a rebate or an invoice price reduction, it does not change the fact that the true market price is 24K.
'11 GMC Sierra 1500; '98 Alfa 156 2.0TS; '08 Maser QP; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '11 Mini Cooper S
" You don't sell the steak, you sell the sizzle"!
'11 GMC Sierra 1500; '98 Alfa 156 2.0TS; '08 Maser QP; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '11 Mini Cooper S
However, at least out here in California, we pay sales tax and annual car property tax based on the SALES price. So if we were to pay taxes only on the net price we would be better off. In other words these rebates actually cost us more than if the car just sold for the net price without any rebates.
An example, lets say you want a car car that has a $3000 rebate on it. If you buy the car out here where sales taxes are around 8 percent then you will pay an additional $240 (sales tax on the rebate) as well as an additional annual tax of around $60 (property tax on the rebate).
So if you keep that car for 6 years that $3000 rebate gives up $240 + 6 x $60 = $600.
From my point of view I would much rather have a lower priced car and no rebates than our current system. For those liberals out there that don't think we pay enough taxes, then the current price scheme is probably just fine for you.
our property tax in Jersey is real estate only. and it has absolutely nothing to do with the selling price.
'11 GMC Sierra 1500; '98 Alfa 156 2.0TS; '08 Maser QP; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '11 Mini Cooper S
My wife brings home a club card from Giant and shows me a rec't showing that she saved 30%.
My question is: 30% of WHAT? 30% of Giant's normal retail pricing, which is an independent issue when compared to pricing at other stores.
Then, another place comes out with a 40% savings club card. It looks like you're saving more at the second place, but are you?
I have a kill all for all the mess - I shop at Wal-Mart Supercenter, where everything is consistently less than other stores 30-40% off prices.
If Wal-Mart sells the same corn for 70 cents a can, the savings from retail at Giant are worthless.
Rebates on new cars always influence appraisers. On a one-year old vehicle getting traded in, why pay anywhere near market value if you can buy a new one $4,000 below invoice because of a rebate?
My mom did it. My sister does it. And my wife does it. None of the men in my family ever say "I saved $xx". We say "I spent $xx."
'11 GMC Sierra 1500; '98 Alfa 156 2.0TS; '08 Maser QP; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '11 Mini Cooper S
But the excise tax is only on vehicles - not other property.
Here in Colorado, my registration fee on my '03 Saturn was something like $400, of which only $60-75 of it was true registration. The rest is tax, which using a formula that takes (I think) the base MSRP of the vehicle and works off of a sliding scale:
2% for the 1st year
1.6% for the 2nd year
1.4% for the 3rd year
and so on. (BTW, don't quote me on the actual % values ... I'm going from memory on something I saw a few months ago).
In comparison, the license fee for our '99 New Beetle was less than $100 this past year.
The good news is that I can deduct that "tax" amount on my federal taxes if you can itemize.
zeus: while I agree with your food shopping example, let me throw this into the mix:
We have 3 grocery stores in my town: Wal-Mart, Safeway and Kroger. While the prices at Wal-Mart are lower than the other two, the service at Wal-Mart leaves much to be desired. They don't have someone bagging your groceries while the other person is scanning them, the lines are usually much longer and the selection is not as good. So, even though it's more expensive, we tend to do most of our food shopping at Safeway and the non-perishible items (tp, shampoo, etc.) at Wal-Mart.
Well, it may also have to do with the fact that our son works at Safeway as a courtesy clerk (bagger, cart getter, "cleanup on aisle 12").
Wait, that sounds like rebates...
2020 Acura RDX tech SH-AWD, 2023 Maverick hybrid Lariat luxury package.
No we don't pay property taxes on TV's and furniture. The car property tax that I was referring to is actually called the Vehicle License fee (or something like that) and is based on the "value" of your car. So a new Mercedes S-class pays proportionately more than a used Geo Metro based on value.
The Vehicle License fee is not called a property tax (by the taxers) but it is in effect a property tax on your car.
The liberals are really good at thinking up ways to get more money out of everyone so that they can "invest" in their poorly run government programs.
So figure a car assessed at $20k. That's $716 owed for the year. I'm glad the real estate rate is only $1.38 a hundred.
John
You are right, if the Social Security system can survive the next 50 years then it will probably be ok. The major problem will be getting the system through the next fifty years.
Class warfare - exclude those that are rich "liberals define rich as those with income over 10k or assets over 20k" from the system regardless of their contributions into the system.
Income taxes - let extra income taxes pay the deficit. After all The problem is that the government spent the "lockbox" so let the rich pay their "fair" share.
Run up the debt - What's another couple of trillion dollars in debt. Think of debt as an investment.
So add these options to the ones that you specified. One of these or some combination of these options is inevitable.
Anyway, I can still complain about car insurance though...
'11 GMC Sierra 1500; '98 Alfa 156 2.0TS; '08 Maser QP; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '11 Mini Cooper S
The Sandman, a middle of the road car lover
But to keep this on subject, how do car dealers feel about people who go to neighboring states to avoid some fees? For example, some states limit the doc fees, others don't. Some manufacturers charge a higher freight fee for certain parts of the contiguous US (New England and NY/NJ) than others.
Personally, I think it all works out in the end, so you should try to stick with the closest dealer that meets your needs in terms of service and integrity.
- Lou
BO said “Some people suspect that prices in a retail store get marked up sometimes so that they can get marked down at a future sale and the price ends up being the same as original but it APPEARS to the buyer that he is getting a really good deal.”
Immediately followed by isellhondas ( a car salesman) saying “That's right!.... It's the PERCEPTION that pushes the customer!" You don't sell the steak, you sell the sizzle"!
I was not saying that reduced pricing is any better than rebates. I was just saying that it would achieve the same effect. Gbrozen said “I'm saying that folks won't perceive that as a good deal like they do a rebate on a more expensive vehicle”. I am not that old, but I can remember a time when there were no rebates on cars and they sold just fine. There have been rebates off and on over the last few years, but nothing like after 9-11-01. My point is that if you are giving a $3000 or $4000 rebate, there is a fundamental problem. That problem IMHO is that your vehicle is over priced to start with for the current market.
I admit I try to look at these situations logically and that may not be the way most buyers approach a car deal (I bet the sales guys are glad of that), but even I missed jasmith’s excellent point. In my state, we too pay sales tax 6-7% when the car is purchased new and an ad valorem (property tax) tax each year based on value. I am picking up a new car this week. It would save me $60 if the car was reduced $1000 vs. having a $1000 rebate, and this does not include any ad valorem tax savings in the future.
Zues also brings up a good point. When comparing similar cars like camry and accord, I would hope most people could figure out that if the camry starts $1500 less than the accord, but the accord has a $1000 rebate, that the camry is the better buy (all other things being equal of course). This is harder to do since no two cars are exactly alike like a can of corn. I do not know what most buyers would do, but I know I would compare the cars based on merit and figure which one has the cheaper overall price.
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Of course, that doesn't apply to some makes (like BMW), where there's no holdback.
Great points about state taxes, sales and use, impacting TCO.
The money circulating in the economy makes the Federal budget relevant to car price discussion. Looking at the facts on that, the Federal deficit as % of GDP during 'conservative' (Republican) presidencies has been more than twice as high as the deficit during 'liberal' (Democrat) presidencies, 1960 to now. The current administration should set new records on that.
Masspector, who said that if you buy a car for cost there is "still a lot of profit" left. Holdback is designed for cars that stay for a period and helps pay for the floorplan or the dealers own "finance charge" to the bank to have them sitting on the lot. Once the holdback is used up it is gone and so is any profit what so ever. Holdback is only 3% of MSRP on a Honda and smaller on some vehicles. Once a car has been sitting around for a few months or sometimes more, how long do you thing it takes to spend $600 from a $20,000 car? If everyone is so sure there is "secret" profit somewhere.......where is it, you show us.
River, a reasonable price for a buyer is invoice but with their overhead and expenses it is not reasonable for a dealer. Even with holdback and a great parts & service department if a dealer consistently sell most if not all of their inventory at invoice they would be out of business in short order.
sellin also makes some very valid points. Just remember that for the dealership to make a profit they can't just sell at invoice all the time. :-)
The number I don't have is the interest rate on floor plan financing.
So, what's the 'typical' interest rate on floor plan financing?
In Sellin's Civic example above, the numbers suggest an interest rate of 10%, or prime + 5.75%. Is that typical?
A salesperson has no decision making power about what the owner can "afford" to sell something for. Salespeople don't get paid on holdback, nor do they get charged back on floor plan expenses. They don't necessarily see any manufacturer-to-dealer money nor do they see the monthly electricity bill. They just do the job that the business owner has hired them to do - just like everyone that's not in the car business. To cry that because the owner makes money the consumer is automatically being ripped-off makes a mockery of everything that free enterprise is about - unless one is prepared to admit that if their own employer is profitable they are ripping off someone else.
By the same token, salespeople responding to the usual guff shouldn't claim things like, "we make nothing ...", etc. because, frankly, they usually have no idea what the dealership makes or doesn't make.
And the more and more I read this topic.. and the longer I hang out here...
The more I laugh. There's some posters who truly think they have even a remote clue about what they are talking about. Guys, ya just do NOT.
As a rule, the new car department runs at a net loss or break-even, unless you own a Lexus or BMW store where it all gets skewed (Lexus dealerships make a large percentage of their profits from sales if you can beleive that!) The talk that a car sold at invoice is "fair profit" is what I find most amusing. Based on who's idea?
Ahhh... you guys dont even wanna know reality I dont think.
Back to lurking
Last year, Honda Oddesseys were selling for MSRP + 2K in the DC area....and they were selling every one they could get. '02 Sienna's were selling under invoice (mine was 200 over invoice -1000 rebate). Why the big difference? The Honda dealer *knew* they would sell the Oddessey to someone else.
Capish?
I'd be curious to know what the metrics are for an averagely-successful store in total. I gather from your handle you are a Volvo dealer, so let's use that.
If I may, what is/are your (assuming you are average):
a) total capital-assets
b) average inventory (new and used) value
c) annual financing costs
d) annual revenues
e) annual payroll
f) annual profit (with all salaries at "market")
g) new units sold per year
h) used units sold per year (at retail)
i) any other instructive metrics
I think many see your big house and country club membership, but do not appreciate the very large amounts of money you have at risk. And in some ways, your long-term prospects are controlled not by you, but your manufacturer. Volvo is riding high, good for you.
But what about the guys with Daewoo, Peugot, Renault, Yugo, Daihatsu, Plymouth and Oldsmobile stores? How did they do? How about Saab, Suzuki, Oldsmobile, Saturn, Isuzu and Mazda stores? How do their futures look?
(If these guys did/do OK too, I'm sure you'll tell us).
Inquiring minds wanna know!
I don't begrudge business owners their profit (though others here might). They have a lot of money invested subject to constant risk.
Anything brentwoodvolvo might share with us makes ua all less-ignorant.