05 August 2015

The Cost of Car Purchasing

I think it would be fair to say that the television has advanced massively in recent times, both in technology and price. The former has gone up and the latter down. In the case of the auto industry, the car has moved upward in quality and safety, while the price has been a relative constant. That means value for money has never been higher, but the cost of purchase is stubbornly resisting change.

The game changer for the television was the moving from a cathode ray tube to LCD. The car hasn't had that sort of massive change, and in some ways are the same today as the earliest examples. The auto industry has used production volume to reduce costs, brands have merged and cost shared in development and some have worked together on projects. Some claim more could be done on the last point.

The move to autonomous pods would change the car from an emotional acquisition to a conveyance, possibly not even owned by the individual. That would throw in car industry in turmoil and one would imagine huge job losses coupled with company closures. The joy of car ownership would end too.

Many basic elements are still the same
Government regulations have forced car companies now have to spend up large on reducing emissions and looking at alternative fuels, that for now add nothing to the efficiency of the industry. In fact they are a cost burden, hurting margins. The cheaper car seems as far away as ever.

Buying a new, regular car (using NZ pricing) of say $35,000 will be worth something like $20,000 in two or a bit more years. 35k is a lot of outlay, and 15k depreciation so quickly is a punch in the solar plexus. 20k initial price and say 12k after the same period would lessen the financial commitment and and what is lost in depreciation. It would also give the industry new customers who could now see their way to buying new. It would ultimately get rid of very old cars off the road too as lower prices filtered down. Can it be done?

The problem is how to get the car top that lower threshold. Greater co-operation between brands would help greatly. You may think that your Audi is streets ahead of a similar VW, Skoda or SEAT, but it isn't. Perception is everything and the boffins at Audi have done a fine job making their car seem worth what you pay. I say it is a good way to save costs and more of it should be done, even outside a company. Could Jaguar make an SUV for Alfa Romeo. Why don't Peugeot supply a car to Mitsubishi? They sure need some help in that department. Handled well and the cost savings would be substantial for any such alliance.

It's up to the car industry but I know I am reluctant to splurge out on a new car as I cannot see the value. Life is too short to spend my time working to pay for personal transport, when there are so many more important things that can be done with it.

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