Are Cars Too Expensive?

It’s hard not to feel like a victim when the media keeps reminding us that we are being taken advantage of and pointing out the evildoers. This segment from CBS This Morning is fairly typical.

The question posed and answered was: “Can a middle-class budget buy a new American car? Probably not.” They begin with the fact that the average vehicle price increased by about 38% for a new car or truck compared to 10 years ago. Of course they don’t mention that more than half of that amount can be attributed to normal inflation. Some comes from required and optional safety improvements and some from added amenities. 

That situation will likely not improve in the future as GM just settled a six-week strike with 46,000 union members who will receive $11,000 ratification bonuses along with other contract improvements. This sets the level for negotiations with the other two US automakers. Economic understanding reminds us that those added costs will be passed along to the car buying public, but back to the story…

Armed with the average annual take-home pay and the recommended percentage for car payments, Tony Dokoupil visited a couple of New Jersey dealers to price a typical car. The only way he could meet his presumed budget was either with a 96-month loan or by buying a much smaller car.

Where is the problem according to CBS? “The big three auto-makers are retiring many family sedans while rolling out souped-up SUVs and trucks at premium rates that families often can't afford without taking on loans that are now larger and longer than ever” while “a record number of Americans fell behind on their car payments.”

About this time I’m yelling at the TV that automakers don’t make cars that don’t sell. The reason they are producing bigger cars is to meet the demand. They are not the bad guys.

To back this up I found a site from January 2019 headed: “39 Interesting Car Buying Statistics, Trends, & Analysis.” Two facts near the beginning of the list were: 

• “Passenger car sales dropped below 30% of the market share in August 2018 for the first month ever. (USA Today) 
• Sales of mid-size (15.6% decrease) and compact cars (13.6% decrease) fell in August 2018, while compact crossovers and SUV’s rose about 14.8% of the market share. (USA Today)”

That’s what people are buying.

Later in the list is the fact that the “top three features consumers are looking for in a new car are safety (21%), Bluetooth/USB connectivity (15%), and a spacious interior (11%). (Crimson Hexagon).”

Safety is number one. A reliable source provides the unsurprising information that “new small cars are safer than they've ever been, but new larger, heavier vehicles are still safer than small ones.” Not only does this explain the trend toward bigger vehicles, it also explains why the cost of cars may have risen more than inflation – even the smaller ones are safer than ever, plus customers are expecting more amenities.

Finally, Americans for a long time have had a love affair with larger vehicles. In 2016 we read: “With gas prices relatively low, you might be tempted to buy that SUV you’ve always wanted.” A few years earlier: “larger vehicles accounted for 63 percent of total US sales in 2013” and “88 percent of all pickups sold in the US in 2013 were full-size models” and 54% of the SUVs “were on the larger side.” 

A couple of other observations: the percent of budget given to Tony to spend was a range of 10-15%. In the story he used 10% for his examples resulting in a worst-case scenario. There was no mention of a down payment or trade in, but many Americans are underwater with the car they are driving, so this may be fair. But it also could be an indication of where the problem really lies. With cars and many other purchases, buying now to pay later has become normal. (See my last entry.)

Finally, in the story CBS included statements from GM and Chrysler explaining their decisions were based on a “customer-driven trend to larger vehicles” and “based on what the customer wants,” respectively. Much as it’s popular to blame the big corporations for problems, the real problem is the appetite and resulting behavior of consumers. Saving for a car before stepping on the lot and then not overspending seem to be ideas of the past.

New Thoughts on an Old Idea

Looking through my various news feeds, I came across a recent reprint of an article published at Inc.com in 2017. It was called “How to Change Your Life in 5 Seconds” and gives a simple tip on how to avoid procrastination. By merely counting backward from five to zero, mimicking a NASA countdown, you can overcome the inertia that results from feeling unmotivated to do whatever comes next in life, simple decisions like getting out of bed or starting a project.

The thought behind the countdown suggestion references a Harvard Business article from four years earlier that, in turn, presents an interview with a Harvard professor who published a book in 2003, How Customers Think: Essential Insights into the Mind of the Market. The book is about how to ensure your marketing message gets through to potential customers, based on years of research and “drawing heavily on psychology, neuroscience, sociology, and linguistics.”

So what does that have to do with procrastination, or anything else for that matter? The key discovery is “that 95 percent of our purchase decision making takes place in the subconscious mind.” In fact he suggests, “95 percent of all cognition occurs in the subconscious mind.” In terms of buying behaviors, we leap before we look. Decisions in general are not based on logic or rational thought. “They're based on emotion, on how a person feels about the action.”

It follows that if you give yourself time to think about not feeling like getting out of bed or not feeling like doing whatever needs to be done next, the result is procrastination. The countdown is a conscious effort to block those feelings and, in those 5 seconds, it’s possible to be out of bed already or taking the first step toward any other task that lies ahead.

But this practice could go beyond the simple, everyday decisions. According to the original source, the same appears to apply to buying decisions as well – and we don’t only buy material goods, we buy ideas and opinions.

Take as an example the common tips for selling a house. Some include: half-empty closets; turning on all the lights; clean or new curtains, door handles and cabinet hardware; inexpensive shrubs and brightly colored flowers for curb appeal; cut flowers or cookies in the entryway instead of the more typical coatracks and key hooks. All this is superficial. It targets the emotions, the feelings, the 95%. It’s manipulative, and it works.

This goes far beyond buying a house. Retailers study how they can get us to buy more: One site lists 15 tricks such as:

• Oversized sales signs;
• Shopping carts at the entrance to inspire larger purchases;
• High profit items at the front of the store so you have walk past them to get to essentials, which are in the back of the store;
• Most profitable items at eye-level;
• Music to make shopping fun;
• Plenty of elbowroom;
• Customer rewards cards;
• Low-cost impulse items at the checkout; and
• Limited time offers, vanity sizing, and other psychological tricks.

One age-old piece of advice to overcome these mind games is to make a shopping list (of items, or features in the case of a larger purchase like a house or car) and stick to it. Also, what if everyone did a countdown before putting something in the cart? What if everyone did a countdown before driving into the car lot? What if everyone did a countdown before believing what we hear or see on social media, on ads from purveyors of health and beauty miracle products, on the national news or in political speeches? 

Use the countdown trick as a safeguard to buy just enough time to let the critical thinking kick in. Make it your trick to defend against their tricks. Use it to protect yourself from the marketing ploys and emotional appeals aimed at that vulnerable 95%.

Puzzling Mail

I got some strange mail earlier in the week. It was a small postcard apparently from a group of lawyers telling me that I could be reimbursed if I bought towels made by a company called Welspun between the beginning of 2012 and last July, approximately seven and a half years. 

As I looked into it, just out of curiosity, I discovered that Welspun Group is a multinational company founded in India in 1985. It does business in over 50 countries in steel, energy, and textiles, employing about 24,000 people. 

The reason for the settlement is that they have been accused of fraud. According to Fortune, “an internal investigation revealed it misrepresented its 100% Egyptian cotton sheets.” When this came to light, several retailers including Target, Wal-Mart, Bed Bath and Beyond and J.C. Penney either had or was considering severing ties with the company. In addition, two class action lawsuits had been filed.

The postcard must have proceeded from one or both of those lawsuits. It says that the company has set aside $36 million to pay “Valid Claims.” If I have a proof of purchase, I “may receive up to $2.30 for Subject Product towels and pillowcases and up to $9.20” for all other products. Subject products are those labeled as “Egyptian Cotton” or “Pima Cotton.” If I don’t have a proof of purchase, the payments are cut in half.

Again according to the September 2016 Fortune article, “Welspun has committed to implementing new labeling practices.” Furthermore, their website boasts of many quality awards in 2018. So why does the Class Period last until July 2019? I don’t have a clue. The company has also been ordered to clean up their marketing and labeling practices.

Welspun financials show over $100 million net profit in the last 6 months reported, so the settlement shouldn’t be devastating.

After going through all that, I wondered who has really been harmed and what is the value of this entire exercise. Consumer fraud is a bad thing. Ordinarily some government agency would send out warnings or apply fines and require the company to straighten out their practices. In serious cases, some people might go to jail. But does forcing the company to provide the funds so that an administrator can reimburse customers with seven-year-old receipts $2.30 per towel make any sense at all?

 A quick shopping trip on Amazon reveals that 4-packs of 27x54 Egyptian cotton towels are on sale for $43 (regular price $60). A 4-pack of comparable 27x54 luxury towels with the same GSM (grams per square meter) sells for $28. Someone who may or may not be able to tell the difference could have paid $3.75 too much per towel. They now can reclaim some of the difference thanks to $9 million worth of attorney work. The situation is probably the same for sheets.

The whole thing leaves me wondering how expecting Egyptian cotton and getting some other kind of cotton in one’s sheets and towels can mean enough to go through all this trouble. If a company commits fraud, either intentionally or unintentionally, it should be fixed and possibly punished. In large matters consumers ought to be made whole, but for sheets and towels? – Where is the perspective?

Read the Fine Print

They seem innocent enough, pads of paper around a display in the aisle at the mall promising a free chance to win the experience of a lifetime – a $59,900 sweepstakes. No purchase is necessary; just fill out the form. It must be very tempting because it looks like about an inch of forms has been torn off from each of six pads.

The forms ask for name, address, phone number, email, age, income, marital status and spouse’s name. That information was once considered somewhat private, but now people apparently are very willing to give it away for free for a chance to win about 60 grand. But they have a better chance to get something else, something much less desirable.

The bottom of the form under the signature line reads: “I consent to receive phone calls, including prerecorded messages and text messages from Promoters at the phone numbers/wireless numbers/addresses above regarding their offers, products and services, including through an automated dialing system.” That’s right, they are voluntarily signing up for the kind of irritating spam messages that everyone is complaining about and demanding action from Congress! They are giving permission to be pestered by robots about time-share opportunities!

Wow! All that personal information must be worth a lot more than $60,000 to the “Promoters.” (The other side of the sheet is filled with terms and conditions in very tiny font.)

Here’s another example. This comes at the end of a 4-page ad in a Sunday newspaper magazine section.

The ad is apparently for a clinic offering addiction recovery services including detoxification. (As soon as I saw reference to detox, I was skeptical; but it acts as a lure for others.)

At the very end of words and pictures showing how wonderful it is, at the very bottom of the page it begins with,  “The images herein are for illustration only.” The images are of happy people. Further on it says that the company “does not guarantee, warrant nor represent successful completion of its program for any of its clients. Results vary by individual, and [the] program may not be suited for everyone.” Then it goes on to say that they might not accept everyone in the program and gives some excuses about why the results for the ones accepted may vary. Finally, the company "is not responsible and expressly disclaims all liability for damages of any kind arising out of use, reference to, or reliance on any information contained in this advertisement.” It directs readers to a website.

Basically, that translates into “maybe and maybe not.” After three-and-a-half pages of happy talk, this is something of a letdown. The company doesn’t promise anything. And they are very adamant about that non-promise. If a client goes through the program and does not get the results expected, it’s not the company’s fault. I would be willing to bet that the first requirement upon entering such a facility is to sign a page or two of documents acknowledging understanding of all their disclaimers.

Part of this song and dance about not being responsible may raise suspicions about the effectiveness of the treatment, but another part must be attributed to a typical reaction among Americans who are disappointed – blame someone else and take them to court. Nevertheless, reading the fine print and all the disclaimers before entering into any agreement leads to better decisions. If it looks too good to be true, guess what.

As the world gets more fast-paced and complex, it becomes of greater importance to pay attention to details. People trying to sell us things, whether it be services, products or ideas, have more tools to trap the unsuspecting and more lawyers to separate them from whatever consequences they may experience for their questionable decisions.

What We Line Up For and Other Perspective Examples

Last time I wrote about perspective with an emphasis on gratitude.  Another aspect of perspective is living according to core values.  Living according to your values means that what you profess to believe or hold as important is reflected in your words and actions.

We often see contradictions to perspective in what we line up for.  It is not unusual for a television reporter to ask, “How long have you been standing in line?” or “What have you been doing while waiting?”  The typical scene is a long line at a store or entertainment venue waiting for the opening or the opportunity to buy tickets.  Publishers often release new books at midnight expecting lines, as was the case when lines of children formed for Harry Potter books.  Sometimes the first in line are in tents, having camped out overnight.  Virtual lines form in Internet waiting rooms for tickets to sporting events and concerts.  Some sell out in minutes.

Yet when voter turnout is below 50%, the politicians argue that Election Day should be made a holiday because people are too busy to make it to the polls.  It’s a big inconvenience.  How many parents would wait in long lines to talk to their child’s teacher at the regular conference?  When the Pope visits, it’s a big deal in the US as in other countries, but I’ve never seen a line outside a church to get into mass, where Catholics say they believe God is present.

But what about smartphones?  ABC reported recently, “Despite [the fact that the company said it had already sold all available iPhone 7 Plus models through pre-orders], lines had still formed at Apple's retail locations across the country hours and -- in some cases -- days ahead of the phone's release.” Some lined up because they wanted one for themselves.  Others admitted to being scalpers, expecting to cash in on the demand by selling the phone at a marked up price.

I commented back in February 2013 about observing over a dozen eager customers lined up at the mall waiting for a shoe store to open.   The first in line sat in a folding canvas camping chair playing on his phone.  When I looked it up later I found this line signaled the return of the Nike White/Infrared Air Jordan 6, listed at $170 a pair.  I was grateful that the competition wasn’t as vicious as it was in other places, for example, Madison, WI last March where police had to be called to breakup fights.  (For many more examples and pictures, Google: waiting-shopping-fight, or anything like that.  It’s definitely not limited to basketball shoes.)

Perspective is not, “It’s OK to hurt other people as long as I get my bargain.”

Perspective also is not, “I worked hard to get into a good university and that gives me the right to be offended by the least little thing – and the college administration must object to anything that makes me unhappy or uncomfortable and require everyone else to change their behavior to suit me.”

From Fox News:  “A University of Wisconsin-La Crosse student had a serious complaint for his campus’ official ‘Hate Response Team’: he was ‘very upset’ by a Harry Potter mural in a college dorm.”  The mural represents a character from the movies changing from nerdy-looking to mature-looking as a result of college experiences.  The objection was that it represented white power, man power, cis power, able power, class power.  (I hope, at the risk of offending someone, he or she didn’t accidently omit any other victim class!)

And speaking of he or she, “to help foster inclusiveness” the University of Michigan announced that students could choose the personal pronoun they want faculty and staff to use when talking with them.  The choices are listed as:  “he, she, him, his, ze, etc.”  (“Ze is a gender-neutral, third-person singular subject pronoun used in place of the masculine he or the feminine she, according to Dictionary.com.” – Is “it” also third-person singular gender neutral – or is it only neuter gender?)  When I talk to someone, I usually say “you.”  If they are not there, and I refer to them how can they be offended?  But to be on the safe side professors must comply.

The “etc.” implies more options.  I wonder if they are allowed to make up their own.  If I were a U of M student, my personal pronoun would be “Wolfman”!

But seriously, maybe these students should look around and see how lucky they are to be given the chance to get a great education in a great country.  They weren’t born in a country at war or where the vast majority otherwise fight for survival everyday.  Maybe they should get a hobby other than being offended.  Maybe they should be preparing for the real world where everyone is not required to walk on eggshells for fear of offending – although the “real world” also seems to be moving in that direction.  Maybe they need some perspective, and the rest of us, starting with college administration, need to start leading by example.

More Discipline Evidence

I was not surprised, more discouraged, to see this headline on CBS:  “Nearly a third of Americans have no emergency savings.”  Five months ago a similar survey from Bankrate.com reported that about 63 percent would be unable to deal with a $500 car repair or a $1,000 emergency room bill.  Surely this doesn’t mean one-third of Americans don’t have emergencies.  Rather it’s more evidence that Americans have a problem with discipline in their spending habits.

The CBS piece points out that the number who have enough stashed away for at least six months has risen from 22% to 28% in the last year, but it’s still not good news for the non-savers or for the rest of us who may be affected if they begin defaulting on bills. 

Of course a natural reaction when someone is accused of weak discipline is to find an excuse.  (Weak discipline often goes hand in hand with weak responsibility.)  Here CBS comes to the rescue with “11 Tricks Retailers Use to Get More of Your Money.” 

These tricks can be condensed into a few categories.  Some have to do with offering prepared foods:  precut or prewashed or heat-and-serve.  It would be cheaper to do the washing and cutting and preparation at home, but buying prepared foods should be the result of a conscious decision to trade your money for free time rather than an automatic decision.  Another category covers bargain displays, soothing music and confusing store layouts to delay shoppers, getting them to spend more time (and money) in the store.  Finally, constant sales and promotions try to make almost everything look like a bargain, even when a product rarely sells for the full price.  Most of these tricks can be defeated by the age-old advice of shopping with a list and sticking to it.  (I’m surprised the writer left out the common trick of pushing an extended warrantee to get you to buy breakdown insurance on a brand new item.)

I wrote last time about how going after false advertising and other fraudulent activities keeps the FTC very busy.  They can hardly be expected to protect us from these little “tricks” too.  Americans need to take some responsibility.

Finally, some people attempt to control their spending by eliminating credit cards.  This strategy has some significant hidden implications and costs.  Not using a credit card (responsibly) affects your credit score, which in turn can make it more difficult to buy a house, a car or other big-ticket item.  Lower credit scores increase the cost of insurance and travel and may reflect poorly on you when applying for a job.  In addition, credit card companies become your ally when you face cases of fraud or have a dispute with a seller.  You also benefit from any cash-back program, have a complete record of spending and don’t have to carry a large amount of cash, especially for emergencies.  When used properly, credit cards have many benefits.

Even though the trend is in the right direction, a large proportion of Americans still have inadequate savings.  It’s futile to blame it on retailers’ tricks or to try to fool yourself by cutting up credit cards.  The right answer, the real solution, is to know it’s up to you, and only discipline will do.  It is hard to imagine that a large percentage of those without savings and living from paycheck to paycheck can’t find at least one small sacrifice or habitual extra outlay to cut as a source for a small savings plan.  It may seem to hurt at first, but it’s a lot healthier than living with the constant stress of dreading the arrival of the next unexpected bill or emergency.