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Why Are Cars So Expensive!?

After all, they've been making them for over 100 years - surely they can make them cheaper?

34w ago
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If you're anything like me, at some point in your life you've probably wondered why cars are so expensive. It seems like most new cars end up costing in excess of $25,000 AUD before you can get anything worth driving, and this seems like a huge purchase. To explain the reasons behind this, I'll uncover the mechanics behind car production and pricing, in a simplified way that makes it easy for most people to understand.

IMPORTANT!

While I am not a professional in the field of car manufacturing and related areas, I have done extensive research on this topic, and have external knowledge regarding it. If you have any futher questions, feel free to comment below.

Part One: The Mechanics Of Car Pricing

There are usually 5 defining factors in regards to the pricing of a car:

1. Materials Used And Features Of Car (Build Cost)

2. Company (Size, Reputation, etc)

3. Car Type

4. Country Of Origin In Relation To Yours

5. Currency Differences

1. Materials Used And Features Of Car

A fundamental rule of the car industry, is that parts mean price. A car that is made with steel, plastic and cloth, is obviously going to cost less than a car made with carbon fiber, leather and wood, as these materials are much more valuable, and have to be treated with care in order for them to mantain their condition. This is one of the key factors that determines the price of a car. Most "cheap" cars have a body made of a mix of plastic, and steel, while most higher end cars have a body made of carbon fiber, and aluminiun. Steel is heavier than Aluminium, and does not rust, unlike steel. It is also very malleable, and can be shaped to make more exotic designs. As for the features, most cars contain a host of computers, which handle multiple tasks that were once thought to be unachievable by a car, such as emergency braking, active cruise control and 4 zone climate control. Computers are not only heavy, but they are expensive, and until there comes such a time that computers like these become a necessity, rather than a nice addition, then perhaps they will be cheaper.

Ant Rozetsky On Unsplash

Ant Rozetsky On Unsplash

2. Company (Size, Reputation, etc)

For obvious reasons, car manufacturers generally keep to one field of cars. For example, Toyota mainly makes cheap cars for everyday use, that will last forever and be cheap to own. To contrast, Mercedes generally makes higher end luxury and performance cars, directed at the wealthy. Car companies have a reputation to uphold, so they generally won't edge out of their comfort zone, unless they're certain the public will follow (ie. Lamborghini would never release a cheap hatchback, designed for young people), and will usually conform to their respective modus operandis.

Bernie Almanzar On Unsplash

Bernie Almanzar On Unsplash

3. Car Type

This is perhaps the most obvious one, and that is that the car type determines the price range. At the bottom end of the scale, the cheapest cars, are usually hatchbacks and SUVs, while on the other end of the scale are coupes, sport and supercars, and convertibles, which are usually priced in a much higher range than the latter. Companies will usually follow this idea, and won't usually make a cheap sportscar, or an expensive hatchback, although there are exceptions (Toyota 86 and Mercedes A45S).

4. Country Of Origin In Relation To Yours

This is the most straightforward answer. Cars cost a great deal of money, even after the purchase of one. Some of the time, the first major expense is actually getting the car shipped to your location, and this price varies depending on supply and demand, and on distance. For example, if you wanted to ship a Ford Focus RS from the US to Australia, you'd be looking at around $5,000 for shipping. This is insane, considering that the car costs around $45,000 USD already - but if you're spending that kind of money on your car, then you probably don't mind the $5,000 shipping cost, but if you're buying a cheaper car, $5,000 is a lot, although it may change depending on make/model.

5. Currency Weaknesses

Not all currencies are created equal; The US Dollar is much stronger than the pitiful Australian dollar, so conversions have to be taken into account when buying a car. Furthermore, it's much cheaper to buy an American car from America than to buy one from Australia.

So there you go - the 4 main factors that determine a cars price, and why they are so expensive! If you have any further questions, feel free to comment below!

This article is a part of my new series called Auto Explained. You can find it on my website, which will open on October 24th!

Thanks For Reading - If You Like What You See, Comment What You Think!

CITATIONS:

“The 10 Biggest Expenses in Life and How to Reduce Them.” Pocket Your Dollars, 16 Jan. 2020, www.pocketyourdollars.com/the-10-biggest-expenses-in-life-and-how-to-reduce-them/.

9 October 2020 · Richard Berry, et al. “Buying a New Car? Beat Currency Price Hikes.” CarsGuide, www.carsguide.com.au/car-news/buying-a-new-car-beat-currency-price-hikes-22158.

Fentahun, Mekonnen Asmare, and Prof. Dr. Mahmut Ahsen Savaş. “Materials Used in Automotive Manufacture and Material Selection Using Ashby Charts.” International Journal of Materials Engineering, Scientific & Academic Publishing, article.sapub.org/10.5923.j.ijme.20180803.02.html.

“Shipping a Car to Australia: Costs and What You Need to Know.” Ship a Car Direct Blog, 22 June 2018, www.shipacardirect.com/blog/shipping-a-car-to-australia-costs-and-what-you-need-to-know/.

Staff, US Inflation Calculator. US Inflation Calculator, 13 Oct. 2020, usinflationcalculator.com/.

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Comments (3)

  • There's one thing you forgot. TAXES. It's a huge part of the car in a lot of countries. For instance an MINI JCW GP is in the UK about 36.000 pound, but in my country exactly the same car is 53.000 GBP. The difference in price is just taxes. Have fun with checking out the price in Singapore, that will really will surprise you.

      7 months ago
  • There’s also depreciation of the dollar itself. A Porsche 911 C2S in 2012-2013 was around $108,000. Adjusted for inflation thats around $115,000, which is why car costs have seemed like they have risen. But, yes, you make valid points. I just hope my first car, hopefully a Golf, will still be affordable.

      7 months ago
  • Good cars aren't getting cheap. Cheap cars are getting good.

      6 months ago
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