Essay on Automobile Values
When considering supply and demand for automobiles, one must take into account its economical value, reliability, gas efficiency, insurance costs and whether the vehicle is domestic or imported. There are some of the main factors that play a major part in determining the supply and demand analysis in certain vehicles. While the dealer prices are the prices (costs) that the dealership has to pay to have the vehicles in their dealerships. Prices in which dealerships base their vehicles on are known as sticker prices. Therefore, the dealership’s profits would be the difference between the sticker and dealer prices. Car dealerships use target prices to forecast an ideal price for selling each of their vehicles. If they manage to sell equal to or above their target price, they can then make arrangements to raise the sticker price of their vehicles for a much-needed increase in profit the next fiscal year. The manufactures also inform dealerships whether or not a specific type of car was in high demand. If the target prices were not met, then that would serve as an indication that the sale price was inaccurate. The MSRP cannot be changed due to a fluctuation in the market as opposed to target prices.
Although the increase trend in sticker prices was relatively the same for luxury vehicles, their prices had a tendency to be higher than others. Such as, the Mercedes-Benz S600 model had a sticker price of $78,950 with a dealer price of $73,424. The following year, there was a price increase from anywhere between $1,000 and $1,500. This may have been due to a supply shortage this model; which also meant that people were willing to pay more for the car even with a lower discount price because there are not as many that are manufactured. The rise in dealer prices could also be an indication of an increase in labor and materials cost due to the overall inflation in the economy. (“Car…,” 122)
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There is a high consumer demand for imported compact cars due to their reliability factor, along with gas efficiency and fairly reasonable insurance costs.
Particularly, the Honda Accord 2.3 DX model is widely known for its economically low sticker price of $15,400 and a dealer price of $13,715. There was a price increase of about $1,000 the year after. This may have been caused by the fact that there are few substitutes for such cars in this industry. With such a high demand for this car, dealerships each year could easily inflate their prices above the estimated target prices and still move substantial amounts of inventory. (“Car…,” 118)
In comparison to the imports, domestically produced cars also showed a significantly increasing price trend as well. While the imports boasted a higher sale value, the domestic cars maintained a strong and consistent price range of their own. For instance, the Chevrolet Cavalier had a sticker price of $13,160 along with a dealer price of $12,305. Although the price of the Cavalier is not as imposing as the Accord, domestic companies are able to reduce the price without having to worry about any overseas taxes and freight rates. The price increase for this particular vehicle was partially due impart to the domestic manufacturers’ attempt to keep up with the rising demand and sticker price of its imported counterpart. Also, the labor and material costs for domestic cars are more reasonable than that of imported cars. (“Car…,” 122)
There seems to have been a decreasing trend in consumer demand for larger vehicles during this past fiscal year. There are several reasons for such a downward trend in this type of vehicle. Many consumers may feel that the sticker price for such a large sport utility vehicle may exceed the benefits of these particular models. This is when we can see that the consumer will weigh the benefits compared to the costs. We can see that with such a downward trend in total sales and in total profits dealers might have felt that it was necessary to decrease the total price of such vehicles as a last attempt to be able to clear out their inventory for incoming newer vehicle models. The Toyota Land Cruiser model is an example of such a sport utility vehicle that had a reduction in prices, the Land Cruiser had an initial sale price of $52,859 in March 2001. By the 4th quarter of the fiscal year it dropped an initial $300 in price. Only sport utility vehicles dropped while other cars such as sedans, minivans, sport cars, luxury cars, and other cars within the field did not. (“Car…,” 126)
Another factor that affects such a decrease in car prices are complementary goods. This term suggests that if one factor rises or decreases in price then the complementary good will also change. Within the forth quarter of that year we can clearly see that there was an increase in gas prices and a total decrease in car sales. These factors seemed to have played a key role in the decreasing of total price in automobiles and the automotive industry. (“Car…,” 126)
Prices, dependability, gas efficiency, cost of insurance along with the issue of whether or not the vehicle was an import or domestic are elements to be considered when using supply and demand analysis. Both the dealer prices and sticker prices are important in showing consumer demands for a certain vehicle. The idealistic price at which dealers want to sell their vehicles at is called the target price. Luxury vehicles had moderately uniform high prices due to the fact that there are a limited number of them manufactured. Consumers have a tendency to desire imported cars because of its efficient gas usage and durability factors. Domestic cars on the other hand can be compared to imported cars but on a smaller scale. Statistics have shown that the increase in sales for imported cars have relied solely on reliability whereas domestic vehicles have not yet established that standing the market. As for larger vehicles in the market, there has been a steadily decreasing trend because of rising gas prices—which are complementary elements to them. Large vehicles have a tendency to need more fuel so consumers would have to refuel more often as fuel prices rose. Since there have not been any dramatic fluctuations in our economy, the trends will stay relatively the same with a few minor adjustments.
Although the increase trend in sticker prices was relatively the same for luxury vehicles, their prices had a tendency to be higher than others. Such as, the Mercedes-Benz S600 model had a sticker price of $78,950 with a dealer price of $73,424. The following year, there was a price increase from anywhere between $1,000 and $1,500. This may have been due to a supply shortage this model; which also meant that people were willing to pay more for the car even with a lower discount price because there are not as many that are manufactured. The rise in dealer prices could also be an indication of an increase in labor and materials cost due to the overall inflation in the economy. (“Car…,” 122)
__________________________________________________________
__________________________________________________________
There is a high consumer demand for imported compact cars due to their reliability factor, along with gas efficiency and fairly reasonable insurance costs.
Particularly, the Honda Accord 2.3 DX model is widely known for its economically low sticker price of $15,400 and a dealer price of $13,715. There was a price increase of about $1,000 the year after. This may have been caused by the fact that there are few substitutes for such cars in this industry. With such a high demand for this car, dealerships each year could easily inflate their prices above the estimated target prices and still move substantial amounts of inventory. (“Car…,” 118)
In comparison to the imports, domestically produced cars also showed a significantly increasing price trend as well. While the imports boasted a higher sale value, the domestic cars maintained a strong and consistent price range of their own. For instance, the Chevrolet Cavalier had a sticker price of $13,160 along with a dealer price of $12,305. Although the price of the Cavalier is not as imposing as the Accord, domestic companies are able to reduce the price without having to worry about any overseas taxes and freight rates. The price increase for this particular vehicle was partially due impart to the domestic manufacturers’ attempt to keep up with the rising demand and sticker price of its imported counterpart. Also, the labor and material costs for domestic cars are more reasonable than that of imported cars. (“Car…,” 122)
There seems to have been a decreasing trend in consumer demand for larger vehicles during this past fiscal year. There are several reasons for such a downward trend in this type of vehicle. Many consumers may feel that the sticker price for such a large sport utility vehicle may exceed the benefits of these particular models. This is when we can see that the consumer will weigh the benefits compared to the costs. We can see that with such a downward trend in total sales and in total profits dealers might have felt that it was necessary to decrease the total price of such vehicles as a last attempt to be able to clear out their inventory for incoming newer vehicle models. The Toyota Land Cruiser model is an example of such a sport utility vehicle that had a reduction in prices, the Land Cruiser had an initial sale price of $52,859 in March 2001. By the 4th quarter of the fiscal year it dropped an initial $300 in price. Only sport utility vehicles dropped while other cars such as sedans, minivans, sport cars, luxury cars, and other cars within the field did not. (“Car…,” 126)
Another factor that affects such a decrease in car prices are complementary goods. This term suggests that if one factor rises or decreases in price then the complementary good will also change. Within the forth quarter of that year we can clearly see that there was an increase in gas prices and a total decrease in car sales. These factors seemed to have played a key role in the decreasing of total price in automobiles and the automotive industry. (“Car…,” 126)
Prices, dependability, gas efficiency, cost of insurance along with the issue of whether or not the vehicle was an import or domestic are elements to be considered when using supply and demand analysis. Both the dealer prices and sticker prices are important in showing consumer demands for a certain vehicle. The idealistic price at which dealers want to sell their vehicles at is called the target price. Luxury vehicles had moderately uniform high prices due to the fact that there are a limited number of them manufactured. Consumers have a tendency to desire imported cars because of its efficient gas usage and durability factors. Domestic cars on the other hand can be compared to imported cars but on a smaller scale. Statistics have shown that the increase in sales for imported cars have relied solely on reliability whereas domestic vehicles have not yet established that standing the market. As for larger vehicles in the market, there has been a steadily decreasing trend because of rising gas prices—which are complementary elements to them. Large vehicles have a tendency to need more fuel so consumers would have to refuel more often as fuel prices rose. Since there have not been any dramatic fluctuations in our economy, the trends will stay relatively the same with a few minor adjustments.
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___________________________________________________________
Warning!!! All free online essays, sample essays and essay examples on any writing topics are plagiarized and cannot be completely used in your school, college or university education.
If you need a custom essay, dissertation, thesis, term paper or research paper on your topic, EffectivePapers.com will write your papers from scratch. We work with experienced PhD and Master's freelance writers to help you with writing any academic papers in any subject! We guarantee each customer great quality and no plagiarism!
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