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My explanation is that they've done the math on how more generous financing encourages more people to buy cars, and that the losses they take on the loans is le
by tanderson92 9y ago
My explanation is that they've done the math on how more generous financing encourages more people to buy cars, and that the losses they take on the loans is less than the extra profit they make from the additional car sales.
- taeric 9y agoI guess my cynicism has just grown to the point that I feel some industries have settled on never taking a known loss. That is, this seems like it is the easy answer, and is certainly what folks would do in the small. At large, though, I feel like they are able to have other options. (I fully ack that just because I feel it, does not mean it is the case.)
- tanderson92 9y agoI explained how they're not really taking a loss, since it increases their profits overall. Companies make these decisions frequently; a closely related concept is a loss leader.
- metaphor 9y agoThanks to both you and taeric for keeping the exchange civil.
- taeric 9y agoIf you ever see me being uncivil, please call me on it! I consider it a safe assumption that I was mistaken on anything I'm not an expert on. And on those things, I think the odds might actually increase. :)
- TrickyRick 9y agoSame as with Nespresso machines, the machine is cheap (Probably sold at a loss but I have no numbers on that) because over a lifetime the customer will buy grossly overpriced capsules which will make the money back and more. Game consoles work the same way early in the cycle.
- taeric 9y agoWhat do folks buy as additions to their car? I could see an argument for taking it to dealer's shop. They certainly do what they can to lock out other mechanics. Would be curious on numbers to know how successful that is.
- taeric 9y agoA loss leader has lock in. How does that relate to cars?
- tanderson92 9y agoI did not state that what the car companies are doing is offering the loan as a loss leader; I am saying it is a related concept. I was offering it to help in understanding that companies make tradeoff decisions of this kind. Please don't take my comment as making a direct equivalence between the two.
- taeric 9y agoEven directionally, I don't see how it is similar. I could see it being like door buster sales. Indeed, I mainly expect that is what they are. Convinces people to get in the market for a car, but then actually get something else.
- tanderson92 9y agoI give up.
- taeric 9y agoThere is no need to "give up." My questions are not trying to prove you wrong, but to help educate me. So, my specific question here is what makes it closely related to loss leaders? A concept which actually makes a lot of sense for me. If that was meant in the broadest of terms, then I understand. But "closely" does not imply "broadly" to me.
- eru 9y agoThe problem is that you _seem_ to have a hard time grasping the very simple math involved.
- 9y ago