Can anyone out there tell me the true cost of a car. Just the metal and plastic. Exclude insurance, advertising, labor, etc. I know I heard it somewhere before but I can’t find it again. Maybe just a generic toyata corolla or something like that. Please post back.
Thanks!
Sam
“the true cost of a car”
That’s not the ‘true’ cost of a car, no more than the cost of a pound of wheat is the ‘true’ cost of a loaf a bread in the store…
Do you mean the “invoice price”, which is what the dealer pays?
The only “cost” you need to worry about is what YOU pay for one…You can not calculate the “true cost” by pricing the raw materials…
It’s IMPOSSIBLE to give a figure on true cost without including labor.
What it seems you’re looking for is the cost of the raw materials?? That is going to just a FRACTION of the cost of the vehicle itself.
Hi Sam. I hope this is not a “conspiracy” question to determine how much money those evil car companies make. However, here’s some general info. Car manufacturinmg costs consist of"
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The cost of amortizing, maintaining and modernizing the factory, as well as real estate taxes…
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The design and development costs of the vehicle.
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The “input costs” such as materials, labor, energy, licensing fees and others. Incidentally, the actual materials are a minor input cost. There is more “Blue CROSS” (insurance for empoyeees) in a car than steel in terms of value. Those “soft costs” came to $1500 or more per car for the BIg Three before the crash.
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Insurance costs for the property and business liability.
Typically, if a vehicles has a list price of $20,000 there is a dealer margin of 15-18% of a vehicle in that price range. A $40,000 vehicle may have a 25% margin, the dealer may pay $30,000 wholesale. Out of that markup the dealer has to pay his whole operation, but cars seldom sell for “list price”.
So, if the vehicle costs the dealer $30,000, the factory margin should minimally be 33% after items 1-4 are included. However, the way the car business was in the last 5 years, GM and Chrysler actually produced these cars at a loss. Efficent manufacturers may get that 33% profit margin. Out of that had to come their sales, advertising , public relation, warranty, and other head office expenses.
So, by now you will have surmised that Factory Cost compared to List Price is somewhere between 57% for compact cars and as low as 40% for luxury cars. Provided the manufacturer is efficient enough to make a profit. Before the meltdown, the Big Three could only make money on trucks and SUVs and some luxury models. They lost money on every small car and barely broke even on intermediates.
As you can see, the car business is complicated and only world class companies consistently make a profit.
Toyota has had only one year of losses in the last 60 or more years. Their cost control is legendary and their warranty costs reasonable.
By comparison, consumer goods sold in department stores may cost $5 at the factory level (in China), and sell for $50 or so. Designer clothes are typical. That highly advertised motor magic formula costs perhaps 43cents to make but sells for $4.95 per can. The biggest single cost here is promotion and advertising.
If any of the above puzzles you, get a basic business text out of the library and it will show you all the typical costs of operating a manufacturing business.
Before I retired a large part of my professional life revolved around finding “True Value” of taxable property.
The meaning in that context was defined by the courts was (short version) what a willing buyer was willing to pay and a willing buyer was willing to accept. Of course things tended to get messy so in the end the resulting value was somewhat different. In the tax law library you will find several shelves of books on the subject.
Docnick did a good job considering the limited time and space available.Just the metal and plastic? Allow me to illustrate the folly of that logic. I’ll ignore th obvious labor and fixed and variable overhead costs.
Let’s assume I’m a camshaft manufacturer and you pose that question to me. My response might be "do you want to cost of only the metal left after I’ve milled the camshaft out of the hunk of steel? Should I include the machine lube used in the process? How about the electricity used to run the lathe? The computer program and hardware??
If I were a casting house casting rocker arms I might ask “should I include the sprew material? The wax parts trees to create the molds? The ceramic mold material?”
If I were stanping body parts, should I include the metal trimmed off of the edges after stamping? How about the welding material that becomes part of the body parts where they’re seam welded togather?
Ralph Nader in his book “Unsafe at any Speed” had a chapter on the Corvair. He accused GM of gouging car buyers by selling a 2300 lb car for nearly the same price as a 3900 lb full size Chevy. He said that a Corvair would be that much more profitable. Being a young lawyer, he was clueless as to how much it costs to build a car and the sensitivity of price to volume produced. I don’t think GM ever made much money on the Corvair since sales were below expectation even before the lawsuits.
The Corvair had almost nothing in common (commonality) with other GM cars, and as a result the unit cost of many components was higher that those in big Chevies, which shared many parts with Oldsmobile, Buick, Pontiac, and even Cadillac, as well as many intermediates…
Cars are not sold by the pound; if that were true, Ralph would have found a Porsche to be a very expensive Volkswagen!.
If carefully disassembled for recycling of the material the pieces might be worth $800. As a crushed heap it is worth less than $450. If
Rod; the going rate is 20 cents/lb for a wreck ready to be crushed. My 3000 lb Dodge Colt got me $60 delivered at the shredding plant’s gate. This car was considered obsolete and no wrecking yard wanted it.
A car with substantial potential for recovering useful parts will bring $800 or so as you say. It depends on the age of the car. A nice car that’s 20 years old will get you little, but a 4 year old accident write-off will bring in more. Wrecking yards her “bid” on those vehicles.
The price has apparently dropped significantly since I last visited the scrap yard, Docnick.
Rod; that would be a good sign that enough scrap is being shredded and adding steel imports, we have plenty to go around. The 20 cents a lb I got for the Colt was in 1997. In 1978 I got $30 (10 cents/lb) for my Dodge Dart, of which very few parts were saleable. India and China have added significantly to the world supply of steel.
Agree, recycled raw materials prices fluctuate. Here we have a large paper recycling depot run by the city. Some years they had to give it away when the market was soft. Other years it brought enough to more than break even.