For a business forum, there seems to be an overall lack of awareness of (1) how retail finance works and (2) how manufacturing margins work.
(1) There are two extremes in retail finance and most schemes are somewhere between the two. At one end you have the regular outside finance and the retailer gets a commission. He/she can, of course, give that commission to the customer (i.e. subsidise the credit) if there is enough margin or if they are desperate to move product.
At the other end, the credit is supplied by a company owned by the retailer (or sometimes the manufacturer) and very often, the goods are cheap and of low value and the credit is 0%. Typical here is really nasty furniture and shoddy white goods and laptops. The finance company gives the consumer two years to pay at 0%, but the contract defaults to 25% p.a. over four years if payment is not made in full before the two years are up. The trick here is that the finance company makes it as difficult as possible for the consumer to effect payment. There will be no telephone contact possible and the registered address changes about once a year. The retail outlet, of course, denies all knowledge or responsibility for the finance agreement. The less savvy customer can end up paying about two-and-a-half times the original price for goods that were probably close to worthless in the first place!
(2) There is usually a huge gross margin on mass-produced products. There has to be! We were talking about cars - it costs at least one billion dollars to get that first car off the production line! Sometimes more, if it is a totally new model designed from the ground up.
There are also huge marketing and follow-up costs, which can cost almost as much as making the thing in the first place - recalls, advertising, legal and technical paperwork, dealer margin and support, transport, warranty claims, getting caught cheating emissions figures, - 1001 things the customer seldom thinks about.
And each variation (EU model, Japanese model, US model, left-hand-drive, right-hand-drive, Diesel, petrol, automatic, manual, etc., etc., etc.) costs millions extra. The Honda Accord had to be offered in Europe in about eight basic models. Tech. documentation had to be made in 24 languages and spare parts stored in dozens of warehouses across Europe. All that crazy duplication of effort costs millions and millions. Honda pulled the plug on the slow-moving Accord across Europe and concentrated on sub-compacts and SUVs. In the US, Honda offers the fast-selling Accord at just $25k RRP with two engine types and that's about it. No manual, no RHD and just one set of documentation. A $25k Accord in the US is profitable. The £30k Accord in the UK was not!
The car dealers may (and are!) be squeezed until they burst, but the manufacturers are steadily reducing model options to cut costs and get profits back up to where they need to be. They are also duplicating cars and their parts across marques - VW has four basic car platforms that are spun-out into about 130 marques and models: the Golf and the Passat rear their heads in dozens of guises!
Put chunky wheels and suspension on a Golf and it becomes a Toe-Rag!
