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Buy American Cars (or Not) (priceonomics.com)
37 points by omarish on March 16, 2012 | hide | past | favorite | 53 comments

We bought an American Toyota Sienna. It was made in Kentucky by American employees, with the profit margin going to a large, multi-national corporation. Its competitors were a Canadian Dodge, a Canadian Ford, an Alabaman Honda, or a Chinese Kia - each with its profit margins going to a large, multi-national corporation.

I'm not even sure what an American car is.

Yup, the Toyota Sienna is a (North) American built car.




So are...

Honda http://en.wikipedia.org/wiki/List_of_Honda_assembly_plants

Nissan: Smyrna, Tennessee; Canton, Mississippi; Decherd, Tennessee

Mitsubishi (DaimlerChrysler)

Mazda (Ford)

Subaru (GM)

Isuzu (GM)

It is very very difficult to import a truly foreign built car. There are many many obstacles in the way. The "Made in Japan" cars are leaps and bounds ahead of anything built "for" North America. If we were actually able to buy them here, the prices for cars from South East Asia would totally disrupt the North American car market -- maybe there are some startup ideas in this!

The "most American car" has been the Toyota for a few years: http://blogs.wsj.com/drivers-seat/2010/06/23/made-in-usa-a-t...

It's interesting to look at this kind of data, but there are a few correlation-causation flaws. For example, the final graph is titled "How Bad Grammer Affects Car Resale Prices". We cannot say that the bad grammar is the cause of the lower sale price, only that it is correlated. It is just as likely that undereducated individuals are correlatively more likely to own less expensive cars and use poor grammar.

Came here to say the same thing -- perhaps less educated individuals are more amenable to lower prices, more willing to bargain, less understanding of market prices... but that's all correlative.

The right thing to do is a buy a USED car with decent mpg. Saves massive amounts of energy creating a new car.

Of course it's not the "patriotic" thing because it would collapse a good chunk of the economy built around Detroit if no-one bought a new car for a year.

I don't expect everyone to drive a 15 year old car like I do, but I simply do not understand why people buy brand new cars when the previous year model with only a few thousand miles will be thousands of dollars cheaper.

Where do you think your used car is coming from? If no one bought a new car for a year whose car would they buy?

Buying used (or coming off lease) is generally a wise choice, but sometimes there really is a qualitative feature difference between this year's model and previous ones. If you are selecting a vehicle with mediocre milage in the first place, getting a new model could mean a 15-20% difference in mpg and that will probably pay off the price differential between the new car and a used car.

What would happen is the price of new cars would be drastically slashed until people started buying them. This would start a chain reaction that would propagate all the way down the supply chain.

For the reason why this would actually be a good thing, I recommend (to everyone who will listen!) to read How an Economy Grows http://freedom-school.com/money/how-an-economy-grows.pdf

Its kind of long, but its a very entertaining read.

I'd argue that right now is about the dumbest time to buy a used car -- nobody bought cars in 2009 or 2010, so there is a shortage of off-lease or similar vehicles.

The smart money keeps the car they have until the market settles.

I think right about the perfect time to buy a car is after the initial 5 year break in - preferably with someone else doing the break in.

That makes me feel better.. I bought a 2006 Accord last November with 70k miles on it for $11,350.

That's exactly how you should do it.

05 GTI turbo new? ~$18,000

05 GTI turbo when I bought it with 97k miles, all dealer maintained? $9k

Environmental reasons aside, buying used vehicles in good shape is an excellent way to judge reliability. The 5 year break in period not only provides a prospective used car buyer with a good idea of reliability, but it also allows you a great gap of time for TSB's and recalls to pop up, so you know exactly what you're getting.

Because lots of people are idiots, especially so when it comes to buying a car. People want to show off.

I'm glad we have them, so I can buy a barely used car at a 30-50% discount.

The problem with this "a used car loses 20-30% of it's value when it goes off the lot" thinking is that the used cars that people sell are statistically more likely to have problems than the new car that comes off the line.

A person less likely to sell his/her used car if it's running great.

Thus the "used car discount" adds in some % reduction due to it's selection being amongst a less healthy population of vehicles... probably not as much as 30-50%, but probably at least half that.

Maybe I'm reading these graphs poorly, but doesn't the type of car people buy seem to correlate highly with the affluence of the area? There's more money in NY, LA, SF, San Diego, etc. (as shown by the graphs at the bottom), so more people in those cities drive nicer (european) cars.

What am I missing?

Honestly I am seeing simply randomness here.

If you plot any piece of random data, and then sort by frequency you'll get a graph that looks more or less like this.

I think you should verify your data in two ways:

1: Plot the graph for each year separately, and see how correlated the years are. If the rankings are the same year after year then you have something, otherwise it's just random.

2: A second thing is randomly divide American and non-American each into two groups by model (just randomly assign each model into american 1, american 2, non 1, non 2). Then plot the data for each group in each place, and see if the rankings are the same - if they are, then the American vs not distinction is valid. Otherwise, again, you just have random data.

You think it's random that Detroit buys American cars and New York doesn't?

I'm sure there's some noise here, but the above strongly confirms conventional wisdom.

Detroit I get - but what's special about New York?

Try parking in Queens sometime.

"American" small cars have a reputation that is not so good.

Many commentators talk about what the "American car" means, that there is no such thing any more, cars are internationally designed and produced, etc. All correct, I suppose. But notice that the linked article is using the combination of words "American car" as a shortcut for the "American branded car", which they also mention several times.

And indeed I think a commentator has remarked that the focus is on the consumer behavior, not the car industry per se. If the distinction is ignored by the main body of the customers, it can be not too important for the researchers as well.

I admit that I know what they mean by "American car", but I dispute that their definition is actually meaningful. I lived in a very small Midwest city when we bought our Sienna. Neighbors driving a Mexico-made Chevy Suburban asked why we didn't buy an American car. What makes GM - a publicly traded corporation - substantially more American than Toyota - another publicly traded corporation? Both have American and non-American factories. Both have American and non-American employees. Both sell to American and non-American dealers. Other than marketing image, what's the fundamental difference?

  what's the fundamental difference?
Perception. And it should not be neglected. (Especially by the researchers who study it!)

This is somewhat misleading and certainly not due to patriotism.

Car companies have massive discount plans for workers, friends and family, supply chain workers, previous customers, etc.

Detroit has lots of automotive industry workers, and thus for many people around Detroit, it's silly not to buy the car that you can get at a huge discount. This isn't necessarily an American vs non-American choice, since workers are typically eligible for a steep discount with only one car company.

Around the time that Japanese automakers began producing quality products, automotive execs in Detroit looked out their office windows and saw an increasing number of competitors' cars in the parking lot and it scared them. What kind of statement is it when a worker buys the competitor's product. So they offered steep discounts, which are pretty much guaranteed to result in workers buying their employers' product.

In more recent years, this has also been used to boost sales numbers in times of crisis. US automakers have had miles of unused tarmac near Detroit Metro airport filled with cars that they couldn't sell. At some point they just offer a steep employee discount and now a bunch of dud product that is losing money can be turned into a few months of strong sales. By using employee discounts for this, the firm is not seen to be succumbing to massive widespread discounting, and so the technique stays off the radar fairly effectively.

When you consider the cities that have automotive plants, supplier manufacturing plants, etc. and all the discounting going on in these areas, the chart starts to make a lot more sense.

Now for a small rant: Ironically, preventing workers from experiencing competitive products seems to have created tremendous myopia in Detroit and may be responsible for the decline of the US auto industry. Detroit is still using cheapo vinyl and plastic on midrange and even low end luxury cars, far inferior to the materials used on low trim-level Honda and Hyundai models.

One can imagine that if more workers had needed to think carefully about what they wanted to drive, the handwriting would have been on the wall and something could have been done about it before it was too late.

Note to business owners. If you have to discount your product by over 20% to get your own employees to buy it, take a closer look at what they prefer about your competitor's product.

I disagree. I worked for Chrysler near Detroit during the mid-90s. The Chrysler employee discount wasn't much better than if you did a good job bargaining at the car dealer.

In the Detroit area, there was tremendous pressure to buy American. I observed this both from friends and coworkers. There was definitely at attitude that you should support the local economy, especially if you're employed by one of the Big Three. If company X is employed you, then you need to buy company X's product. It's almost as if you owed it to your employer, that your paycheck somehow has strings attached, that the proceeds should never be used to purchase a foreign car.

Chrysler took it a step further and forced non-Chrysler cars to park in the "competitive vehicle parking area" of the employee parking lot - which happens to be the farthest few rows.

If you actually comparison shop and get final quotes you'll find that the employee discount is actually a much better price, particularly on leases.

The mid 90s was also toward the early edge of the use of the technique to generate sales.

To give you an example, a vehicle that the typical person would lease for around $400 per month would be available to an employee for about $275 per month. Chrysler executives get a new free lease every year, even after they retire.

I don't think it's too outlandish to expect people who work on building a product to buy the brand of product they help manufacture.

Imagine Google engineers NOT using GMail --or, rather, avoiding GMail. Exceptions for studying the competition and all.

Imagine the pressure form colleagues. "Yeah, I work at Google, of course, but I prefer to use Hotmail. I don't even have a GMail account".

It's their version of dog-fooding it. Albeit, one with greater bottom line involved.

I've met many Microsoft employees who use iPhones. Can you blame them?

I believe that as an employee, I am free to purchase any product or service without any obligation to my employer.

In a similar manner - if you aren't driving a "north american" car you're not even allowed to park in any of the close lots at the local GM plant. you basically park further away then everybody else as your punishment. When mixed with the large price discount for buying from GM it is basically a fool's game to buy anything other than a GM here. If you're an employee/partner/supplier/ or know an employee/partner/supplier.

For the rest of us who don't get discounts.... the world is our overpriced oyster.

tiny nitpick, the typical three letter code for Japan is JPN, not JAP.

Thanks for pointing that out. Fixed it!

This explains a few things to me:

I feel a particular affinity between D.C., SF and NYC, I wonder if it's the similar mix of cars that do it?

More importantly, I see sales figures for some American cars, and find them unbelievable. I see way more Hondas, Toyotas and Hyundais these days then just about anything else. Stop at a stop light and I guarantee there will be on of the above three cars one car away from you.

Then I travel to the midwest, lets say Ohio. And boom, American cars everywhere. Those three brands above are almost nowhere in sight. And suddenly the sales figures make sense. I can't remember the last time I've seen a a Ford Fusion, but they move around 20,000 a month. In Ohio, I can't remember not seeing a Ford Fusion.

Moving to the bay area from Detroit. The first thing I noticed was the lack of American cars.

I buy American cars for several reasons:

1. Most American cars are NOT world cars, I'm a big guy, 6'3 300 lbs, I dont fit well in a world car, so I'm always looking at vehicles designed for the North American market, plus I do a whole lot of long distance driving.

2. Less intensive maintenance schedule, my town car will never need its timing belt changed, nor a valve adjustment, the primary services done, are simply to change fluids.

3. While is sounds jingoistic, its patriotic, I prefer to buy something made here.

Both the Toyota Camry and Honda Accord are more made-in-america than the Lincoln Town Car (but not by much).

What's worse, the Lincoln Town Car got the worst score possible for expected ownership costs (1 out of 5) and had a 55/100 overall score. (http://www.consumerreports.org/cro/lincoln/town-car.htm)

Compare to a Camry's score of 93 or the Accord's score of 90, with 5 and 4 points for ownership costs respectively.

Lots of foreign cars are made in America, several of them are far more American-made than American cars are.

Check your own car here:


Or see the Consumer Reports article on it here:


The Consumer Reports car issue just came out. There are a small number of American-made cars on the list of top cars. I would never buy a car not on that list, because reliability is an important factor. When there is a car on the CR recommended list that I like, I will definitely favor it over other cars not made here, but I won't be making sacrifices in quality just to buy American.

I am hopeful that Ford, at least, is on the path to making a car I would buy.

It sounds like all you really mean is #3.

#2 is bizarre. I'm not even aware of a modern car that requires this as regular maintenance.

More importantly, until fairly recently, American cars have a long history of requiring aggressive maintenance. They aren't as bad as say, German electrical systems, but they've been pretty darn bad.

#1 is also strange as many foreign cars make specific American versions of their cars for the larger Americans. Or their world cars are sized for the large U.S. market.

> 2. Less intensive maintenance schedule, my town car will never need its timing belt changed, nor a valve adjustment.

Which is also the reason it gets terrible mileage and is horrible for the environment. It's an unsophisticated hunk of junk, basically.

I've noticed that you have more flexibility in choosing your mechanic with an American car because the mechanic will be more familiar with them. My parents' mechanic did great work on their American SUV but kept botching their Volvo.

The funny part is I have a friend slightly bigger than you and he fits great in the SmartCar and the Toyota Yaris. When he got in the SmartCar during an auto show a large crowd gathered and was pretty amazed.

I love how you guys at Priceonomics include our little town of Eugene in your analysis. Nice to see how we compare :)

Keep up the great work, always a pleasure to read one of your articles.

Back when I was studying in Michigan this topic came up one night over beer. Almost everyone there knew a friend of a friend or family member who could get them a decent employee discount on American cars.

If you walk around in downtown Ithaca you might get the idea that Chevy and Ford are exotic nameplates like Ashton-Martin or Ferrarri.

Hang out at a gas station 8 miles away, however, and you see maybe 50% American cars.

I wonder what iPhone ownership is like in Microsoft's turf (Redmond WA)?

Lower then it is in the bay area, just from observation.

I'm surprised that Portland doesn't rate higher in Subarus. It always seems to me that 30% of all cars there are dark green Subarus.

Also, why is Salt Lake so high in used-car prices? Large Mormon families?

Subarus tend not to make it to the used-car market because they stay wonderful forever. ;-)

I was surprised with Chico, CA's high median price for used cars.

There is no such thing as an "American" car anymore. All (major) car companies operate at a global scale, and are dependent upon many different nationalities to produce their products. There are thousands of Americans employed by foreign auto manufacturers just as the opposite is also true. Yet Detroit is treated as if it were a sacred cow, and their advertising is geared toward instilling nationalism. However if you were going to buy a new car would you say it was any more patriotic to buy a Toyota that was manufactured in South Carolina or a Ford from Mexico?

I'd expect places with Real Winter to have different taste in cars than California, wouldn't you?

A bit arbitrary. Many "Japanese" and "German" cars are manufactured in the US.

I think your criticism applies more to the consumer behavior than to this analysis of it.

Rhode Island is not a city.

Yes, but the population of Rhode Island is ~1M, half as big as Brooklyn, a borough of a city.

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