Tuesday, July 24, 2007

Car Divorce Update

by Tom Bozzo

As a recovering car nut, I've been mulling whether to extract myself from the upper-middle tier of the car market (thereby returning a Lot of Money to the household budget) or to ditch the second car altogether (increasing the savings to a Heck of a Lot of Money). I'm still not completely decided, but I'm leaning towards the latter. At a minimum, I expect to avoid some welfare losses associated with positional externalities (PDF).

In one corner, we have the well-regarded Honda Fit (a/k/a Jazz in Europe), which I've decided is cute as a bug, and not just a bug. (The tall packaging emblematic of modern minicars is practical but loses something in my SUV-loathing eyes to the sainted if very small Honda CRX.) Adjusted for eighteen years of CPI-measured inflation, the Fit (about $16,600 MSRP delivered for a loaded model) is no more expensive than my 1989 Isuzu, which stickered just a hair under $10,000 at the time. Skeptics of "hedonic" adjustment of price indexes (e.g.) might note that the 1989 car lacked an array of features standard even on the base Fit — power windows, remote locks, CD player, anti-lock brakes — not to mention the ability to score anything close to four stars in the EuroNCAP crash testing. Indeed, the base Fit adjusted for 22 years of inflation costs less than my first car with even fewer creature comforts and which the Fit could drive circles around.

In the opposite corner, there is the realization that — mirabile dictu! — Madison's bus system can deliver me to work much faster than I'd thought. The catalyst was Suzanne adding to the adventure of taking John to TtFTE: Teh Musical Extravamaganza on Saturday by taking the bus. Since we live a block off of one of the system's spokes radiating from the Capitol Square (and passing Overture Center), the ride was immaterially longer than a car trip with parking, and less expensive at the roundtrip cash fare. My office is not so located, but it turns out that since the route pieces together segments on two high-frequency spoke routes, the bus travel time is 20-25 minutes, which is comparable to my typical time by bike. Now if only the Madison Apple Store had been located at Hilldale... darn you, Steve Jobs!

And thinking about hedonics, having the ability to get most places I'd routinely visit without maintaining a second car in the household touches on a good point Dean Baker recently made, which is that CPI without adjustment understates inflation in the face of quality deterioration. It may have been a bit too easy to forget during the late era of cheap motoring that "being convenient to places" is an important quality of housing.

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Just for the record, I'm with Barry R. on the hedonic price adjustments. Unless there's a Fit out there that offers an 8-track player and hand-cranked windows, it's not my pleasure that is being accommodated, but rather the natural creative destruction of market forces.

(For the record, we have a friend who tried to get a car without power windows; apparently, they're not longer offered, at least by Saturn.)
I'll repeat something from the early days of the blog: read Ariel Pakes, whose '03 AER paper is a pretty sober look at the methodological difficulties of hedonic adjustments, but also of the unpleasant consequences of pretending that pure matched-model indexes are appropriate.

The Fit Sport has an audio in jack, so you can patch in your 8-track player if you want, nuts as I have to say that sounds to me. As for power windows, I can't deny that there might be people out there who derive positive net utility from cranking their own (vs. the conveniences of remote operation). Vive la difference, etc. But Teh Market is telling the (cheap) majority of hand-cranked window seekers that they aren't being deprived of many utils, thanks to economies of scale and all.
One problem with the minicars - horrible safety ratings when it comes to being rear-ended (see http://www.iihs.org/ratings/summary.aspx?class=90 )
Oops! see IIHS site
I take the IIHS rear testing with a grain of salt, since they're focused on avoidance of whiplash-type injuries. So seat design, rather than the size of the vehicles, primarily determines performance.

The Fit, specifically, is due for a full redesign this fall -- U.S. sales actually started near the end of the current model's life cycle -- and I'd expect some improvements from the new model.

Given the size mix in Europe, EuroNCAP makes some effort to show that well-designed small cars can ace its tests (which closely resemble the IIHS front-offset and side testing).
On manual window cranks and old-fashioned key entry door locks: I remember many a snigger as a kid watching someone wrestle with power whatevers that had iced up during a winter cold snap. (It happened to keyed door locks, too, which is one reason why we never locked our car doors in the winter.)

Several friends' car windows were permanently rolled up, thanks to internal damage sustained during winter. Better up than down, I suppose.

Perhaps advancing technology, or at least global warming, has taken care of that problem in the mean time.
Whoa. Madison has an Apple Store?
Kim: We've had a number of temporary window freezes, esp. since we've had no garage for the last 3 winters, but no protracted window lift failures (parking the car in the sun, and not trying to force matters, usually does the trick). The locks have been fine, but we've occasionally had the door gaskets freeze, which could just as easily happen to manual lock cars.

Global warming hasn't gotten that far, yet.

Jeremy: Yes, at West Towne Mall.
(Jeremy begins kicking himself on his move to Evanston.)

Tom: We're not cheap so much as wanting a way to get air when the power system dies. (The Cool New Feature—power windows that automatically open in some models on impact so that the passengers are not hit by shattering glass—is being used to rob cars in our area. Unintended consequences, indeed.)
"power system dies" -- you mean in the "car soon to go to auto heaven" sense or the "need accessory power" sense?

As for that variation of smash-and-grab, that's new(s) to me.
Need accessory power. (As in, the windows are up, the car is dead, and the choices are leave the door open to be able to breathe until help gets there or crank down windows.)

Here's a link for the new feature:

"They did not steal the cars but they took EVERYTHING inside. And they know what they are doing...they smashed my lock because they know on my car that it has a safety feature to put all windows down so passengers are not hurt my shattered glass in a crash. They stole my purse, laptop, and bags of new school clothes, among other things. They also hit other cars on our street."
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