You've missed one disturbing trend: The cost of s...

2009-10-05T21:29:28.900-04:00

You've missed one disturbing trend: The cost of software to dealers is significantly cheaper than the cost to other mechanics.

The reason: Manufacturers want to keep their dealer networks alive and well. However, there is a great deal of downward pressure on new car prices, pressure that reduces dealer profits.

The solution: Limit the size of the market for repairs of your brand of auto by charging non-dealers extra for the software. This raises the cost of repairs (and, of course, the "lifetime" cost of ownership of any particular car) and limits the number of non-dealer mechanics who can service all makes and models of autos, but does so in a way that is opaque to a prospective purchaser of an auto. In other words, the car costs more than the sale price would indicate because repairs are more expensive.

But, as the late Billy May would say: There's more. Auto dealers are more likely to use manufacturer branded parts, even though their more expensive than "black box," generic parts. So, the manufacturers benefit by (i) channeling a secret subsidy to their dealers, allowing the "initial" the sale price to be reduced, and (ii) it becomes more likely that the brand name replacement parts that they manufacture will be used in repair work.

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You've missed one disturbing trend: The cost of s...