Tuesday, October 29, 2013

Dealer Installed Options and Adminstrative Fees - the latest gag.

New 2013 Nissan Frontier SV $26,750**

 
**Disclaimer: Prices plus tax, tag, dealer installed options and fees including $55 private tag agency fee and $599.00 pre-delivery service fee
 
 
Buying a brand-new car is never a good idea.   Things like "Internet Pricing" and pricing services like Kelly Blue Book (KBB), Edmunds, and TrueCar, would seem at first to level the playing field for the consumer.   People like to think they can outwit a dealer this way, but dealers are constantly coming up with new "gags" to pad and obscure the price of a car.
 
The latest "gag" the Auto dealers are using to hide the cost of a car, is to add on "Dealer Installed Options" to confuse you about pricing and to pad the price of the car.
 
For example, the car shown above is advertised for $26,750.  This sounds pretty cheap, until you realize that you can use any online price service, such as TRUECAR to drive down the price considerably - to about $23,147, which of course is a lot better.
 
So you call the dealer and he says, "Come on down!" and you think, reasonably, that the price of the vehicle is $23,147.  This includes the list price minus any incentives, rebates, markdowns, etc., plus the cost of shipping.
 
Of course, there are the normal "hidden costs" of buying a car, such as sales tax, and titling fees, which come to $1700 in my State.   So $23,147 is now $24,847.   OK, still a cheap car under $25,000.
 
But the dealer adds in a "$599 administrative fee" - some call it "document prep" or "vehicle preparation" - basically profit to cover their overhead of washing the car for the nice photos and to pay for secretarial help.   Some websites suggest you should not pay this fee, or at least negotiate it down:
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And as you might guess, "Friendly Al" at the dealer didn't mention this $599 fee, which appears in fine print on the Internet Ad, until he is asked point-blank about it.    Salesmen can't lie, outright.  But they can lie by omission.   And if you don't ask, they won't tell you about the $599 fee or what is considered a "Dealer Installed Option".
 
Of course, if you do something stupid like trade-in your old car, they will just adjust the price of that accordingly, or pad the financing price.  The simpler you can keep any financial transaction, the easier it is to figure out the real price involved.
 
But what about dealer installed options?   The local Nissan dealer adds their "Safety Package" for a whopping $1685.   What is in this package?
 
Well they tint the windows.  This sounds expensive until you realize that on this model, the rear windows are already tinted, and that a tint job in Florida is less than $100 - maybe $50 if done in bulk.
 
They add a few options - the step rails shown above ($184) and wheel locks ($44) and rubber floor mats ($115).   The car comes with standard floor mats, for free.  They also add a pinstripe, which is maybe $50 and that's being generous.
 
So this comes to about $500.  How do they pad the price of the car by over $1000?
 
Well they add "One year free roadside assistance" - which is essentially worthless, particularly if you already have AAA.   And they throw in "free oil changes for a year" which means two oil changes with Dino oil - a $39.95 value each, at Jiffy Lube.
 
So where does the rest go?   Well, no doubt they add in "labor" to "install" the side rails and other items and pad out the price accordingly.
 
The point is, you don't know in advance, unless you ASK, what "options" are installed on the car, even if you have an "Internet Pricing Deal!"   And not surprisingly, they get really vague on the phone about what these options are.   If you can even get them to say, they usually just give you the flat fee for "the safety package" (how this makes the car safer is anyone's guess).
 
And you had better be astute, as they will try to tell you than some things that were installed at the factory were "Dealer Installed Options".    Floor mats, bedliners, trailer hitch, and cargo extender, for example, are all factory options on this truck, but that doesn't stop the dealer from trying to add one or more to the list of "Dealer Installed Options".
 
So you take your stupid Internet Pricing Certificate (such as from TrueCar) to the dealer and they snicker at you, because most of that "discount" has been wiped out by "Dealer Installed Accessories".  You think you are being clever and smart by clipping coupons, but once again, "the man" has beat you to the punch.
 
And at that point, the vaunted ease of "No haggle Internet Pricing" is shot.   Because you will spend hours - as many as four or five, trying to argue down these penny-ante items which collectively, add up to over $1000 to the sticker price of the car.  (The dealer will argue that since they have already been added to the car, they cannot be removed - except for an additional fee.)
 
And a lot of people do this - spending hours at a dealer, being worn down, until they finally throw in the towel and say "to heck with it, I just want to get out of here!"
 
So you see what has happened here.   The dealers have found a neat end-run on the "no haggle" pricing.   They quote you a price on the Internet, and when you get in the door, they show you another price quote, with "dealer installed options" added on.  Dealer installed options that are often gimcracks and garbage and not worth much - but are wildly overpriced.

How do you avoid this?
   Well, buying used is one way.   You can't lose at their game, if you refuse to play the game.  The same truck shown above, in a different color, with 10,000 miles on the odometer, is for sale an hour away for $21,400 from a private owner.  In fact, two such trucks could be easily found on Autotrader.  Yes, that is a savings of about $5000 when all is said and done.  And the private owner has added the side rails and a tonneau cover ($500 value) as well.
 
A used car seller isn't going to play this bait-and-switch game with you, telling one price on the phone, and then jacking the price when you arrive.
 
It also illustrates how much a car depreciates in the first year of ownership.   Here, a $26,000 truck drops $5000 in value - about 20% in just 10,000 miles.   Those first 10,000 miles cost 50 cents a mile to drive!
 
The other advantage of buying used, is that when you sell the used vehicle, you lose a lot less in depreciation.   Let's say two people buy these trucks, and one pays $26,000 at a dealer and the other pays $21,000 secondhand.  Each keep their cars about 5 years and put 75,000 miles on them.   At that point they are used cars, one with 75,000 miles on it, and the other with 85,000 miles on it - the difference in resale is negligable.  They are both worth about $12,000 at that point.
 
The new car buyer takes a hit of $14,000 in depreciation or 18 cents a mile.  The used car buyer pays only about $9000 or about 12 cents a mile - a 50% decrease in cost-per-mile.   Of course both buyers do far better than the fellow who bought the truck new and sold it in the first year - he got hammered with the most depreciation.   That's why a late model used vehicle is the best bargain - it has taken the biggest hit in terms of depreciation.


FOOTNOTE:   Deceptions like this are perfectly legal, since the "disclaimer" mentions that other items may increase the price.   Dealers also do very despicable things that are also legal.  For example, they sell a car on credit to a buyer and slap temp tags on it.   Two days later they inform the buyer than the interest rate on the loan is higher than expected.   The buyer cannot "take the car back" as it is no longer new.  Or, if used, the dealer will claim the "trade-in" was sold at auction already.  This is perfectly legal, and one reason you should NEVER take possession of a car, until it is paid for.

The point is, car dealers have 1000 sleazy and yet legal tricks to fool you into spending far more money than you intended, on a new car.   The only way to win at this game is to not play.
 
 

Tuesday, October 15, 2013

ObamaCare is Here!

 

Obamacare is here.  Is this a good thing?   Maybe on a personal level.


NOTE:  While I am no longer posting to my blog, I had to write up my experiences with the Affordable Health Care act, as it is quite interesting how this plays out.
 
I went on the affordable health care act website today to sign up for Obamacare - or at least see what the premiums are like.   It is fascinating.


First, the site is pretty badly done.  It asks the same questions again and again (middle name and Social Security number, e-mail address, and phone number, all entered twice - on separate pages) plus has a paranoid level of security with regard to user names and password structures, and security questions (two sets in different parts of the site).

In addition, there are so many questions to be answered that have nothing to do with health insurance - like ethnicity and demographic data.

And then it bombs out.   The final "signature" page bombs, and then I get an e-mail message saying "I have a message waiting for me!"  So I click on the link to sign in, and that signs me OUT on the bombed page.   Badly done.

The "message" says I am eligible for a $627 tax CREDIT every month (!!!!) based on my sucky 2012 income (2013 will be slightly better, so my credit may go down).   The message is in a pdf format that is not recognized by my old version of Adobe Acrobat, but a new version of Adobe reader will display it.

HERE IS A PROBLEM RIGHT HERE:   While my tax credit is based on my 2012 income, if my income goes up next year, I may lose part of that tax credit, and thus have a nasty surprise on my tax bill on April 15th.  As a self-employed person, it is hard to predict my income from year to year, which may vary from over $100,000 to as little as $25,000.    This makes planning, based on the tax credit, nearly impossible.    The only "safe" was to deal with this is to chose a plan that costs less than the tax credit, or be prepared to put aside money for April 15th.

A warning message comes up that I have to "review my application for unresolved issues" but when I click on the link, it says "Page not found".    Clearly the HTML isn't ready for prime time, but then again, it has been up for only 15 days now.

Regardless of this warning message, the site allows me to proceed further in selecting a plan.

What is troubling is that this massive tax credit, while appreciated, is something that government will have to pay for.   At the present time, Mark and I are on a $10,000-deductible Blue Cross plan, which costs us $240 a month, combined.    We get a deduction for this on our taxes, which might reduce the cost to $210 a month or so.   This is still a cost to us.

What is interesting is that I have a letter from Blue Cross on my desk, offering to extend my existing plan for another year, for a $298 premium.   This would "grandfather" in my high-deductible plan, but clearly compared to the tax credit plans, it is not a very good option.

With a $627 tax credit (each) we can "afford" a Cadilliac plan now - with more coverage - and pay nothing for it.
  This is great for us, personally, but it means that combined, the government will get about $15,000 less in taxes out of us in 2014 - which is about what we pay in taxes every year.   In other words, our tax bill is being shifted from Uncle Sam to Blue Cross.

All very well and fine, but what is Uncle Sam going to use to pay his bills?

That is an interesting question.

There are several levels of plans out there, Bronze, Silver, Gold, Platinum, and all in my State (Georgia) are from Blue Cross (my present insurer) or Humana:


 BCBS Healthcare Plan of Georgia, Inc. BCBSHP Bronze DirectAccess w/HSA - caar
        Monthly premium  $0/mo.  was $524.73
        Deductible $6,300 group total
        Out–of–pocket maximum $6,300
        Copayments / Coinsurance
            No Charge After Deductible Primary doctor
            No Charge After Deductible Specialist doctor
            No Charge After Deductible Generic drugs

 BCBS Healthcare Plan of Georgia, Inc. BCBSHP Bronze DirectAccess w/HSA - cabp
        Monthly premium $0/mo. was $547.62
        Deductible  $4,000 group total
        Out–of–pocket maximum $6,350
        Copayments / Coinsurance
            20% Coinsurance after deductible Primary doctor
            20% Coinsurance after deductible Specialist doctor
            20% Coinsurance after deductible Generic drugs

 BCBS Healthcare Plan of Georgia, Inc. BCBSHP Bronze DirectAccess - cabr
        Monthly premium  $0/mo. was $541.23
        Deductible  $4,300 group total
        Out–of–pocket maximum $6,350
        Copayments / Coinsurance
            $35/20% Coinsurance after deductible Primary doctor
            20% Coinsurance after deductible Specialist doctor
            20% Coinsurance after deductible Generic drugs

 BCBS Healthcare Plan of Georgia, Inc. BCBSHP Bronze DirectAccess - caae
        Monthly premium  $0/mo. was $570.28
        Deductible  $5,550 group total
        Out–of–pocket maximum $6,350
        Copayments / Coinsurance
            $45/25% Coinsurance after deductible Primary doctor
            25% Coinsurance after deductible Specialist doctor
            $20 Generic drugs

 BCBS Healthcare Plan of Georgia, Inc. BCBSHP Bronze DirectAccess w/Child Dental - cdae
        Monthly premium $0/mo. was $619.41
        Deductible $5,550 group total
        Out–of–pocket maximum $6,350
        Copayments / Coinsurance
            $45/25% Coinsurance after deductible Primary doctor
            25% Coinsurance after deductible Specialist doctor
            $20 Generic drugs
        Dental: Child

 BCBS Healthcare Plan of Georgia, Inc. BCBSHP Bronze DirectAccess - caaw
 
       Monthly premium $0/mo. was $575.81

        Deductible $5,750 group total
        Out–of–pocket maximum $6,350
        Copayments / Coinsurance
            $40/20% Coinsurance after deductible Primary doctor
            20% Coinsurance after deductible Specialist doctor
            $20 Generic drugs

 BCBS Healthcare Plan of Georgia, Inc. BCBSHP Silver DirectAccess w/HSA - cbbg
        Monthly premium $22.56/mo.  was $649.56
        Deductible  $500group total
        Out–of–pocket maximum $500
        Copayments / Coinsurance
            No Charge After Deductible Primary doctor
            No Charge After Deductible Specialist doctor
            No Charge After Deductible Generic drugs

BCBS Healthcare Plan of Georgia, Inc. BCBSHP Silver DirectAccess - cbds        Monthly premium $51.28/mo. was $678.28
        Deductible $200   group total
        Out–of–pocket maximum  $600
        Copayments / Coinsurance
            $10/10% Coinsurance after deductible Primary doctor
            10% Coinsurance after deductible Specialist doctor
            $10 Generic drugs

BCBS Healthcare Plan of Georgia, Inc. Blue Cross and Blue Shield Healthcare Plan of Georgia Silver DirectAccess, a Multi-State Plan        Monthly premium $70.17/mo. was $697.17
        Deductible $200    group total
        Out–of–pocket maximum  $650
        Copayments / Coinsurance
            $5/20% Coinsurance after deductible Primary doctor
            20% Coinsurance after deductible Specialist doctor
            $10 Generic drugs

BCBS Healthcare Plan of Georgia, Inc. BCBSHP Silver DirectAccess - cbiq        Monthly premium $70.17/mo. was $697.17
        Deductible $200    group total
        Out–of–pocket maximum $650
        Copayments / Coinsurance
            $5/20% Coinsurance after deductible Primary doctor
            20% Coinsurance after deductible Specialist doctor
            $10 Generic drugs

BCBS Healthcare Plan of Georgia, Inc. BCBSHP Silver DirectAccess - cbaa        Monthly premium  $77.96/mo. was $704.96
        Deductible $150   group total
        Out–of–pocket maximum  $650
        Copayments / Coinsurance
            $10 Primary doctor
            No Charge After Deductible Specialist doctor
            $10 Generic drugs

BCBS Healthcare Plan of Georgia, Inc. BCBSHP Gold DirectAccess - ccab        Monthly premium  $206.52/mo. was $833.52
        Deductible  $750   group total
        Out–of–pocket maximum $6,000
        Copayments / Coinsurance
            $30 Primary doctor
            No Charge After Deductible Specialist doctor
            $15 Generic drugs

BCBS Healthcare Plan of Georgia, Inc. Blue Cross and Blue Shield Healthcare Plan of Georgia Gold DirectAccess, a Multi-State Plan        Monthly premium  $255.63/mo. was $882.63
        Deductible  $750 group total
        Out–of–pocket maximum  $6,000
        Copayments / Coinsurance
            $30 Primary doctor
            No Charge After Deductible Specialist doctor
            $15 Generic drugs
        Dental: Child

BCBS Healthcare Plan of Georgia, Inc. BCBSHP Gold DirectAccess w/Child Dental - cdcp        Monthly premium $255.63/mo.  was $882.63
        Deductible $750   group total
        Out–of–pocket maximum $6,000
        Copayments / Coinsurance
            $30 Primary doctor
            No Charge After Deductible Specialist doctor
            $15 Generic drugs
        Dental: Child

Humana Employers Health Plan of Georgia, Inc. Humana National Preferred Bronze 6300/6300 Plan        Monthly premium $327.39/mo.
        Deductible $6,300 group total
        Out–of–pocket maximum $6,300
        Copayments / Coinsurance
            No Charge After Deductible Primary doctor
            No Charge After Deductible Specialist doctor
            No Charge After Deductible Generic drugs

Humana Employers Health Plan of Georgia, Inc. Humana National Preferred Silver 4250/6250 Plan        Monthly premium $386.68/mo.
        Deductible $500   group total
        Out–of–pocket maximum $750
        Copayments / Coinsurance
            $35 Primary doctor
            $60 Specialist doctor
            $17 Generic drugs

Humana Employers Health Plan of Georgia, Inc. Humana National Preferred Gold 2500/3500 Plan        Monthly premium $443.62/mo.
        Deductible $2,500 group total
        Out–of–pocket maximum $3,500
        Copayments / Coinsurance
            $25 Primary doctor
            $35 Specialist doctor
            $8 Generic drugs

Humana Employers Health Plan of Georgia, Inc. Humana National Preferred Platinum 1000/1500 Plan       Monthly premium $499.97/mo.
        Deductible $1,000 group total
        Out–of–pocket maximum $1,500
        Copayments / Coinsurance
            $25 Primary doctor
            $35 Specialist doctor
            $8 Generic drugs


Whew!  That is a lot of data to digest!   If I sign up for a "Bronze" or some "Silver" plans, it appears my health insurance costs will go from $240 a month to ZERO, and the coverage increased (deductible decreased to $6500 or less) and Uncle Sugar will pick up the tab.

That's pretty sweet, considering my net worth is over a million bucks - I get some of that tasty gub-ment chee for a change!

But what do these plans entail?  It is hard to parse this out.   When I click on "Provider directory" I get:

Access Denied

You don't have permission to access "http://www.healthcare.gov/marketplace/auth/GA/en_US/www.bcbsga.com" on this server. Reference #18.f8050f17.1381842281.23969eec 
 Which is not helpful.   My present plan, even with a $10,000 deductible, does provide $40 co-pays at the doctor's office and a $15 prescription plan (the latter I never use, as many pharmacy plans are cheaper for generic and older drugs).

The site also logs you out after 30 minutes, so you'd better read fast!

We scotch the "gold" plans right off, as the premiums are ridiculous.    People with severe health problems probably will go for these plans - if they have high drug costs and lots of treatments to make.  But $500 a month?   That's $6,000 a year and a big chunk of my disposable income.   Not even a starter!

Similarly, the link to "SUMMARY OF BENEFITS" goes to a dead link generating the following message:

"Your Summary of Benefits and Coverage (SBC) is not available at this time, please check back soon."

So..... I have to sign up for a plan without really knowing what the plan is all about.

Geez, this isn't really very well thought out.  The premium costs of each plan are far higher than my old $10,000-deductible plan was for TWO people.   So we are talking about a4X increase in premiums!    And I think the premiums went UP because Uncle Sugar is paying the tab - to the tune of $7000 a year.

I was very hopeful that Obamacare would solve some of our health care crises problems.    So far, it ain't looking very good to me.

One problem is, of course, how the GOP is fucking this up totally.  Suppose I sign up for this new plan, at $500 a month and then the GOP decides to kill Obamacare?   I can't go back to my old plan, and now I may be stuck with a high-cost plan - and no tax deduction.   Our overall premiums would be over $1000 a month, versus $240 before.   I am not sure how this is "cutting" the cost of health care or health insurance.

But stay tuned.    Obviously this whole thing is in Beta stage....

UPDATE:  I am holding off on signing up for now. I have a $240 a month plan now (my share being about $120). If I sign up for a $570 a month plan, and the GOP decides to scotch the tax credit, I'd be screwed royally!

UPDATE:  10/16/2013  I called Blue Cross.  They have offered to extend my "non-conforming" plan for another year for $298.   It is a $10,000 deductible plan.

Blue cross has its own Beta website, Changemycoverage.com (they admitted it is not quite ready for prime time) where you can "sign up" for Obamacare - well, actually change from a non-conforming to a conforming plan.  A conforming plan for two people would run $1037.31 a month (!!!) for two people.

They also indicated that you might be able to shop for Blue Cross plans that are offered in other States (!!).

Here is the conundrum:

1.  If I keep my non-conforming plan,  I pay $298 a month, but get no tax credit (maybe a deduction, but no credit).  I am still "insured" and do not have to pay the fine. 

2.  It is unclear whether the non-conforming plan will be offered in 2014 - I may have to switch over to Obamacare eventually.

3.  Right now, we could switch to a conforming plan, and the tax credit WOULD PAY FOR ALL OF IT (Wheee!  Free Ponies!!!) but the government would be out about $12,000 to $15,000 in tax money from us (basically all we pay in taxes).

4.  If our income goes UP, we may lose this credit, in whole or part, and then be "stuck" with a $1000-a-month plan.

5.  If Republicans manage to cut the tax credit, we may lose our subsidy and be "stuck" with a $1000-a-month plan - and wished we kept our old $298 plan!

So, what should I do?  Renew the existing plan as a back-up, AND sign up for "Obamacare" and see how that works out?

Or just jump off the cliff, sign up for Obamacare, and hope the GOP doesn't kill off the tax subsidy, so our rates don't skyrocket.

The best answer the folks at Blue Cross had was, "Wait and See" - which I suspect a lot of people are doing!

UPDATE:  October 17, 2013

If we assume that 1/3 of the country (100 million people) gets a subsidy averaging $5,000 a year, we are talking about 500 billion dollars in lost revenue to the Treasury.  This is a lot of money!    And that number could be much higher.  Since the median household income is about $51,000 at the present time, it may be that more than half the country gets some sort of subsidy.  This could add a trillion dollars to our budget, easily.  Ouch.  Now I see what the GOP is getting at.

How much of a subsidy do you get?  It is hard to play with the numbers as the healthcare.gov website does not have a "change my lifestyle" section just yet.   When plugging in my 2012 income, it says I get a subsidy of $627 a month.  But I may make as much as 50% more than that this year.

This site:  http://kff.org/interactive/subsidy-calculator/

Has a subsidy calculator.  Kaiser Permanente seems to have done the best job of preparing for this.

So, for example, if I make $16,674 a year (my adjusted gross in 2012) my subsidy

Household income in 2014:  145% of poverty level
Unsubsidized annual health insurance premium in 2014:  $5,172
Maximum % of income you have to pay for the non-tobacco premium, if eligible for a subsidy: 3.71%
Amount you pay for the premium: $619 per year
(which equals 3.71% of your household income and covers 12% of the overall premium)
You could receive a government tax credit subsidy of up to: $4,552 (which covers 88% of the overall premium)
This is on the Kaiser site, and it is interesting that it shows a lower subsidy that the government site - but still a substantial subsidy!

Now, 2012  was  a nadir of income for me.  2013 will be much higher.  In fact, I will probably have an adjusted income of about $30,000 (apiece), if I apply singly:

Household income in 2014: 261% of poverty level
Unsubsidized annual health insurance premium in 2014: $5,172
Maximum % of income you have to pay for the non-tobacco premium, if eligible for a subsidy: 8.37%
Amount you pay for the premium: $2,512 per year
(which equals 8.37% of your household income and covers 49% of the overall premium)
You could receive a government tax credit subsidy of up to: $2,660
(which covers 51% of the overall premium)

Ouch.  Even with a modest middle-class income (median income in this county is about $51,000, and combined, we would make about $60,000 in 2013) my subsidy would then drop in half.  My premium would then be about $200 a month (as compared to $298 a month for both of us, in a renewed existing plan) even with the subsidy.  As my income rises, the subsidy evaporates, and the cost of insurance would jump to $500 - APIECE....

Note that the subsidy is based on INDIVIDUAL income, not on joint income.  If we assume a "household income" of $60,000 and TWO people in the plan, we get the following numbers:

Household income in 2014: 387% of poverty level
Unsubsidized annual health insurance premium in 2014: $9,317
Maximum % of income you have to pay for the non-tobacco premium, if eligible for a subsidy:
9.5%
Amount you pay for the premium: $5,700 per year
(which equals 9.5% of your household income and covers 61% of the overall premium)
You could receive a government tax credit subsidy of up to: $3,617
(which covers 39% of the overall premium)


This is interesting.  The new premium under Obamacare comes to $475 a month (this is line with the Humana and BCBS Bronze plans, which run from $499 to $550 a month for the cheapest plans).  This would be my out-of-pocket cost, with the subsidy (tax credit) included.

Compare this to BCBS's renewal offer of my existing plan at $298 a month, and it is clear which is cheaper.  The Obamacare plan might have a lower deductible ($6300) but does not have the co-pays and drug plan I have now.  Hmmmmm....

THUS MY CONCLUSION FOR THE TIME BEING IS THIS:   Since I will only receive a partial subsidy for these new premiums, and the Obamacare premiums in terms of cash-out-of-pocket will be higher than my existing plan, I will renew my BCBS plan for the time being.

This, tied with the uncertainty regarding the subsidy (and my income) makes the existing plan more attractive.   If I dump my $10,000 deductible plan and go with Obamacare, and lose my subsidy through legislation or increased income, the cost of insurance would be about three to four times what I am paying now.

Subsidy or not, for many Americans, a high-deductible existing plan may have lower monthly costs than even the cheapest Bronze Obamacare plan.

This is not working out the way I thought it would!