Gasoline prices are based on a number of factors: wholesale price, State and Federal and even local taxes, as well as the various operating costs of the gas station. Yet for some reason, we are able to display, with ease, the final price on a daily basis with no add-ons. In other industries, this is apparently impossible to do.
The airlines are at it again. They claim the Federal Government is interfering with business-as-usual by forcing them to post real prices for airfare, and then charging those prices. They claim this is an unnecessary intrusion of the government into the business world and, moreover, is an attempt to tax you more. Huh? Am I missing something?
Spirit airlines is at the head of the pack on this, and I suggest you boycott them, as they clearly don't have your best interests at heart. Spirit was famous for advertising $9 airfares - the so called "hot dog" fare, which, when you finally got done paying for it, could be well over $100 round-trip.
You know, $100 round-trip isn't a bad fare, so why not just advertise that? It is not much more than going by bus, and a lot cheaper than car or train travel. But $9? You're just pulling my leg - lying to me. And any business relationship that is predicated on a lie isn't going anywhere good.
Sprint's really odious argument - which appears in a pop-up ad on their website when you book - is that the government is trying to "hide" taxes this way, and who knows? Maybe you will be next! I am not sure what that means, only that this whole concept of Corporations being "people" seems to be coming true, and Spirit, like the Frankenstein monster, has arisen from the slab and appears ready to vote in the next election, if with nothing else, your airfare dollars.
Like I said, Boycott Spirit.
Incidentally, for all you tea-baggers out there who claim that this sort of thing is "Unconstitutional" - you might actually want to read the Constitution sometime, as it is a very illuminating document.
Funny thing, it turns out that under the Commerce Clause, Congress has broad powers to regulate Interstate Commerce, including even setting airfares and even routes the airlines can fly. And until about 1980, they did just this - which is why, when I was a kid, I could fly a 727 from Syracuse to Hartford, and be the only one on the plane - and the airfare was $499, which would buy you a good used Vega at that time.
Airlines were "de-regulated" (as was the trucking industry, which had similar constraints) in the early 1980's. Many folks think that Reagan did this, but a funny thing - the act was passed in 1978 when Jimmy Carter was President. Hmmm..... the 1970's were an odd time, weren't they? Nixon doing wage and price controls, Carter deregulating airlines, and Rockefeller a "Liberal Republican". Oh, well, maybe they were all high on cocaine and disco music.
Today, outside of gasoline and air fares (thank you, FAA!) there are many venues where prices are indeterminate, which leads to a lot of confusion in the marketplace. Teabaggers will again point out that for groceries and other basic purchases, the sales tax is not included in the price of the item, which means you have to calculate that in your head. But I think this is another canard (along with the "Unconstitutional" argument). Sales tax is a flat tax, and traditionally has been added to a transaction. It is not hard to calculate this in your head.
Moreover, sales tax does not raise the price of an item by 40-50% or more. Nor it is irregular or unpredictable, from store to store. It is a fixed amount, dictated by the government. It is not a fee tacked on by the store as a service charge. Spirit charged, for example, a $16.99 "user fee" to book the $9 flights. This really pads out the price of the ticket, and doesn't reflect the real cost of booking. And don't get me started on "fuel surcharges" either.
There remain a host of other areas where prices are indeterminate - and not surprisingly, in most of these areas, there are few bargains to be had. Indeterminate pricing is a sure way to sell a bad bargain - by dangling out a 'bait' price and getting you to buy - usually with a one- or two-year commitment - and then charging you a much higher price.
Telecommunications is the worst offender. Landline or wireless, it doesn't matter. The $69.95 cell plan ends up costing $100 a month - as does the landline plan. One reader reports that a $29.95 plan ended up costing them over $60 a month - double the stated price!
Again, this is why I chose AT&T GoPhone service. My one year anniversary is coming up, and the overall cost has been $100. Not per month, per year. Period. It costs 10 cents a minute, and when I make a call, it costs 10 cents a minute. No access charge, no user fee, no excess fee, no state tax, no excise tax, no 911 fee. Nothing. I know exactly what I am paying and I am paying a lot less than I was before.
Of course, it helps not to be one of those idiots who is constantly yakking on the phone. We see this all the time - people texting and yakking while driving. Who are they talking to? Worse yet, people will be talking to you - in person - and then ignore you to answer a cell call. Why is someone talking on a cell phone more important than the person you are standing in front of? It is just rude. But people do it - and the cell business is making tons of money out of this idea that you can't communicate anymore, except through a wireless device.
But I digress....
Cars have always been an area of price flux. The "Manufacturer's suggested retail price" was always a big joke - with American car makers, at least. One appeal of the "foreign cars" in the 1960's and 1970's was not only that they were cheap, but that the price was pretty much what you paid - no haggling and negotiating. Steep discounts on a Japanese car were unheard of, back then. Today, we are seeing more and more rebates (not right now, of course, it is a bad time to buy a car!) on foreign cars, but not on the level of the U.S. automakers, which often offer six-digit rebates on some models.
Compounding this are the add-ons. For some reason, it is traditional in the car business to put shipping separately. Then they throw in a tag and title fee (usually padding on $100 or so for their minimum-wage tag boy to stand in line at the DMV with a fist full of title apps) and increasingly, a "dealer prep" fee. If you borrow money through the dealer, they often add document prep fees for loans, and add on any other fees they feel they can get away with. And of course there is sales tax.
And that is why buying a used car - never from a dealer - but from an individual owner, can be a good deal. There is not much haggling to do, and there are no add-ons. The price you pay the owner is the price you agree on. At a car dealer, you agree on a price, and then get shown a contract which has a lot of fees added on. You crow to your friends that you paid "only $15,000!" for your new econo-box, when in fact, the overall cost was $17,000 with all the fees and taxes added in.
What is annoying about this type of price indeterminacy is that you always end up feeling that some other shmuck got a better deal than you did. You really have no way of knowing whether you were hosed or got a bargain. At least with the airline, the add-ons to the fare are the same for everyone (but of course, no two seats on any airplane are priced the same!). With a car, there is always this lingering doubt that maybe you overpaid. And this anxiety is one reason (among many, many others) I shy away from new car showrooms. Buying a new car is a bad bargain period. And the fact that they cannot quote you a fixed, finite price just is another aspect of this.
Again, price indeterminacy is a way of selling product. People with smart phones tell me they pay only $69 a month for the service, neglecting to add in all the taxes and charges (and the $9.99 for each additional phone for their family). Rather, they quote the "plan" price, as if that were what they were paying. And psychologically, we tell ourselves that is what we are paying, "plus tax" - neglecting to cognitively register that we are paying 50% more than that.
Price indeterminacy takes other forms as well. For example, coupons, rebates, cash-back, and other loyalty and rewards schemes, tend to skew what you actually pay for things. Bed, Bath, and Beyond, which mostly sells junky crap today, sends out so many 10% or $5 off coupons, that anyone who doesn't use them is being foolish. If you pay full-price at BB&B for a new electric back-scratcher, then you are paying too much. Personally, I find it easier just not to shop there - there is little I need in the way of "as seen on TV!" accessories, and we have enough linens and towels to last us well into retirement at this point.
I noted before that Rebates have particular issues for consumer items, as in order to get them, you have to cut off the bar code, which means you cannot take advantage of the store's return policy anymore. If your new computer is dead, out of the box, you have to mail it in under warranty.
So, how do you avoid these traps in everyday life? It is hard not to, these days, as more and more items are sold with indeterminate prices. One way, of course, is to consume less. Many things we think of as "needs" end up being "wants" - and we convince ourselves that we need them. I don't know how many friends will tell me that they "need" to buy a new car, because the old one needs repairs - and the dealer wants so much to fix it! What they are really saying is, they want a new car, and they want someone to validate their wants as needs. And a car dealer is happy to do that.
Walk away from things that have indeterminate prices - Cable TeeVee, wireless plans, things of that sort. Walk away from consumer toys with irrational pricing - jet skiis, cars, anything with a motor on it. Learn to find happiness outside of owning things - because true happiness isn't in owning anything. Not only will you be happier, you'll save a boatload of money as well. And you'll spend a lot less time washing and waxing junk, and changing the oil, or wasting hours watching reality shows. You'll get your life back.
When possible, avoid buying indeterminately priced items at all. When you get sucked into buying something with a screwball pricing scheme, you validate that merchant's use of screwball pricing. When you see two deals, one with a straightforward price, and another with a complicated scheme of rebates, coupons, add-ons, and "taxes and fees extra" - pick the simpler deal. Nine times out of ten, the simpler deal is the better deal.
Keeping your personal finances SIMPLE makes it easier to understand where you money is going. I keep harping on Faux Financial Acumen - the thinking that cashing in rebates and coupons and loyalty points is the way to get ahead in life. These sorts of things only complicate your financial picture, which is complicated enough. And usually they are bait designed to get you to do things against your own interests - like step into a credit card pit lined with punji sticks.
Simple deals are usually the best deals. Now, note that I said "usually" - there is always some Weisenheimer who will chime in on what a great deal they got on a cash-back-bonus-rebate-loyalty-card, or whatever. And occasionally, people do win on these things. Occasionally, people win at the Casino. This does not make Casinos a good bargain. And funny thing, too, the people pushing these bad deals always celebrate the few who win.
Overall, you are better off seeking the simpler deal for the simple reason that in the aggregate you will come out ahead. Maybe you might miss that one complicated "deal" - but odds are, you would be screwed by the 100 others you got suckered into.
And the allure is so strong! All of us think, "Gee, I am leaving money on the table here by not looking into getting a cash-back rewards card!" And this form of financial anxiety is what the card companies use to reel you in, like a bass on a hook.
Simplicity is the best, however. You cannot spend your way to wealth. You cannot eat your way to slimness. You cannot charge your way to happiness. The less you spend and the more you save, the better off you are. The fellow chasing the complicated bargains ends up worse off in the end. And I say this out of bitter experience!