(I had a lot of fun writing this, it may be bullcrap or missing a few details, but it was a good exercise in comparative thinking.)
A scene at an auto dealership:
A man walks in, and is greeted by a salesman.
"Howdy, sir, this Mustang is $15,000, or, you could sign a 5 year lease with us and drive it home today for no money down and $299/mo. How's that sound?"
"...well, salesdude, what's the final cost of the car?"
"I don't mind telling you that, good sir, it'll be a 5% loan, so we're lookin' at a final cost of around $21,000, give or take, with taxes, yadda yadda."
"...so it's cheaper if I avoid the contract?"
"Sure, sir, you're only paying for the loan amount."
"My cell phone company doesn't work like that."
"Sir?"
"Well, what I mean is, I see a phone, they say it's $99, and I have a two year contract with them, and I pay about $150 a month. If I want to cancel, I have to pay what they call a "penalty" and I suppose that's to recoup the phone cost, but they said it was $99, and I even read the fine print...which said nothing about the cost of a phone, just a penalty. They also listed an MSRP next to the phone..."
"...MSRP, sir?"
"Sorry, salesdude, that's 'Manufacturer's Suggested Retail Price'....anyway, it said the phone was $699. So I figured I was getting one hell of savings, right?"
"Sure sounds like it!"
"Of course! Now, say, here at USA Car Sales you came up to me and said for $5,999, I could drive away that Mustang over there, but I'd have to pay $600/mo for five years in order to do so. The sticker cost on the car is $30,000..."
"...wait, sir, but our Mustang isn't $30,000, it's $15,000..."
"...ah, but that's not the point, kind salesperson. The point is to make the contract a sweet deal, so the price is lofty by design...we both know the car is a $15,000 car. In fact, if I do my math, I'm owning that mustang at $36,000 after all is said and done, due to the contract."
"That's outrageous, sir!"
"Not only that, if I back out early on the contract, I have a $30,000 penalty...never mind what I've already invested in the car."
"Can they really DO that?"
"Of course, my good salesperson. That's because for some reason, when a lack of zeros at the end of a monetary figure exist, usually less than four, people think of it as 'affordable.' More than five, then it's pretty much out of their reach, and they merely ignore it as an impossibility. But, someone were to shroud those numbers in other numbers, suddenly, you get them past the 'big numbers' they're afraid of, and a company can earn more profit."
"That sound deceitful, if you ask me, sir."
"Some might call it theft, salesdude, and there's a law claiming that if you want to use your phone in someone elses' network, that's theft to."
"Come again, sir?"
"Here's the deal...we have this here Mustang. Let's say we can only drive our Mustang on highways with even numbers...but you want to drive it on a street with an odd number. The company that sells the Camaro has a car that you can drive on odd numbers, but not even. You're expected to throw away, recycle or turn in your Mustang, or simply buy a second car (the Camaro) so you can drive on the streets you want. Anything else is not only nearly impossible to do, if it were to be done, it'd be considered illegal."
"It is? That's rough! Why would someone design a system like that? What if someone were to...you know...just jump on the wrong street with the wrong car?"
"Money, my good man, money. Well, nothing, according to a dealership like yours. One way or the other, you're making your money via a contract for a $30,000 Mustang. Do you have used cars here?"
"Well, of course we do sir, would you like to see them?"
"Not right now... my point is, your used cars aren't from the same company as the Mutang, but you still sell them. Imagine if your company was not the only company that sold mustangs...but your competitor did too, or something almost identical to a Mustang."
"Why would they do that? That sounds like they'd be undermining their own sales, between the companies!"
"For the same reason gas stations pop up right across the street from one another. It regulates the market, and 'price fighting' is a natural part of that. Now, imagine further, the streets we drive on are also owned by your company and your competitors, and it was totally okay to drive along all the streets no matter what car you drive...but all you had to do was keep the car's original name badge on it."
"Sounds fair, but I'm getting confused...I thought certain cars could only go on certain streets?"
"Well, salesguy, that's the truth, but it's come about in this story that they've decided to let anyone use their streets no matter who they are, because they have deals with each other that they agree to, and even buy access from totally different companies that own special streets."
"Special streets, huh? This is sounding like a tall tale."
"Not really. Say for example your wife goes out of town to visit her grandparents, but she took your Mustang here. For some reason, out of the blue, she discovers she can't get to Grandma and Grandpa's because the street exists on that pesky competitor's set of streets, and to get there would require her to walk, rent a bike or catch a cab...for a 50 mile journey. Silly, right?"
"Right."
"What if she knew all she had to do to get to her destination all she had to do was remove the 'Mustang' name badge and put on a 'Camaro' name badge and she could get there...no muss, no fuss."
"Sounds reasonable, sir."
"Ah, well, that's where it gets tricky. While the companies might not care, the government does. In fact, they want to fine her a million dollars and put her in prison for it."
"Are you kidding, sir?"
"No, as a matter of fact, they think she's a crooked thieving miscreant, and because she already owns the Mustang, and just called it 'Camaro' to get to Grannys means she stole from the company that owns 'Camaro."
"How did she do that?"
"Because of the agreements between the companies and the government."
"How much did she actually steal, then, sir? Is it that bad of a crime?"
"I'm not sure, that's a matter of who you ask. Since the Camaro is $30,000, and she never bought it, but claims she has a Camaro, that company is apparently entitled to $30,000. Stealing $30,000 is a big deal, according to some."
"...but isn't the Mustang the same price as a Camaro, $15,000?"
"Yep. It's the contract that makes it $30,000, or in actuality, $36,000."
"Where'd that extra $21,000 come from, sir?"
"It came from the contract. As did the illegality that said that you cannot change the name of the car from one to the other, even if it means you get service/availability to streets you did not have before. Would your customers pay more than $15,000 for a car, salesguy?"
"Only if they leased it."
"Right, and that lease amount is based on money you borrowed to own the car, not the car itself, right?"
"Right, sir. Right again."
f
"Back to reality, salesguy, what if the government were the ones that actually owned the streets, but leased the streets in our fictitious little car/street scenario, that they were the ones that built and maintained them, but someone else was collecting the rights to use them? We call that the 'FCC' and they control the frequencies we talk on with our phones."
"That's kind of weird."
"Not at all. Now you see why the contract is so important to the car companies and the government, especially on a funding standpoint. It's all designed to keep a neat, tidy and what most would assume is a consumer-driven system that no one really complains about."
"I have a question, sir."
"Ask away, good salesdude."
"If I bought my Mustang outright, for this new MSRP of $30,000, can't I use it on any street?"
"Well, yes, you can, but only once. And not every Mustang or Camaro or any car will necessarily work, you are limited to whatever is a current model because of compatibility. You get to choose whatever system you want, but once it is there, you can't change it. So if you want features of the Camaro, you have to get a Camaro, and if there's that rare street you can't get onto, you either have to buy a Camaro or 'illegally' change the name."
"So what does the $30,000 actually get me, and why the compatibility? And what happened to my $5,999 car?"
"A Mustang, or a Camaro. That's it, but it'll be a NEW one. Some people do that, but not very many here in the good ol' US of A, paying full-price for either car, which price was based upon a contract, and now becomes the 'value' because people really have no choice, and on top of that, have to follow the rules, and compatibility set by the car company and the government. The car companies make it so that old cars can't be used on the system, because they upgrade the system (whether it's needed or not), or more to the point, make new cars not only desirable, but the old ones obsolete. Not only that, the old cars are to be turned into the car companies themselves for recycling, but you can also sell them and try to recoup some of your losses...no pun intended. You're still at the whim of all the rules and cost. It isn't $5,999, nor $30,000...it's still $15,000, but that world doesn't exist in this hypothetical one, remember."
"Makes me not want to buy a car. Or a cell phone."
"Ah yes, but you will. It's become such a convenience and a daily-life product that you'd be outpaced and out-traveled by those whizzing past you...and that would not only make you feel bad because people would look down upon you, it'd seem like you were standing still, or at least going very slowly. Fortunately, there's a few companies that also allow you to buy disposable cars you pay for every time you use them, but they often lack the 'cool factor' and newness of a real Mustang or Camaro, and since that's not what the majority people 'want,' it isn't really an issue for the big car companies. You're paying for a name, and maybe a few extras, like a windshield wiper warmers...all the rage, but next year, it'll be something else. And that partially justifies the cost and contracts involved. Cell phone with their new releases, faster this-n-thats, or car with windshield wiper warmers."
"I see...but windshield wiper warmers? Who really needs that?"
"No one, really, but you'd think you'd die if you didn't have them if you ask some people that are fans of them."
"So were stuck in this world you speak of, sir?"
"We're stuck, my good man. Be thankful your Mustang here is only $15,000, or with a contract, a around $20,000. Be thankful our cars aren't run like cell phone companies. Say, does your company sell vintage motorcycles?"
"No, why?"
"I think I need one of those rather than a Mustang after talking about all of this."
8)
