December 5, 2021

Bits Blog: Amazon and Apple’s Giant Markups on Flash Storage

Apart from the look and feel of their products, there’s a key difference between Amazon’s new tablets and Apple’s iPads: the amount of money each company charges for storage. Apple customers typically pay more to get extra gigabytes, but over all, both companies do a major markup on memory.

Take the example of the 8.9-inch version of the Kindle Fire HD. Its Wi-Fi model comes in two options: 16 gigabytes for $300 and 32GB for $370; to enjoy 16 extra gigabytes of storage, a customer pays $70 more. For its smaller 7-inch tablets, Amazon charges $50 more for an extra 16 gigabytes.

Now look at Apple’s iPad. You can get a 16GB model for $500, a 32GB model for $600 or a 64GB one for $700. That’s $100 extra for that first 16GB bump, then a relatively cheap $100 to get from there to 64GB.

Of course, when you buy a new gadget, you’re not just paying for a slab of components. The maker of the product is trying to get you to cover the cost of research and development, manufacturing and advertising, and still rake in some profit. But when you get an iPad or Amazon tablet with 32GB as opposed to 16GB, extra space is all you’re paying for.

And it turns out that the cost of flash memory chips is dropping significantly. In a report issued Friday, RBC Capital Markets points out that the cost to device makers of 8GB of the flash memory used in tablets has declined from $6.82 in the beginning of the year to $3.63 now, representing a 46 percent drop.

Doug Freedman, the analyst at RBC who wrote the report, points out that while the cost of the chips has fallen, the final cost to the consumer has barely decreased at all. Even though Kindle tablet customers usually pay less for storage, Amazon’s markup is still hefty. The memory that Amazon uses costs about 70 cents a gigabyte, according to Mr. Freedman, so every 16GB costs the manufacturer about $11.20 — far from the $50 to $70 that an Amazon customer pays for the storage. Apple’s memory costs about 40 cents a gigabyte, he said, so 16GB costs Apple about $6.40 — far less than the $50 or $100 customers pay.

A report published by IHS iSuppli, the components research firm, in March found that marking up memory costs is where Apple gets a lot of its iPad profits.

“The NAND flash memory is one of the key profit-generating components for Apple in the new iPad line, as it has been in previous iPads and in the iPhone family,” said Andrew Rassweiler, an analyst at iSuppli, in a statement. “Apple makes far and away more money in selling consumers NAND flash than NAND flash manufacturers make selling it to Apple. And the more flash in the iPad, the higher the profit margin there is for Apple.”

Article source: http://bits.blogs.nytimes.com/2012/09/10/amazon-apple-tablets-flash/?partner=rss&emc=rss

Bucks: Getting the Best Rate on a Car Loan

Jim R. Bounds/Bloomberg News

When it comes to buying a car, you’re often far better off seeking a loan directly from a bank or credit union than going through the dealership, because dealers often add hidden finance charges.

That’s the conclusion of a report on car dealer financing from the Center for Responsible Lending.

The group examined data from bonds backed by car loans and survey information from 25 auto finance companies with a combined 1.7 million accounts and found that dealers often marked up interest rates but didn’t disclose the markups. In 2009, the average markup was 2.47 percentage points, and the average extra payment was $714 per consumer over the life of the loan.

As car sales dipped in the slow economy, dealers felt pressured to make more money on the “back end,” as it’s known in the industry — that is, through making car loans and selling extras like accessories and service contracts to car buyers. Car sales dropped 20 percent from 2007 to 2009, but markup volume grew 24 percent during that period — to $25.8 billion from $20.8 billion — mostly due to increased markups on used cars, the report found.

While the markups can raise the cost of new car loans, used car loans usually get higher markups, as do borrowers with less than stellar credit histories. Say, for example, a borrower’s credit score qualifies him for a 60-month used car loan of $17,500 at 8 percent interest, but the dealer adds a markup of 2.5 percent. At 10.5 percent, the loan costs $1,278 more. (That amount is much higher than the average $714 because the average includes loans with no markups. Such loans are probably made to borrowers with very good credit, or those savvy enough to know what sort of rate they would qualify for based on their credit score, said Kathleen Day, spokeswoman for the Center for Responsible Lending.)

The extra charges are often particularly burdensome for less credit-worthy borrowers, and can increase the likelihood that such consumers will default on the loan or have the car repossessed, the report said.

Yet most consumers aren’t aware that dealers can mark up rates without their consent and often don’t know what the interest rate is on their car loan. Dealer finance staff members may tell buyers the rate quoted is “the rate that is available,” rather than the “best rate they qualify for,” to avoid legal challenges over deceptive practices, the report said. Consumers who said they believed their dealer gave them the “best” loan possible actually paid rates 1.9 to 2.1 percentage points higher than others with similar credit standing.

The report proposes having finance companies pay dealerships a flat fee for arranging loans, which would compensate them for their time but reduce the potential for abuse. A federal requirement for an interest rate disclosure, like those used for mortgage loans, is also warranted, the report said. (Sounds like yet another job for the new Consumer Financial Protection Bureau)

Meantime, what can consumers do? The report makes the following suggestions:

  • Consider seeking preapproval for financing from a bank or credit union before visiting the dealership. At the very least, it will provide a point of comparison if the dealer makes a loan offer.
  • If you do obtain financing from the dealer, realize that everything in the loan is negotiable — including the interest rate.
  • Check your credit scores ahead of time to help estimate what sort of interest rate you should be able to obtain.

Have you tried negotiating finance rates with a car dealer? What was the result?

Article source: http://feeds.nytimes.com/click.phdo?i=03fd5497b73dac8b4099555ca5a36228