Editor’s Note: Civil Beat is examining why life in the islands is so expensive in an ongoing series, Living Hawaii. We are taking a look at what’s behind high prices here and discussing ways to bring them down.
We’ve all heard about the “Paradise Tax.” It is, people say, the added cost of living in these islands.
Many believe it gets back to the cost of shipping goods across the Pacific. The cost of transit may be what adds a buck or more onto the price of a six-pack.
So what about that brand new Chevy Cruze? What could be more vulnerable to the so-called paradise tax than a shiny new car fresh off the boat?
Almost everything in Hawaii is more expensive, but not new cars.
Eric Pape/Civil Beat
After all it weighs more than that sixer of beer, and takes up much more room on a cargo ship. But as it turns out, new vehicles aren’t subject to the same paradise tax as most other goods.
“It’s so counter-intuitive it surprises people,” said Dave Rolf, of the Hawaii Automobile Dealers Association. “There’s uniform shipping so it’s the same cost to ship a car one mile from the factory as it is to ship it to Hawaii.”
That means a new Toyota should list at the same price in Lihue as it does in Los Angeles, where the cost of living is far less than in Hawaii where Oahu’s median home price just touched $700,000.
Rolf says that the car company’s policy acts as a great price “equalizer” because it puts dealerships — no matter the location — on the same footing.
A dealer and its customers who are located 700 miles from a car factory shouldn’t have to pay more for a vehicle than the dealer who is just 70 miles away.
That fairness principle is ultimately what benefits consumers here, as we live in the only state surrounded entirely by water.
That doesn’t mean the cost of shipping isn’t built into a vehicle’s sticker price.
As Kelley Blue Book explains: These destination charges can range from $400 to $800 per vehicle, and “no amount of negotiating will make it go away.”
But every car, truck, van or SUV throughout the country takes on a portion of the overall transport fees so it is spread out over the entire fleet.
When looking at a selection of car prices in an array of cities, it is clear that there is some variation, it just isn’t supposed to be because of shipping. It is due to things like the detailing and options you choose, as well as the law of supply and demand.
As is clear from Kelley Blue Book’s fair market calculator in the chart below, Honolulu doesn’t have the highest or the lowest price range.
Once a car is here, the price of owning a vehicle can — and often does — increase due to the high cost of living.
Our roads, at least in Honolulu, are also some of the worst in the country, according to TRIP, a national research group based in Washington, D.C. This adds an estimated $598 a year to the average car owner’s vehicle operating costs.
Car parts can also cost more in Hawaii due to shipping expenses.
Ejaz Dean, owner of B&B Auto Repair on Dillingham Boulevard said this can add between 5 percent and 10 percent to the cost. Hawaii labor prices are also higher than many other places in the U.S.
“Some of the shops they charge $80 an hour,” Dean said. “But in Hawaii there’s no such thing as $80 an hour. … The average going rate is around $100.”
That said, Dean believes there are mechanics in some parts of the country who charge more for repairs than those in the Aloha State.
A recent study by CarMD, a vehicle diagnostics company based in California, found that Hawaii repair costs were on par with other states in 2013.
Hawaii ranked 23rd in average total repair costs — $389.03 — after a vehicle’s check engine light came on, according to the CarMD analysis.
The most expensive state in 2013 for repairs was North Carolina followed by Massachusetts, with average costs above $420. West Virginia, New Hampshire and Nebraska were the cheapest, ranging from $320 to $340.
Dean says people ultimately need to consider land prices when looking at how Hawaii’s car prices stack up against other states.
Car dealerships need a lot of space to showcase the latest and greatest in automotive technology. And on an island — where land is limited — floor space can come at a premium. Some of those costs are passed on to car buyers, but you won’t see it in the sticker price.
The cost of real estate also hits mechanics, Dean said, increasing their overhead, which is usually passed on to customers.
“You can rent a shop in Arizona, which is 5,000 square foot, for $1,500 maybe $2,000,” he said. “The same square footage over here is about $6,000.”
And then there is the price for dealerships and mechanics of keeping the lights on in the state with the highest electricity rates in the country.
“It is more expensive,” Dean said. “The cost of living is high in Hawaii.”
Just not when buying a new car.
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