The Hidden Vig
Posted: Sat Dec 09, 2017 6:23 pm
Last week I bought an inexpensive used car from an individual to replace my daughter's car, which had been totaled in an accident. No, nobody was hurt - it was just an old car with damages that amounted to more than it was worth. We had around $4K to spend on a car, which meant I was not going to spend more than $3K on one. Why? Because I knew there was a hidden cost to buying a car from an individual - which was my plan. When you're buying a car for $3K there are several things you need to be aware of. First off, it's likely going to need a brake job and one or two tires. It may need a front end alignment and you'll certainly want to have a good detail job done on it. And, of course, I want to start out with clean oil so an oil change and lube is in the plans. Older used cars rarely come with both keys, and if it's a car that once had a key fob, you can count on them not having one. The car will have to pass the state's inspection - which in the case of this car meant new wiper blades and a replacement light bulb over the license plate holder. Then there's state tax and registration fees and title applications. Bottom line - when all of this reconditioning and registration is done and you are satisfied the car is road worthy for your kid - you're out an additional $600 - $1200. You're in that $3000 car for $4200. And that is why, when you walk into a used car dealership to buy a car that Kelly Blue Book says is worth $5500 - and the dealer has it listed for $7995 - you might blink and decide to shop elsewhere and buy from an individual. The individual doesn't have to do all of this reconditioning. He just sells you his old beater. A dealer is required to perform certain inspections and make sure the car meets certain safety standards before he can sell it. The dealer spends that $1200 - plus the $5000 he gave the previous owner on trade - and marks the car up $1795. He'll end up discounting the car to the customer $900 or so, leaving an $895 profit margin. Out of that he pays a sales person a commission of around $200. The finance manager and sales manager each get a piece of the profit amounting to another $200. That leaves the dealer $495, out of which he pays his office staff, his building rent, his light and phone bills, his IT bills, and his own salary. When it's all done he's lucky to have an extra $100 to roll into net net profits. Welcome to the car business boys and girls. That's the way it works. There's a hidden "cost" to buying at a retail outlet - but if you buy wholesale direct from an owner you ultimately STILL pay that hidden cost.
So where does that take us? Where else. Directly to the casino floor. I’m often amused by guys who complain about the vig on certain bets – yet they’re completely unaware of the hidden vig they’re paying every casino trip. What do I mean by “hidden vig?” Let me give you an example or two.
First let’s look at a guy we’ll call “Gus the Grinder.” Gus is a typical low limit Don’t player. He hits the casinos every Monday thru Thursday mornings and plays for three hours, then had a comped buffet with his wife and goes home for his afternoon nap. He buys in straight out on a $5 game for $200 – all red – then changes $20 in red chips for white. He charts religiously, picks his entry points, and has a 100% session win rate. His average win is around a $25 per session win. By picking his entry and exit points carefully he has managed to play for the last six years without a losing session - hence the 100% win ratio. Gus calculates his winnings at around $4800 a year. The house has almost no edge over his game, and his comps reflect it.
Gus’s wife, “Betty the Button Pusher,” on the other hand is a die-hard penny slot player. She accompanies him to the casino every day. If there’s a free tournament or the casino is offering bonus points for play she’s there with her butt on a slot stool. If there's no "free" or bonus play available she's feeding the machines with her Social Security income. If Gus ever complains about her slot play she reminds him that he’s betting a minimum of $5 on that damned craps game, and she’s only playing pennies. Her favorite machine is an IGT nine liner with a fifty cent max coin per line limit. She always plays max coin – at $4.50 a pull. The game is on a carousel that advertises “up to 95% payback” on this carousel. She’s hitting the spin button on average ten times a minute – or 100 spins per hour. That’s 300 spins per session, which translates to running $1350 through the machine in three hours.
Gus the Grinder has a theoretical loss of around $4.20 per session. Betty the Button Pusher has a theoretical loss of $67.50 for the same three hours. Her actual loss is much more than that because she has limited funds to bet and cannot lose more than the $800 week she brings to the tables. Betty has no problem getting a copy for two Senior Citizen lunch buffets. Gus thinks that free lunch is about the best thing he ever ate. The casino’s buffet restaurant, by the way, has about $2 worth of food and personnel costs invested in each of those plates of meat loaf, green beans, and mac and cheese.
So what’s the hidden vig in this example? Sorry, guys, but the bride is costing you money every time you take her with you to the casino. She – and her slot play – are the hidden vig. It's not unlike the reconditioning expense on a used car. If it has tits or tires it's going to cost you money.
So where does that take us? Where else. Directly to the casino floor. I’m often amused by guys who complain about the vig on certain bets – yet they’re completely unaware of the hidden vig they’re paying every casino trip. What do I mean by “hidden vig?” Let me give you an example or two.
First let’s look at a guy we’ll call “Gus the Grinder.” Gus is a typical low limit Don’t player. He hits the casinos every Monday thru Thursday mornings and plays for three hours, then had a comped buffet with his wife and goes home for his afternoon nap. He buys in straight out on a $5 game for $200 – all red – then changes $20 in red chips for white. He charts religiously, picks his entry points, and has a 100% session win rate. His average win is around a $25 per session win. By picking his entry and exit points carefully he has managed to play for the last six years without a losing session - hence the 100% win ratio. Gus calculates his winnings at around $4800 a year. The house has almost no edge over his game, and his comps reflect it.
Gus’s wife, “Betty the Button Pusher,” on the other hand is a die-hard penny slot player. She accompanies him to the casino every day. If there’s a free tournament or the casino is offering bonus points for play she’s there with her butt on a slot stool. If there's no "free" or bonus play available she's feeding the machines with her Social Security income. If Gus ever complains about her slot play she reminds him that he’s betting a minimum of $5 on that damned craps game, and she’s only playing pennies. Her favorite machine is an IGT nine liner with a fifty cent max coin per line limit. She always plays max coin – at $4.50 a pull. The game is on a carousel that advertises “up to 95% payback” on this carousel. She’s hitting the spin button on average ten times a minute – or 100 spins per hour. That’s 300 spins per session, which translates to running $1350 through the machine in three hours.
Gus the Grinder has a theoretical loss of around $4.20 per session. Betty the Button Pusher has a theoretical loss of $67.50 for the same three hours. Her actual loss is much more than that because she has limited funds to bet and cannot lose more than the $800 week she brings to the tables. Betty has no problem getting a copy for two Senior Citizen lunch buffets. Gus thinks that free lunch is about the best thing he ever ate. The casino’s buffet restaurant, by the way, has about $2 worth of food and personnel costs invested in each of those plates of meat loaf, green beans, and mac and cheese.
So what’s the hidden vig in this example? Sorry, guys, but the bride is costing you money every time you take her with you to the casino. She – and her slot play – are the hidden vig. It's not unlike the reconditioning expense on a used car. If it has tits or tires it's going to cost you money.
