Saturday, December 24, 2011
Yesterday's Dream Car
Once a highly coveted object of status, this 20-year old car can be bought, in like-new condition, for less than the cost a Chevy Sonic. What does this say about status and desirability of luxury goods?
Kids, particularly boys, love to obsess about cars. Many a teenager has a poster of a Ferrari and a hot babe in their bedroom. When I was young, my friends had that famous Farrah Fawcett poster, and that poster of a Lamborghini, on their bedroom walls. Both were images of the unobtainable perfection. Both were likely things you might not want in real life anyway (high-maintenance cars and high-maintenance women are rarely as satisfying as they might appear to outsiders).
But a funny thing happens to desirable cars, as they get older. They simply get older, and less desirable. And few, if any, become rare collectables, as people who bought Ferrari's in the 1990s discovered to their dismay. A Magnum, P.I. 308 GTB or a Miami Vice Testarossa will depreciate like any used car, it turns out.
Now, if you are astute and like cars, and have a knack for fixing things, you can pick up one of these cars, for not a lot of money, and have a very nice ride for only a fraction of the cost new. A lot of them were third or fourth cars for their owners, and often were garaged and waxed and rarely driven - and have very low miles as a result.
And this illustrates how the vast majority of Americans - like the herd animals they are - over-pay for most things. The fellow who bought the above car, brand new, in 1990, burned through $40,000 in depreciation in five years - over $600 a month. The fellow he sold it to, went through half that, in the next five years. And so on. Were those first few years of ownership really that worthwhile?
What has happened in the last 20 years to make the car shown above worth less than 1/4 of its original sales price? Has automotive technology advanced that far? Not really. But cars like this are sold on status, and part of the status is being able to say you paid $80,000 for a car. When it is new and shiny, it is a bauble or trinket and indicia of your apparent wealth (apparent being the key).
But as a decade-old used car, or two-decade-old used car, there is little status associated with it. At that point, it almost becomes an anti-status symbol. Older BMWs and Mercedes are a sore reminder to the owners of new ones of their eventual resale value and intrinsic value in the marketplace. And perhaps for this reason, luxury-car makers don't want to see their vaunted rides tooling about after 10 or 20 years, showing rust, dings, dents, and their pedestrian underpinnings. And of course, they don't want folks to see their status cars parked in non-status neighborhoods.
And perhaps that is why the Germans are getting more aggressive about changing sheet-metal on cars more often - shortening product cycles to less than five years. The above car was made from 1990 to 2002, largely unchanged - a lifetime in the product cycle of most automobiles. And therein lies the problem. How do you sell this car to someone in 2002 for 80 grand (or far more) when the original version is for sale, in good shape with low mileage, for a quarter of that price?
Making cars look different is one way to make the older versions look obsolete. And at one time, that sort of practice was considered only a sin of Detroit - who changed sheet metal on a yearly basis, throughout the 1950's and 1960's. Meanwhile the staid Germans hardly changed a thing - keeping their VW design intact for 40 years, for example. And even when they re-designed the cars, they kept the look very similar.
Of course, there are some folks who are not very bright about cars, and don't notice the differences in sheet metal. To them, any car that is shiny and clean is "new" - because their three-year-old car, parked outdoors, is already fading and dirty. It is funny, but people give me a hard time for driving a "brand new BMW" and when I tell them that it is over a decade old, and worth maybe $9000, they sort of freak out. That's less than half what they paid for their new Altima! And that already has a big dent it it!
So what, you say. You don't drive expensive cars or seek status. Au Contraire, mi amigo! We all seek status. And yes, when people lease a new car - even if it is a piece of crap made by Chrysler, they are seeking status. Having the newest and latest car - often distinguishable only by the fact the grill or headlights are sightly different - is a form of status-seeking. "I can afford a new car, buddy!" is what many people subconsciously think, as they drive down the road and see someone they perceive as "poor" driving last year's model.
But it is only a year or two before the product cycle changes, and suddenly it is you who are the poor schmuck still making payments on the old, obsolete version. And of course, it is hardly old or obsolete.
Owning brand-new cars for the sake of having brand-new is, oddly enough, more common a status goal of the underclass and lower-middle-class than it is of wealthy people. The strivers as Vance Packard calls them, are the ones most likely to be serial leasers. The truly wealthy really don't need or want to show off in that manner. A five-year-old Mercedes has more style and class than a new Camry does, any day. And ironically, they cost about the same.