Wednesday, April 22, 2015

Car Fever

We all lust for fancy cars, thinking to ourselves how cool we will look, tooling down the boulevard in our fancy wheels.   It is sort of stupid of course, but we all do it.

Car Fever.  A reader writes they are suffering from it.  They want to sell a year-old car they have financed, wrap the negative equity into a new loan, and buy a used Toyota FJ.   If you are not familiar with the car, relax.  Not many people are.  Some are saying the car is "collectable" as a result.  Others say it is so unpopular, they had to stop making it.  The truth is somewhere between, probably more of the latter.

Toyota made a Jeep-like car that was the original FJ40 "Land Cruiser" back in the 1960's and 1970's.  It is not to be confused with the pimp barge they sell today under the "Land Cruiser" name.   It was an OK Jeep, but outside of California, they rusted to death in short order.  Out West, they developed a cult following, and more than one fellow makes a living rebuilding these old classics. 

So, Toyota, jumping on the "retro" bandwagon, did a concept car on the Tacoma/4Runner frame and it was popular at the auto shows.  "Build it!" everyone cried.  People say "build it!" but that doesn't mean they are going to buy it as Toyota found out.  More than one car maker has been caught in this trap - building a show car because fan-boys said they wanted one, only to never see those fan-boys appear in the showroom to actually buy one (think: Plymouth Prowler, Chevrolet SSR - two other "retro" showcars that were made into slow-selling production models).

The retro craze in car design has largely petered out.  The PT cruiser is gone, as is the HHR, the SSR, and the Plymouth Prowler.  The "New" retro Mustang has been replaced with something less retro and more modern.  Only the Challenger and the Camaro carry on the retro theme these days - and for how long is anyone's guess.  And of course, there is the Mini, but they are quickly bastardizing that into an SUV and an ugly fastback.

The problem, for car designers, is where do you go with retro?  Since you are locked into a design "look" from the 1960's or whatever, you can't really change the design much.  It gets to be boring and people lose interest and as a design theme, it is a dead-end.  So designers revolt and "retro" goes into the trash.

The first two years of production, Toyota sold 50,000 FJs a year.  Not bad, but a niche product even at that level.  Since then, sales dropped to about 10,000 a year, ending in 2014.  To give a comparison, BMW sold nearly 300,000 of the Z3 roadster, which is considered a "boutique" level of production.  The FJ maxed out at 200,000 worldwide.

Toyota can't afford that, and likely lost money on every FJ sold.   Just certifying a vehicle for sale in the US (and California) costs millions of dollars, as cars have to be crushed, smashed, and run to death to certify for emissions and crash safety.   So if you are going to sell a car these days, it had better be high volume.

And the FJ design was a bit odd.  With a huge rear quarter panel, there was no rear view.  Huge truck-like mirrors blocked the front view.  The rear "suicide" doors could not open by themselves (the front door had to open first) and the tinted windows in the rear did not even roll down.  It was a dark and claustrophobic ride for the people in the back.

Given the choice, most people not enamored with "the look" went for a 4-Runner instead.  Same car, about the same price, but four doors with windows that rolled down.  For the hard-core off-road set, a real Jeep (for which they make a boatload of aftermarket parts) is probably a better bet, as it has live axles both front and rear (the IFS setup on the Toyota, which I had in my 1988 4x4, was not loved by the off-road set).

But given the limited number of sales, the resale prices were very high.   In fact, some blue book companies claim the FJ has the highest resale value of any SUV - perhaps any car.  To be sure, some folks have built a mystique around the car, much as 40 years later, people have fond feelings for the original FJ-40.

But a car is a car.   And used cars do depreciate over time, as they wear out.  A "garage queen" kept in a garage and never driven might hold its value more, but then again, it just becomes a 4,000 lb paperweight at that point, not a car you can use.

And I've seen this firsthand.  I have a 1999 M Roadster, of which only a few thousand were made.  It is more than boutique, it is like bespoke, hand-crafted level of production.   But it is just a car, made in a factory, with the front suspension from a E36 BMW and the back end of a E30.   It doesn't fly or travel through time, although it does corner like it is on rails.

But it sold new for $44,000.  I bought it four years later, with 7,000 miles on the clock, for $29,000 - still the most expensive car I've ever bought.  Today, it is 16 years old, and has 54,000 miles on it, and the book value might be around $12,000.   It depreciates like any used car.

Why is this?  Well, they came out with the Z4, and then the Z4M, and then the Z4 hardtop convertible, which is pretty slick, and the twin-turbo 3.0 puts out 300 HP in stock form.  The new M version?  I hesitate to ask.   In other words, they now make better cars.   Actually much better, as the suspension was designed from the ground up, not warmed over from leftover 318ti parts.

And the same is true with the FJ.   They will keep making newer and better cars.   And  once the FJs out there have 50,000 or 100,000 miles or more, people will not want to pay top dollar for them, when they can buy something brand-new for less.  Will it be a cult car?  Perhaps.   The production levels are low enough.

But a "collectors item"?  Maybe in 20-30 years or more - far longer than most owners will plan on keeping them.   Why is this?  It is just is the way it works with old cars.   It takes a LONG TIME for a car to actually appreciate in value.   Even a Ferrari follows the depreciation curve, particularly mass-market models like the Testarossa or the old 308 "Magnum" GTB - both of which are just now starting to tick up in value after three decades.

But the reader admitted that the real reason he wanted this particular car was that it was "cool" with the people in his age group, and he fantasized about driving around with everyone admiring him for his ability to go into debt to finance a car. 

Well, that is the fantasy.   But at least he was up front about it - he desired to impress people he didn't even know, with the car he drove, as if picking out a car is akin to actually designing and building it.   But in reality of course, anyone can have a "fancy ride" if they are willing to go into debt.

And to trade in a year-old car with a loan balance to do this is, well, not a smart choice, financially.

That is the point of this blog, which is sometimes missed by some readers.   I am not blame-shifting here.  I am not saying the poor "deserve their fate" or that the shrinking middle class "had it coming" or that somehow I am above the fray.

Rather, my point is (and I did have one) is that we all succumb to these kinds of feelings - craving status, to be exact.   We all try to impress people we don't even know - which in an odd way, makes sense.  You can't really impress your friends with a fancy new car - they know how broke you really are.  But strangers?  We can make them think we are rich by merit of a fine ride.  Or so we think.  And this why having a bitchin' ride is so coveted in the ghetto, and the middle-class drives silver or beige Camrys.   The middle-class has a 401(k) and doesn't need to impress people they don't know - as much.

And that is why wealthier people tend to look down on those who drive flashy cars as being nouveau riche or gauche.  And they are probably right about that.   I remember growing up, a neighbor down the street had a Porsche 356.  He beat his wife and his kids were sent to reform school.   They had money, but they didn't have much in the way of common sense.   They were shunned by the neighbors.

Some of the biggest financial mistakes I have made in my life revolve around cars.   There are cars that I wish I had kept a few more years, others that I regretted selling (but sometimes had to sell, nevertheless) and others that I definitely regretted buying.   In most cases, the show-off "look at me!" cars were the worst sort of bargains.    The more plebeian rides, ironically, gave better satisfaction.   The most fun cars I had were broken down old clunkers I worked on - with the working on being the fun part, not the driving around and showing off.

I had a nice Camry which I though was a nice car.  It was the first car I ever owned with power windows and air conditioning!  I stupidly traded it for a Taurus SHO which fell apart on the dealer lot and depreciated down to nothing in no time.   For the few years I had the Taurus, I could have driven the Camry that much longer.  The amount squandered?  $25,000 at least - enough to buy a nice secondhand 3-Series BMW!

The M Roadster might get sold someday soon, perhaps.  The only reason we've kept it, is that it has so few miles on it (54K) and its resale value has sort of flattened out.   But it is not a comfortable car (indeed, many have 50,000 miles or less, even after a decade-and-a-half) and increasingly, even hard to get in and out of.  In terms of cost per mile and depreciation, we're looking at about 33 cents a mile, double what the X5 was (18 cents) or the F150 (15 cents).   And as you get older, you want less of a "look at me!" car so much as you want a "don't look at me!" car.   Urban camouflage sometimes is handy.  If you want to rob a bank, use a beige Malibu as a getaway car.

Blending in can be handy, if you are robbing a bank...

But kudos to our reader for understanding, at least, his own motivations.   We all fantasize about "looking cool" with the latest sneaker, or Abercrombie shirt, or cool car or truck or boat or whatever.   Our marketing overlords know this, and pitch these things to us accordingly.   How many fancy vacation packages are sold on the perceived status?  No one will admit it, but part of going on an expensive vacation is posting all those pix to Facebook, so everyone will be envious, right?   Well, no one admits to that out loud, but then why do people post shit on Facebook?   Funny thing, when you post something on Facebook, they call that your "Status" - the word has two meanings, and perhaps Facebook uses both.

And really, not many people are exempt from this.  Even my stinking pot-smoking hippie brother ended up buying a monster SUV (according to his last voicemail, we don't talk).   And maybe those hippies compete to see who has the coolest tie-dye or best patchouli stink or who is the most politically correct or whatever.

It's human nature, human weakness.   We all do it.   To get ahead in life, realize when you are status-seeking, and either squelch the behavior by "doing the math" and realizing how broke status will make you, or find a way to do status-on-the-cheap.

But the more you can walk away from status, the wealthier you will be in life.  It is a lesson that takes most of us a lifetime to learn, if we ever learn it at all....

1 comment:

  1. The Ill-fated 11th generation Thunderbird (2 seater) was another "retro" car that wowed them on the show circuit, made a big splash, and then sold like crap. Ford lost money on every one sold. Retro is a dead-end, design-wise.


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