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Having a choice is a wonderful thing. Something that I suspect many of us take for granted. Which vocation to pursue. Which meal to order at a restaurant. Which car to buy. To even have the luxury of a choice means we are in a very fortunate position, relative to so many in the world.
And with every choice, we actually make two decisions – what we accept, and what we reject. I was pondering this whilst reading an old article by Mr. Quinn as he wrestled with the logic of purchasing a Bentley SUV.
Some luxury car owners will have such abundant wealth that the purchase will just mean a slightly lower inheritance to their heirs. So the choice is relatively easy and with little impact. But I suspect for many of those driving their dream luxury vehicle, they have made the choice of a car, and rejected some financial benefits that they might otherwise enjoyed.
Where I live, I would be happy to bet you $1,000 that we won’t see a Bentley SUV this year. But motor vehicles still seem to be imbued with status. A fully optioned Ford Ranger or Toyota Hilux, or maybe a 300 Series Toyota Landcruiser, will certainly generate lots of comments around town.
And everyone that purchases a 300 Series Landcruiser for about A$110,000 has spent about 1.5 times the median annual Australian income. The 300 Series is an amazing vehicle. Powerful, comfortable, high towing capacity. But you have spent 1.5 times the Australian median income! That is a lot of money that you have chosen to use for owning a motor car, and you have therefore rejected lots of other things. That money could have been invested for retirement, funding education, family holidays, charitable donations or myriad other things.
Personally, family holidays, minimal debt and retirement investments are far more important to me than a motor car. So that is what drives my choices.
But I get it. People have different motivations and aims, and therefore make different choices. But I do wonder if people viewed each choice as two choices – what did I accept, and what did I reject – would it change their behaviour?
When my oldest and now 38 year old son was in high school he asked me why I didn’t drive a nicer car. “You could afford it dad.” (At the time I was driving a 6-year-old VW Passat.) I gently explained to him that I chose to drive the car I did so that there would be money available to help pay college tuition for him and his two younger siblings. Now, more than twenty years later, He’s a dad who drives a 6 year old car as he plans for his daughter’s future. While it was not my intent at the time to teach him about the value of deferred gratification or the importance of considering the impact of choices he makes, it appears to have had a lasting effect. (In retirement I bought a very comfortable EV, not top of the line but very nice.)
Overall I like to buy, not the best but say the second best, is that is the most value for your dollar. From a car experience, I want a soft ride, and a comfortable ride. My choice lately is a Lexus RX350. I am 6 ft so I fit in easily and like the accessories. And right, I do not need a Porsche, or other expensive car similar. If I get into a Corvette or the like, I may have to live in there because at 80 it is difficult to get out.
Thanks William. We probably sit more in the middle ground – we don’t buy the very best available, but also don’t buy bargain basement. We have found that by buying “mid-range” and using carefully, that we get very long and reliable life from cars, appliances furniture etc.
By the way, the RX350 looks like a beautiful motor car.
Opportunity cost is a real dilemma that people often overlook when making spending choices like the ones you describe.