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I was sitting in the car outside my grandkids’ school this morning while my wife Suzie dropped our granddaughter into preschool. I noticed my grandson’s friend being dropped off in a shiny new VW Transporter Multivan. I know his parents, they don’t do camping. It seems like an awful lot of cash and car for a family of four. They’re everyday folks with normal-paying jobs.
This trend for large, expensive vehicles seems prevalent with the thirty-something drop-off crowd at my grandkids’ school: large German SUVs, transporters, and low-end performance cars with “M” and “RS” badges. I meet and talk to these people at school sporting and social events. They’re mostly ordinary blue-collar workers, not high-end professional career people.
The thought passing through my mind is: why? Why saddle yourself with such a large fixed financial cost at that stage of life? It’s a puzzle to me. Personally, at that age, I was driving much less car and funding my retirement accounts. Maybe it’s just a “thing” now to focus more on your look. Maybe they have large resources I’m unaware of. But I suspect not.
I know cars are less often purchased outright nowadays, with various leasing arrangements being the normal method of ownership. While this shift has let people stretch into more expensive options than they could afford by buying outright, the real difference is what happens after the payments end, or don’t.
With traditional financing, you pay for a car over five years, and when the finance is finished, you have the opportunity for maybe three to five years to divert that money into savings. That’s a lot of cash saved. With these leasing deals, you don’t get that chance. You’re locked into a perpetual payment cycle, you always have to take on a new one. I don’t know which approach is best, but I would personally prefer the savings route.
I hope for all my grandkids’ parents’ sake that this choice doesn’t lead to underfunded retirement dreams in later life, as the constant car payment obligation limits their ability to focus on long-term security.
But sure, what would I know? I’m only a middle-aged gentleman making himself useful and passing his retirement time dropping off the grandkids. Anyway, they seem happy with their choice of cars, so I guess that’s okay. And I’ve more important things to think about, where to go for breakfast when Suzie gets back from the school building. This drop-off business makes you hungry.
I purchased cars of various sizes as the children were growing. I had a 2WD Ford Explorer at one time which I used to ferry Scouts and tow the troop trailer. There was a pickup truck in the mix, too, and I used it for my business. I once hauled tech to New Orleans after Katrina. I had fabricated everything in the Midwest. Ditto for projects as distant as Salt Lake City and Tulsa.
As the vehicles aged at a certain point I prepared them and sold them at a discount to the children as their first automobiles. After a couple of years they traded them for something newer.
Over a period of 59 years I’ve purchased quite a variety of vehicles, many slightly used. There was a Chevy Vega in the mix, with 5-speed manual gearbox, and a slightly used 1969 Ford Thunderbird with 429, 4 bbl engine. That was a beast! My only real splurge was a Subaru WRX. But once G got into it, I couldn’t get her out of it and I switched to driving the Chevy Malibu. I guess the Roadtrek RV could be called a splurge, too, if for no other reason than the 6 figure price tag.
When we evaluated RVs in 2013 we rented one on a Mercedes chassis. The cache of the badge was insufficient for me to buy one. One problem at the time was service. There were only abut 200 Mercedes certified service centers in all of North America. The BlueTec diesel provided decent mileage and adequate torque, but diesel being more expensive the cost per mile was higher than the Chevy chassis. It is also finicky and there were complaints of fault codes resulting in the vehicle limping along for miles, as the vehicle computer constrained the RPMs. In the end a 6.0 liter gasoline engine won. After 75,000 miles, it has performed as expected and I know of instances where this particular engine and transmission, if maintained, will provide 400,000 miles of service. The Roadtrek has a fiberglass coach and it will outlast me.
At 21 ft. the Roadtrek is sufficiently small that some use this type of vehicle as a daily driver. However, at 15-16 mpg that doesn’t make much sense to me. Furthermore, I prefer to save it for real trips, rather than for short hauls purchasing groceries. It is our backup vehicle.
After living in a resort community for about 10 years I finally joined the group and purchased a used golf cart for $3,000. We use it for short hops to and from activities and the restaurant, etc. It isn’t street legal but because it is confined to the resort I don’t need to register it in the state. It’s included in the home insurance, so that’s taken care of, too. Operating cost is very low; simply electricity to charge the batteries. It is tempting to upgrade it to Lithium batteries and when a battery change is required I’ll probably do that. It would be cost effective to do so.
We have no idea what the next vehicle will be. Our daily driver is in a 2015 Chevy Cruze with all of the bells and whistles. We purchased it very slightly used and it has performed flawlessly and is very comfortable. Cost of ownership has been low.
One splurge is using professional car washes. We’re on a monthly, fixed fee plan. The incentive is to save water here in the desert, as these recycle and reuse some of that water. A few here in the resort wash their own vehicles, while fretting about potential water shortages. We don’t have any grass, either, preferring native desert species and rock. Go figure.
If I had a solar house I would consider a Tesla as the next vehicle. However, it is very unlikely I’ll be adding solar. But who knows? It is all about allocation of funds. Our local electric utility provides a monthly comparative analysis of our energy use and we are much lower than the average for this area. Monthly kWh is about 400. Natural gas consumption is 3 therms per month for about half the year. It is used for cooking and hot water. Consumption peaks in winter with more baking and cooking. We have an “on demand” hot water heater.
Our electric consumption is sufficiently low that installing solar panels and backup batteries would take a long time to achieve a payback, unless used to charge an automobile. I recently reevaluated this, because the battery prices continue to fall.
Many neighbors of mine have gotten golf carts to take their kids to school and skip the car line.
We’re in the pickup business for two of our grandkids and, yes, it does make you hungry. Tomorrow night we’ll be having German food at a pub that runs a.month-long Oktoberfest!
No matter how you purchase your car (buy outright, finance, lease), a more expensive car costs you more. I sort of understand that many folk love to have a nice new car. But deep down, really deep down, I just don’t get it.
My second hand ute (small pick-up for those not in Australia) cost me about $12,000 with some repairs and modifications to suit my needs. A similar new model would start at around $58,000. I just can’t see myself being $46,000 happier with a new vehicle compared to what I’ve got.
Or alternately, there are so many things I could do with $46,000 that would make me truly happy – dinners, trips away, helping out family etc.
My car makes me happy. I have an affinity for Mercedes going back to when I was 17 and my father sold them, but could not afford one.
I was 70 when I bought the first one and 81 when I bought the second one. I paid cash in both cases. I saved the money for that purpose.
I waited until all my obligations to family were met and I still do all the things like you mentioned that also make me happy.
Last weekend we drove 200 miles in my happy car to visit two grandchildren in college, watch my granddaughter run a cross country race, take them out to dinner and tour a national park.
Sometimes when you have patience and plan it’s not a matter of either or. If it had been, I wouldn’t be driving my dream car and I sure wouldn’t or couldn’t have bought it in my younger days.
Thanks Dick. I hear you. My wife just bought an insanely expensive chicken coop. I recently watched a Youtube video of the presenter’s collection of rare, hand-crafted pocket knifes (cumulatively worth many tens of thousands).
I’m glad you’ve got your dream car, and that it brings you joy. This is where we are all just built different. Even if you landed $10M in my lap, I would still drive my 2005 Toyota, I just see a car as a tool, and mine does what I need.
Lucky we’re all different, it would be boring otherwise.
I bet if I offered to trade cars you would change your mind. 😎
My father always said people have different spending priorities.
Regardless of how vehicles are financed, all the (many) years I dropped kids off at school I’ve noticed a trend toward bigger vans and SUVs. From my own experience, drove a 8-seater Honda Pilot for 12 years. (Bought used, three years in). Needed every one of those seats for my fair share of driving teams and scouts, including their equipment, and for school field trips. Plus holiday visits to and from relatives who wanted to hang with the kids when little. Having a taller, heavier car gave me a bit more sense (and fact) of safety and visibility. I suppose if I’d wanted to impress people I could have upscaled the brand but that’s not my thing. However, I spent so many hours a year, in so many kinds of weather, all the finer elements of that car (heated front seats for one) were appreciated. Original plan was to have the twins use it as young drivers, which they did briefly, but it gave up the ghost after about 16 years on the road.
There are a lot of assumptions built in to his discussion: First, maybe they haven’t saddled themselves with such a large fixed financial cost, maybe they paid cash outright. Second, maybe the people with the expensive cars aren’t living above their apparent means (as you say, Mark, they may well have financial support from somewhere – how would you or anyone else know that)? Third, maybe they are not leasing to afford something they couldn’t buy outright – maybe they bought it outright. Last, maybe they derive greater enjoyment from driving than most others do – in which case they may prefer to splurge on a vehicle and cut back on vacations, or some other areas to afford the vehicle. Maybe it was the vehicle in lieu of (fill in the blank).
But, as you surmise, the most likely outcome is that they have purchased too much car given their stage in life, and like many of us, will learn from the mistake. I hope in the meantime the car brings them lots of enjoyment.
One can’t read Bill Bernstein’s A Splendid Exchange: How Trade Shaped the World without realizing just how ingrained is the desire for goods that denote status. Silk, gold and silver, spices and porcelains were highly desired millenia ago. Bernstein notes that during the 14th to 17th centuries, cinnamon, nutmeg, mace, and cloves were the world’s most sought after commodities. These spices were much more desirable than spices that were easier to obtain precisely because they were rare and expensive. Bernstein noted that their gustatory appeal paled into insignificance compared with the message conveyed by their aroma and taste: here resides someone of wealth and status (p.112)
I remember when the movie “Urban Cowboy” came out in the 70s. Prior to that the pickup was strictly a redneck work truck. I bought the top of the line F-150 for $2300.00 in 1973 and later after the movie, everybody wanted to be a cowboy, I sold it in 1975 after 2 years of using it for work for $5595. Love those urban cowboys.
It’s hard, if not impossible to judge anyone’s by personal financial position by outward appearances of homes, cars and clothes/ jewelry. We have long time friends who’s both grown kids married into wealthy families. These young families have no financial worries as the parents (in-laws) are providing substantial financial support (in one case paying for the house). Our friend says they have no worries about their kids financially. You never know the whole story (unless you know these young families well yourself. 🤷🏻♂️
And that was THEIR decision ! Actions have consequences. Some choose to live for today, period the end.
Can’t argue with that. Still, there are thousands of people who read HD. Maybe the post will cause a positive change in someone’s behavior.
In my mind, people are either spenders or savers, with few in the middle; 40 years as a CPA bore that out. I have always been a saver, as I suspect most Humble Dollar readers are. One of the partners at a firm I worked at once told me “some people weren’t meant to have money.”
After houses, cars are the most visible means of displaying status. And leasing makes them accessible. Which facilitates fake it til you make it.
I don’t mind looking poverty spec. But then I’m not trying to play any social game. If anything I’m playing an anti-one. My $40k plus that would be invested in your depreciating hunk of metal is working hard for me in my portfolio thanks.
We, at least in the UK if not all of Europe are definitely catching the US disease of SUVitis. Which I hate as wagons/estates drive far better and have at least the same capacity and I already note the lesser choice of them.
Americans love their pickup trucks and full size SUVs. Parking a crew cab pickup with an 8 foot cargo box is like trying to dock an aircraft carrier at the local marina.
Pickups seem to be the default vehicle for building tradesmen.
I used to be a speaker at an annual financial event hosted by the carpenters union. I suggested that if a guy insisted on having a pickup, they could get by with basic trim vs, say, a Ford F-150 with the Kings Ranch luxury trim. I had to suppress my laughter when I saw one of the wives elbow her husband’s ribs. $80K for a truck seems like too much money for someone who only earns a fraction of that amount.
Yes indeed. I laugh when I get a comment about buying a Mercedes when I know many pickups and SUVs are more expensive and yet are perceived as the working man’s vehicle.
Hulking SUVs have been a thing in my non-rural part of the US for years. Sorry to hear that they’ve spread across the Atlantic. And you are certainly right about the roads!
Maybe their kids are in sports and they have more room for the gear? Who knows? Chris
That’s the typical reasoning. We have an older couple in our building with two grandchildren. He decided he needed an SUV so he bought a Porsche for the job and then decided it was not large enough so he bought a huge BMW suv. For two grandchildren mind you.
Husband and wife neighbors in their 70s each have the largest BMW SUVs – the mystery continues.
Chris, indeed, who knows? It was just an observation that struck me this morning.
My generation (here in the US) called it keeping up with the Joneses. Gotta keep up the look at any cost.
Oh yeah, get that credit card out, it’s a long time until the end of the month.
The largest selling vehicles in the US are pickup trucks. I am quite sure the vast majority are not used for business purposes. Then we have SUVs some like the Cadillac and Jeep Grand Cherokee- huge and far more expensive than my Mercedes. No logical reason at all. I don’t get it either.
We were a family of six and never had a vehicle other than a midsize sedan. We went on vacations and back and forth to college and made it work.
I’ve never been able to figure out the pickup truck phenomenon. If you’re a pro contractor or do lots of home projects, sure. Transporting a bunch of dogs? Yeah, OK. But for groceries? Gotta be kidding.
Weekly trips to the transfer station (dump), transporting bicycles and Kyacks for exercise, bark mulch in the spring etc, etc. Lots of other reasons. Much easier loading a Kyack into the bed of a pickup than a Thule on top of a car.
BTW it’s a Tacoma not a Tundra, and four wheel drive for the first time after 30 years of loading a frame and cinder blocks into a 2WD, and changing into studded snow tires twice a year.
it’s compensating.
Not only is it a puzzling financial choice, you’ve been to Ireland. I’m sure you noticed some of the roads aren’t the widest. It’s a puzzling width of car choice!
Right, been to Ireland top to bottom, east and west and most of the roads we were on were barely passable two cars at a time – not to mention the sheep.
Yeah, definitely don’t mention the sheep. I do a bit of hillwalking, and the damned man-eating wild ones unnerve me, lol.
“Maybe it’s just a “thing” now to focus more on your look.”
Peer pressure of social media maybe? Social media only projects the good side of life.
Also in this country some of those same people then complain they don’t have the means to pay off their college loans and want to either pay a ridiculously small monthly payment or ask “the government” to forgive their debt.
I’m sure social media is somehow involved in the mix.