I was at a party a couple summers ago when an old co-worker (Tina) pulled up in her new “Lexus.” She was clearly very proud of herself and her new car when a friend of mine decided to have some fun and throw a little rain on her parade:
- Tina: I LOVE my new Lexus, isn’t it nice?
- Wolfgang: Well, you do know that it’s just a Toyota Camry that you paid too much for, don’t you?
- Tina: No no, it’s a Lexus! See the “L” on the hood?
- Wolfgang: Well, actually, it’s the same thing as a Camry. Toyota adds some features, a Lexus badge and pumps up the price.
- Tina: No, you don’t understand; it’s a Lexus! It says it right on it!
- Wolfgang: Next time you see a Camry, take a look at it and see if it looks any different than your “Lexus.”
- Tina <now annoyed and very angry>: Well, that would be a Camry, I HAVE A LEXUS!
Tina wasn’t the brightest bulb at the party* and clearly didn’t understand what Wolfy was talking about. The conversation ground to a halt when Tina lost her cool (I tried my best not to laugh out loud). Wolfgang was referring to the practice of badge engineering or rebadging. Car companies will take a cheaper model, toss in a couple options, throw on a different badge (Toyota becomes Lexus, Honda becomes Acura, Nissan becomes Infiniti), jack the price up a bunch and sell it to people who like to pay extra for status. Not all of the expensive cars in these lineups are derived from cheaper models, but many are.
The Honda Accord/Acura TL is a great example. The TL costs over 50% more than the Accord, but they are the same basic car. Take a look at the two pictures below and see for yourself:
Now, I will admit that the Acura flavor of the Accord comes with fancier standard features. You get a more powerful engine, a rear view camera, leather seats (I personally can’t stand leather upholstery) and some other gadgets. However, you can get these options on the Honda and still come in at a lower price. The main thing you’re paying for with Acura is the name.
Cars are just one example of paying for status, but there are many others. People do it with clothing, purses, sunglasses and just about anything else you can think of. In most cases, the added expense doesn’t justify the increase in quality, if there even is one. Is the $500 dollar purse going to last you 20 times as long as the $25 one? Is the $40,000 Acura going to run for twice as many miles as the $20,000 Accord. The answers to both questions are a resounding No.
I don’t advocate buying cheap junk either. I’d rather pay a little more for something that is going to last. The first thing that comes to my mind is tools. I don’t buy the cheapo stuff from Harbor Freight because I expect my tools to last and not break in the middle of a job. As with most things, there is a middle ground and that is what you should aim for.
I can’t relate to paying for status. Whether it’s a purse that costs $500 or a car with an uppity badge on it, the attitudes behind this type of behavior never made sense to me. I believe in paying for quality and it ends there.
I believe that the frugal life is a good way to weed out true friends. If you don’t like me because you’re embarrassed of my car or the way I dress, no problem. Bye bye! Don’t bother looking for me at the office in 5 years though if you change your mind. I’m not sure what I’ll be doing, but I know where I can find you. You’ll be at work, trying to keep up with your life financed on your credit card. I hope your friends are impressed!
*Tina sure wasn’t the brightest bulb and later that evening, said something that makes me bust out laughing to this day. The party was on America’s Independence Day (4th of July) and that evening, we went to watch the fireworks. In the middle of the display, she turned to a Chinese woman who was at the party and asked, “Is this how they celebrate the 4th of July in China?”
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