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?”
Join the 10s who have signed up already!
Subscribing will improve your life in incredible ways*.
*Only if your life is pretty bad to begin with.
I have a coworker who is young, only 24, who spends like it is his day job. A smart guy who just doesn’t understand that he has the ability to maximize his potential by living within his means. With maturity comes respect for a dollar, no matter what your intelligence level might be.
It is sad that most young people don’t get it. They are the ones who need to get it!
I went to an investment seminar once and everyone around me was at least twice my age. I remember thinking to myself, ‘you all should have been here 20 years ago.’
Poor Tina. I don’t feel bad for her because you guys made her feel like crap about her shiny new car. I feel bad for her because she’s just another hopeless consumer that doesn’t understand how re-branding works. It’s pretty funny that most men will say that if they ever became rich they’d buy a Rolex and a Ferrari. So… a watch and a car. You could buy a Timex and a Honda instead, because they have the same exact functionality. I don’t care how fast the thing can go 0-60. I’m not wasting my money on increasing my lifestyle even if I have the extra scratch the throw around.
Yeah, lifestyle inflation is everywhere. Too bad more people don’t suffer from “retirement saving inflation” instead!
I agree with your outlook, I don’t want anything more in life than I have right now (except time). I will admit that it took me a while to come around to that type of thinking though.
However, my brain has changed. When I used to see someone with a nice car, I used to think, ‘Wow, that would be fun to have.’ Now, I actually feel sorry for them.
I disagree with your Acura/Accord comparisson. My dad has owned a couple TLs and was able to get them for the same or lower price than an Accord that was comparably loaded.
I was also able to get a TSX (you know the European Accord R) for less than the base accord at the same dealer. It was the only new car I have ever purchased for myself and will probably be the last new car I will ever buy myself (paid straigh cash homey).
@Johnny Moneyseed- You can’t compare a Rolex to a Timex… Many Rolexes actually go up in value over time. I believe Sam (financial Samurai) actual deals in timepieces and would be able to speak to this.
I try not to judge people based on their purchases. I just say to each their own and go about my living my life and saving for my future. In the end, people are going to do what they want to do and the responsible ones will probably have to help foot their retirement bill… which makes me sad
I took a look at the Honda website today and priced out the most expensive Accord which came out to $34,220. I flipped over the Acura site and the TL is starts at $35,905. However, this is just the MSRP and doesn’t take into account factors like local market conditions which may explain why your dad got a good deal.
I do like the TSX (my Honda Element shares a detuned version of the same engine). In the case of the TSX, its a different car, otherwise not available in the US.
This is something I struggle with and I’m probably a bit harsh. Sometimes, it’s just easier for me to see the bad in people over the good.
“‘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?”'” Lol! I had a very similar encounter with my boss several years ago when we bought our Altima and she had an Infiniti. She started going off about how nice they look, what they communicate and how she feels. To be fair, my boss and I did not really see eye to eye on many things. My response to her 10 minute diatribe about the virtues of the Infiniti, I simply said “What my car communicates is that I can have the same exact thing, but for at least 10-15k less than what you spent.” Suffice it to say, she did not care for my remark. 😉
Oh man, had I not been around to hear the “China” comment in person, I probably never would have believed it.
This woman is a piece of work, extremely superficial. Later on, she had a boob job done. A little while later, she had a second one done. Bigger and bigger! Dumb and dumber is how I prefer to think of it.
I love your comment on Altima verses Infiniti! That pretty much hits the nail on the head. People buy luxury items because of the way they want others to think about them. When others don’t buy in, that person is NOT happy!
“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.”
Amen, it’s of no better quality. It was probably assembled at the same place. But stick a big price tag and a name brand on it…the people will come flocking to pay that huge premium. Whacky stuff…
I just don’t get it. I’d much rather buy the cheaper model and put the remaining money to work for me.
Another thing to consider is the difference in insurance prices between the two. When we were shopping for our RAV4 last year, we looked at the base Lexus equivalent (since it had similar features to the RAV4 model we wanted), not only was the Lexus 1.5 more in price, it was over twice as much to insure! Needless to say, we’re driving the RAV4…
Wow, I didn’t even think about it from that aspect. Good point!
I also wonder about maintenance. Do luxury brands cost more for the same work? I had a friend with an Acura Integra and the oxygen sensor went bad. The dealer wanted over $200 to replace it. I did some research and found that an oxygen sensor is a generic part (same across all cars) and costs about $15. I helped him replace the part and it took less than 10 minutes. The $200+ estimate for this work was absolute robbery.
However, this was only one estimate at one dealership. I have no idea if they are all like this. Also, maybe it would have been the same at the Honda dealership.
HAhaha oh my Tina sounds like an interesting person to be around. You always need “that friend” who is entertaining, right?
Absolutely! I have many, many other stories. Plenty of blog fodder.
Hyundai is amazing. I’m a car nut, so tend to pay close attention to the auto industry. I remember when Hyundai first showed up on the US market about 20 years ago, they were absolute garbage. Now, they are making high quality product. Kia and Hyundai are also the same company b the way.
This seems like a good post in itself. It seems that many items are like this. Just thinking about clothes, you have Nordstroms for the big spenders, Old Navy for the not so big spenders and thrift stores for people like me!
Its funny how people don’t realize this. If you’ve ever worked in marketing you know that most products are about the same, but it helps sales to have a “premium” branded item whether or not its better. Great post!
Thanks CashRebel! That is exactly right, but I don’t think most folks realize it. You just expect that the item will be better because it costs more.
This post made me laugh because my dad and brother are always point out the same thing every time they see a Lexus or Acura.
I think a lot of people associate labels with quality because they haven’t learned to how to spot quality for themselves. The problem is that brands known for high quality have been licensing their label to cheaper goods. When I bought my kitchen knives, for example, I consulted experts among my friends and family about what to look for in a good knife. They agreed on the brand, but warned me I needed to spend at least $x to get the good quality ones. They were disappointed that this company was now putting their name on cheap blades found at the hardware store.
We can all learn about quality. It isn’t that hard – it just takes some effort.
I’m glad others know about this!
The knife story is interesting as well. It is a bit sad that someone would lend their name to a lower quality product just to increase market share. It doesn’t seem like a good long term strategy.
Good point! I wonder how much of all of those expensive cars are actually owned? Not many I bet. Millionaire Next Door comes to mind. Most millionaires don’t own luxury cars and own them outright.
It is crazy how much people will pay just to try to look like the coolest person in the room. It’s so much better (IMO) to own something a little less “fancy,” and then avoid the stress of figuring out how you are going to pay for it!
Jon recently posted…How to Get Swagbucks Codes
Great post! I’m shopping for a car now – I need something w/a 3rd row – I was looking at the Toyota Highlander – just insane how much that car costs let alone it’s Lexus version – I see so many nice cars out there on the road – I have no clue how people afford those cars. I’m having a hard time parting w/the $40K sticker on a fully loaded Highlander Limited. I might opt for the used one for $25K.
Some of these cars not only have INSANE costs – but their maintenance is through the roof – each repair on a high-end car seems to be that much more on the higher end versions. Also, when you see a japanese car’s entry price and a german car’s entry price remember, the japanese car somes w/some options – in the german car EVERYTHING is an option (they look damn nice like the audi a6). I can’t get myself to go higher than the Highlander.
You’ll definitely save a lot of money if you go the used route. Let someone else take the big depreciation route. With proper maintenance, almost any modern car should get you 200,000 miles without nickel and diming you.
My husband has a Lexus. It’s 12 years old, has 200000 miles on it and runs beautifully. But so does my Toyota Corolla with 100000 miles. His car is a much smoother ride but cost twice as much to drive and fix. I can’t wait to read him this blog. I am sure he will scoff!!!