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Why your luxury car doesn't impress smart people

The sticker price of somebody's car can never be considered a reliable indicator of their financial success.

By Karen Datko Jan 28, 2011 12:32PM

This guest post comes from Len Penzo at Len Penzo dot Com.

 

Jennifer from Live Richly commented on a post I had written entitled "8 big reasons why you're getting an F in Personal Finance 101." She was lamenting the sense of entitlement she sees in many people. Here is an excerpt:

I know a woman who is a single mother and hit up her friends for money to replace the engine in her SUV. I declined to participate because even though I have a lot more money than her, I have a 9-year-old car that's worth maybe $2,000, and hers is worth about $30K. Her engine costs more than my whole car…. I will admit that peer pressure is real, though. I've had many people mock my car, and if I cared, I would run out and get a fancier one.

Ah, Jennifer. Let them mock you all they want because those people clearly have a misguided view of how the world really works.

 

Yes, it's true a large segment of society still believes that the car a person drives is a status symbol that accurately reflects the level of financial success he or she has achieved.

The truth is, smart people know that nothing could be further from the, er, truth.  (Dang, I hate when I do that.)

 

As far as smart people are concerned -- and even dummies like me -- the sticker price of somebody's car can never be considered a reliable indicator of their financial success.

 

If you don't believe me, just look around; the proof is everywhere.

 

For example, here in Southern California I see teenagers driving BMWs, and Lexuseseses (or is it Lexi?) all the time. I don't think most of them hit it big blogging, or own wildly successful businesses at that tender age.

 

I also see people working in jobs that pay $30,000 per year driving Infinitis. Is that supposed to be impressive?

 

More like stupid.

 

Heck, Jennifer's friend owns a relatively modestly priced SUV and she couldn't even afford to get the engine fixed.

So clearly, one cannot determine the size of a person's bank account merely by the type of car they drive.

 

A couple who used to live in my community drove brand-new his and hers BMWs. Guess what? The bank foreclosed on their house a while back and they had to move away. Although I do not know the exact circumstances that led to the foreclosure, perhaps if they had driven more modest cars that didn't require monstrous monthly payments -- or better yet, no payments at all -- they might still be living in their home today.

Although we can truly afford to drive almost any car we desired, the Honeybee and I choose to drive a 2001 Honda Odyssey and 1997 Honda Civic, respectively. Our cars are not glamorous, obviously, but they are well-maintained and, best of all, they are paid for.

 

Although she didn't say so, I bet Jennifer's car is paid off. I'll also wager that the vast majority of newer luxury cars on the road aren't.

 

And while those luxury-car owners will continue to be saddled with some hefty car payments over the next several years for the privilege of traveling to their jobs in style, the rest of us will continue driving our Honda Civics, Toyota Corrolas, and Ford Focuseses-es (or is it Foci?) and use the money we save for our relentless drive toward financial freedom.

 

And guess what? Most of us won't give a hoot what the others think either.

 

If I had to give any advice to Jennifer on this subject, I would tell her that she should never fear peer pressure for owning a "beater" for a car.

 

Financially savvy people actually consider it a badge of honor.

 

More from Len Penzo dot Com and MSN Money:

4Comments
Jan 28, 2011 4:40PM
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I have been told over and over that not everyone can afford to pay cash for a car (used, and saved for), that they have to have car payments in order to get something that isn't about to fall apart. 

Tried pointing out that the car payment can be banked for a few years, giving them the cash when the time comes, but I get blank looks and a comment on how they couldn't possibly buy USED.  Usually right after they tell me it must be nice to not have a car payment and have all that extra money every month.  I've given up and just avoid talking about finances.     

Jan 31, 2011 11:10AM
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I love my $1000 beater.  It's a great car (89 Acura Legend) and has proven to be reliable.  I wouldn't trade it for a nicer car with payments; no way.  The money I save every month is worth the extra maintenance, and it's cheaper to insure. 
Aug 29, 2012 11:49PM
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I bought my first new car last month. Don't regret it at all. I traded in a used muscle car I had for 4yrs and got nearly what I paid for it. When I bought it from a private party sale I drove a state away to pay in cash and saved 6k over sticker....never any problems either. But gas prices where starting to piss me off and paying 400 a month in gas seemed just stupid. Shy of 96k I got rid of her....the dealership would have ripped me off if not for the excellent deal I got 4yrs ago. I bought a chevy sonic 1k off and 9k out the door in cash. 
Now I must say, this market is really off right now. Trying to buy anything used that is fuel efficient is a real scam these days. Dealers are making more off overpriced used hogh mileage cars than new cars because no one is buying. Everybody thinks the used cars are the steal. Used gas guzzlers are, but IMO the numbers aren't favoring used purchases for consumers on compacts...even mid sized cars. Think before you buy into the thrifty used car idea. I've always bought private party used and still will ifmthe market corrects itself, but if you do the math like me, ot might actually make more financial sense to buy new...crazy as ot seems....thanks to cash for clunkers killing off good cars and the middle class now having to buy used as our wallets are being pinched....dealerships have caught pn and afe trying to get every nickle they can out of the used market.
Jan 28, 2011 12:57PM
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If you were really smart you would keep you money in america by buying american autos.
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