Cars: What Are We Paying For?

I recently started shopping for a new car (my lease is almost up), and was absolutely blown away by the cost of a new vehicle.  To start, I looked at getting a newer model of the same car I was driving: the Nissan Altima.

Nevermind that the car hasn’t actually changed since 2008, when I bought my last one.  It’s almost $3000 more expensive with the same options.  What am I paying for?  It has no new features, it’s just newer.  That’s ridiculous.

I’m sure that everyone’s list is different, but here’s my list of “must-haves” for a vehicle.  (DISCLAIMER: My wife drives a 2011 Honda Oddysey, and the car I’m describing rarely transports anyone but me.  For long trips, or any kid-transport, the Oddysey is where it’s at.)

Must Haves

  • Gas Mileage – no less than 28mpg city, 35 mpg highway.  Higher is better.
  • Bluetooth Connectivity – I drive and work (make phone calls) a ton. Not having to hold my phone is a must.
  • MP3 Player Compatibility – I certainly understand that everyone but me seems to own multiple iPods, but I don’t.  I’d still like to listen to podcasts and music while I’m driving without feeling like an outcast.  At a minimum, I need an AUX jack.
  • 4 Doors – From time to time, I do transport other adults, so the car has to be able to carry 4 adults comfortably for a short trip.  Again, for longer trips, we would use the Oddysey.
  • Leather Interior – I’m messy, especially when I’m driving a few hours to a conference, presentation, etc.  Leather seats are a must for someone like me.  Cloth seats would be stained within days of getting a new car.  Leather seats wipe clean every time.
  • Automatic Transmission – I haven’t driven a stick transmission since high school, and I don’t think I’m going to start that again.  Stick is fun, but it’s not practical, if you can justify the price.  I’m not driving this car for its handling or acceleration.  I just need to get across town.
  • Trunk Space – I’m a golfer, and I need a car that can hold 2 golf bags (minimum) in the trunk.  That might be the only thing the trunk EVER gets used for.
  • Power Everything – power seats, power locks, power windows.  These should be standard on every vehicle.

Nice-To-Haves

There’s also the list of “nice” things that would be cool to have in a car, but aren’t going to stop me from buying something that doesn’t have them.

  • Moonroof – I’m not getting a convertible (because they’re just too expensive), but getting some fresh air blowing in the car is always nice.
  • Navigation – While I have free, turn-by-turn directions on my phone, there’s something nice about having it in the dashboard, on a nice big screen.  If I was facing two equal vehicles, this would definitely tip the balance.
  • Driving Itself – You may think I’m kidding, but you’ve already seen it in the commercials.  Cars can parallel park themselves.  I’d love a car that did that, but I certainly don’t require it.
  • Back Up Camera – it would be nice to see how much room I have left behind my car, and would greatly benefit me if my car can’t drive itself.
  • Voice-activated Communications – the ability to talk to my car and have it respond would be awesome.  “"Lights on.”  “Drive to Chipotle.”  “KITT, come save me.”
  • HD Radio – This is actually a really cool technology, and there’s plenty of new radio stations you’ve never listened to (with fewer commercials, too!)
  • Heated Seats – These seem like such a frivolous feature until you jump in your car in January.  Then they’re amazing.

Summary

To get everything in my list, I expected that I was going to need to start looking in the “luxury” category.  But an entry-level Lexus, Acura, or Infiniti starts around $35,000.  That’s significantly more than I wanted to spend on a car.  I don’t have some ritzy image to portray.  I don’t need a Mercedes.  I need a car.  And this is where the point of this article comes from:

What are we paying for?

There are not that many vehicles that can meet my long list of requirements.  Almost all of them are in the luxury category.  But why?  I have been struggling with this fact for months.  Why do I have to spend $35K (or more) to get the cool stuff?  I’m obviously a technologist, and I want that technology.  I don’t care nearly as much about your V6 engine, your sport-tuned suspension, or your fancy British accent in your commercials.  At the end of the day, it’s a seat that transports me from one location to another.

In the past, I used to look at American cars.  But over the past decade or so, I always felt like they were of lesser quality. My #1 judgement of the quality of a car’s manufacturing?  Interior door handles.  If they feel cheap, I’m never going to be able to get past it.  However, with all of the noise that SYNC has been making over at Ford (especially as a Microsoft employee), I felt I owed it to them to at least check out what they were offering.

I decided to check out the 2011 Taurus (which looks very cool from the outside), and the 2011 Fusion.  After pricing out the Taurus (it starts at $25K), it was almost as expensive as those lower-end luxury models I mentioned earlier.  Plus, the gas mileage wasn’t very good, at 18/28. The Fusion, however, looked like I could get the features that I wanted, at a more modest price tag (it starts at $19K), and 5mpg better in both categories (23/33).  I went for a test drive, and my fears were immediately confirmed.  It just felt cheap.  It was a nice car, but it just didn’t feel “nice” to me.  I started to think that what I’m paying for is that “nice” feeling.

I went home and started over.  I was determined to find a car that had piles of technology at a more modest price.  Nissan.  Nope.  Toyota.  Nope.  Honda.  Nope.  Chevy.  Nope.  But during this search, I started considering slightly smaller vehicles.  And this led me back to Ford.

I checked out the 2012 Ford Focus online.  Not a name I generally associate with a great vehicle, my mind was open at this point.  Every single feature I listed above, in both lists, was available on this car.  For a reasonable price.  How was this possible?  I guess I need another test drive.

The car drove responsively, the nice chrome door handles were solid.  It had enough space for my wife to sit comfortably in the back seat.  And it had all of the bells and whistles I wanted.  In fact, it had more than that.  It had remote car starting.  10 speakers.  And it even integrated with my Zune and Windows Phone.  Huge.  All for a pricetag under $25K.

Many of you, if you’ve kept reading this far, just thought to yourself:

“Yeah, but you’d be driving a Ford Focus.”

My answer to you is this:  What are you paying for?  A name plate on the back of your car?  A V8 engine that allows you to dramatically accelerate to the posted speed limit?  Sport tuned handling for driving in rush hour?  A symbol that you make more money than your neighbor?  I don’t want (or need) any of those things, and that’s how I ended up ordering a new 2012 Ford Focus.

What are you driving?

19 thoughts on “Cars: What Are We Paying For?

  1. I take issue with your premise, that the cost of a car (or anything else for that matter) is set by the cost of manufacture + a reasonable profit, and if the cost is above that, it is unreasonable. That is a nice theory, but it isn’t capitalism, the system we (nominally) operate under.

    In a capitalist system, the way the price is set is this: what is the optimal price to maximize profits? That is, draw a curve. To the left is less expensive, to the right is more expensive. These are potential prices.

    Now draw a second curve representing number of cars sold. As you move to the left on the first curve, the second curve reflects more sales; as you move to the right, the second curve reflects more sales. Finally, multiply sales by profit at every point and determine the sweet spot where profits are maximized. Hey! Presto! that is the market price of the car. And by any reasonable definition, that is also the fair price (as long as no one is compelled to buy at that price, but does so freely).

    Now, your new car may have fewer features and yet it may cost more than your old car, but that doesn’t make the price unfair, because (and here’s the secret) no one forces you to buy. You might decide to buy a different car, or keep your old car, or take a bus. A second check against overpricing is that other car manufacturers are free to offer those features for less, and then the price of those features comes down.

    I love my car (I drive a mini) and I know it was worth exactly what I paid for it, because that is what I paid for it. If it were worth more, they would no doubt have raised the price, and if it were worth less I no doubt would have found a better deal elsewhere.

    Isn’t capitalism cool?

    [ Yes, it is all much more complicated than this, but let’s not loose site of the essential truth that price is not a factor of cost + reasonable profit, but is a factor of what the consumer is willing to pay ]

  2. I only had a couple requirements the last time I bought a vehicle. They all revolved around comfort. I am tall and wider than I should be and at the time, I had serious back pain and neck pain. I needed to sit up straight for my back and neck, but when I did that in most vehicles (including the Pontiac Bonneville that I was trading in), I found I was ducking my head to see the signal light when I came to an intersection….which caused more neck pain. I found two vehicles that I did not need to duck my head in. A Volkswagen bug and a Toyota Tundra. The bug was fun to drive, but I bought the Tundra because I had a family and the Tundra could seat 5 comfortably. I bought the Limited edition because it had the power adjusted seats so I could adjust the seat back in tiny increments. I love the Tundra, but it is hard to park at times.

    I sat in a Honda Fit the other day. I think that might work for me too … when I eventually decide to give up the Tundra.

  3. I personally like having 350 horsepower in the city where most of the time I am in traffic. Being able to zoom to the next red traffic light is a MUST!

    Kidding aside, consumer reports does indicate that the Focus has been getting better over the years.

  4. My hubby traded in his Altima and got a Ford Edge. It is a large car, but we have 3 growing boys. All I can say is the Geek Factor on that car is huge. It does everything but make coffee, and the backup camera is so clear! The price tag was a tad high, but for the size of the vehicle, and the convenience it was definitely worth it.

  5. The “curb weight” on cars seems to have increased by 20-25% over the last 20 years. (Do a search on “1991 Toyota Corolla curb weight”, then repeat for 2001 and 2011. Then do the same for Camry, Civic, Taurus, etc.)
    I would guess that most of this is due to mandatory safety features. Which helps explain the upward trend in prices.

    Product liability issues (ie lawsuits) play into this as well, both in terms of immediate costs and in terms of the push for additional safety features.

  6. I just purchased a 2005 Acura @ 55K Miles, v6, 280HP, black on black with Navi. This has been one of the best decisions I have made in a long time. I used to drive a Honda Accord, nice car but driving 50 miles a day I now find what used to tire me, refreshes me.

    There are several things I like. The added power is tremendously enjoyable. The sound proofing and excellent sound system are key elements of why I am refeshed after driving. I think comfortable and very adjustable leather seats also help (totally agree with heated seats).

    The car is certified, so I know the mechanics are excellent, the body and inside are almost pristine and with excellent credit (equals a 4.24% loan) my payment is just over $250/mo, which is what I used to pay for a new Honda. My cost was roughly half of the new cost so it might not be the latest but the body is one of the best and it’s a great joy to me.

  7. The price of new cars has been increasing way faster than inflation since the 1980s. I suspect the increase in dual-income (ie dual-commute) households is a factor.

    I only mention the above because I am the sole breadwinner in our household — our youngest has “special needs” and someone needs to be at home to meet the school bus — and both of our cars are over 10 years old with 200k+ miles. Other special-needs parents I’ve talked to almost all are in a similar situation: a new car just ain’t in the budget.

    • OK, that was a little melodramatic … I guess that’s what I get for commenting right after receiving bad news at work.

      I guess what I wanted to say is:
      1. I honestly don’t mind driving a “beater”. If someone’s opinion of me is based on the kind or age of car I drive, that’s probably not someone I want to waste my time with anyway.
      … except when it comes to repairs. When one of the cars breaks down — which older vehicles of course tend to do more so than new ones — I occasionally find myself wishing for a new car just so I could take it to the dealer and get it fixed (presumably under warranty).
      2. Don’t take your blessings for granted.

  8. Your headline caught my eye, and I “resemble your remark” about the Focus! Four years ago, I too had a list of must/nice to haves and a Focus was available (I was looking for used for a 2nd car). The mileage was superb, the price was even better! The deal proved too hard to resist. (The only difference is I wanted a stick shift haha). Four years later, I’m still driving the same car, love it, and would do it again!

    As for the “…but you’re buying a Focus.” hhmmm I thought that too, but my Focus, I hope like your’s, has done me a great service, and I hope it continues to do so. Good luck to you and congrats on the new purchas.

  9. You and I are Looking for vastly different things in a car. I love my 09 Honda Civic Si coup. Sox speed manual, no frills other than iPod support and a moon roof. But the fact is that I enjoy driving it to work every single day. I like the sporty suspension, the extra horsepower, and would love more.

    Sure, bluetooth would be nice, along with all the other Things you mentioned, but at the end of the day I am in my car to drive, not be distracted by other gizmos and gadgets. I wish more people were the same way. I might not have to dodge the guy on his cellphone running the red light while I’m trying to clear the lane. Oh well, I probably shouldn’t have been testing and driving either.

    Also I like to work on my car. An expensive hobby, but one I like. A new exhaust, reprogram the on board computer, a cold air intake and racing headers. Suddenly you feel like your driving a new car. My car has tons of after market parts which were a must for me.

    At the end of the day, every one is so egar to get out of their car as quickly as possible. What happened to finding a few fun winding roads out in the country and just going for a drive?

  10. The Ford Focus with European specs is a car that has a very good handling, and also nice and economical engines, namely the 1.6 diesel. And the new model has a lot ot cool gadgets!
    What engines are offered with the Focus on US?

  11. Rather than, “…but you’d be buying a Focus”, how about, “You’d be buying a EUROPEAN Focus,” which is now, and has been for years, far far superior to the crap they peddled to us on this side of the pond. I’m not a huge Ford fan, but the new Focus and Fiesta definitely have my attention.

    I’d be impressed if you (in my mind) wisely chose to buy a Focus.

    Though, I’d still go for a Subaru WRX… 🙂

  12. Hyundai sonata 2011.

    Has everything you want except the windows phone integration.
    I have windows phone 7, but I manage by connecting to the car system via bluetooth for my podcasts and music.

    • Ditto on the Sonata, I bought the wife one for Christmas and even sprung for the Turbo, it is looooooooaded for $28k, peppy, fast, sporty, good look, mileage is good. Sonata++ (and her tag says Opus109…. get it?)

  13. I really like the new Focus hatchback – it’s really sharp. The sedan looks a bit more boring.

  14. I just had a Ford Focus as a rental car last week for work. I would normally have gotten a mid size car, but I was given the option of a Focus or a full size truck. I went with the smaller option just to save my employer some gas money. I had a 45 minute drive from the airport to my customer, and I personally thought the Focus drove horribly! Perhaps it was because it was a rental fleet car, but the ride was noisy, not smooth, and the steering just did not feel right.

    Note that my vehicle at home is a 2002 Nissan Pathfinder, so it very well may be just the difference between an SUV and compact car. Since I just hit 100k miles, I have considered getting a new one, but I agree that the price has gone up so much since I bought this one it is unbelieveable! I mostly work from home so my next vehicle will probably be a higher mileage used car. I will admit that I am a Nissan fan, but many of the newer “American” cars are looking better and better.

  15. I was in your shoes a year and half ago. Comparing all diffrent makes and models and ended up buying a 2010 Mazda 3 hatchback. It also comes in a 4 door version. I opted for the 6 spd manual shift and that is one fun car to drive. Excellent engine, not so cheap interiror, enough room for two adults and two kids. Bluetooth, voice recoginition, audio and phone controls from steering wheel and decent gas mileage. Pretty much everything in your Must have list is on it. Granted it is not a Honda or a Toyota but for the price of $21000 + tax, it had lot more options than any of them. One and half years and 30,000 miles later I am still liking it and the way it drives.

  16. In my family, I’m the one driving the Odyssey (2001, 110k miles) and my wife drives a Civic (2002, 60k miles). It would make more sense the other way around, except that she feels very uncomfortable driving something as big as the van.

    Once my daughter goes off to college in a couple of years, I’ll want to move to something less expensive to operate, like a Prius. If gas prices keep rising, I may have to do a cost/benefit analysis on that switch sooner.

    I’ve driven to NJ and back in the Civic, and it wasn’t bad. But I do that only once or twice a year.

    I neither need to impress anyone nor do I need all the latest gadgets. I just want something to handle my Hilliard to Westerville commute with acceptable comfort, reliability, and efficiency. The best bet, financially, is to buy a two year old car and drive it until it falls apart. If you take care of them, modern cars should last at least 150,000 miles before the cost and nuisance factor of repairs makes it time to make a change.

  17. In 2000, I had an Acura Integra, which is really just a more expensive civic – it drove great and I love it, but I found it uncomfortable for long trips as I am 6′ and my husband is 6′ 5″ – I have checked out the Prius and it is suprisinly roomy, but I definitely agree on getting a 2 year old car and then driving that until everything starts going bad. My Pathfinder was a little over a year old when I got it, and it was almost 15k less than the price of a new. It is just about to reach 100k. The only negative about driving a car so long is really the technology inside. It is changing so rapidly right now, but I don’t drive much since I recently started working from home. That’s the best way to keep your auto expenses down!

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