Jun 6 2009

Bad Economic Times Favors Buying Cheap Vs. Buying Efficient

An article at Yahoo! Finance from earlier in the week addressed the consumer mentality of buying discounted automobiles instead of buying fuel-efficient ones. Cheap, gas guzzlers are preferred over hybrid vehicles simply because the people want to shell out as little money as possible since gas prices are quite low. It sparks the thought of how the U.S. consumers act when deciding what they buy.

Why buy cheap rather than buy efficient?
Whatever the reason, everyone is saving their money and industries that sell big ticket items seem to be suffering in the short-term. Even though it is obvious that purchasing items for the long run is a smarter move, consumers are just not comfortable with having a high cash flow.

I witnessed this first hand the other day when interning at the dental office. When treatment options were provided, the patient chose temporary teeth over dental implants as she openly expressed her concerns of her financial stability. This mentality has become widespread and we can see these same results when applied to other buying decisions.

Just think:

  • Would you buy a $7000 car or $16000 car?
  • Would you opt of a $12,000 treatment plan or a $30,000 treatment plan?
  • Would you rent an apartment for $600/month or $1100/month?

Many would choose the less expensive route because they just can’t afford the luxury at this time. Surely, my assumption shouldn’t be universally applied to everyone because these purchases can vary greatly, in terms of quality, and an individual just may fork over the extra cash for something better. But, no matter how much wiser it is to plan for the future, people just need something that can do the job now.

Once we make it out of this slump, the difficult decision may become as ridiculous as asking: Should I get the red Ferrari or the yellow Lamborghini?

Photo credit: arulnathan and sledhockeystar7

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2 Comments on this post

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  1. The 208th Carnival of Personal Finance: Lobster Roll Edition | Money Under 30 wrote:

    [...] Realm of Prosperity: Bad Economic Times Favors Buying Cheap Vs. Buying Efficient. [...]

    June 8th, 2009 at 7:32 am
  1. Michael Harr @ Wealth...Uncomplicated said:

    While I agree that people are definitely moving more towards cheap instead of overall value, fuel efficient vehicles still lack a significant value proposition. Until gas prices move north of $5/gallon, high tech auto will still lag behind in total value offered to the consumer. At this point (gas prices around $3/gallon), buying a much less expensive gas powered vehicle is still a better value over hybrids. In other words, buying new tech just doesn’t add up from a direct cost analysis for consumers. If you want to go green, then you’re not going to do it for the potential savings on fuel costs, you’ll do it because you’re willing to pay a premium to reduce environmental impact, ego, etc.

    By the way, a Ferrari historically doesn’t lose it’s value so if you’re looking for resale value, it’s better than a Prius, Civic, Camry, or just about any other gas/hybrid/whatever.

    June 6th, 2009 at 10:29 am

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