I was recently thinking about the first car that I bought after graduating from college. I went to a bunch of different dealerships(Honda, Nissan, Toyota) trying to find a car that I both liked and could afford. The cars that I could get financing for I didn’t like and the ones that I did like I couldnt get financing for. I had a low credit score due to credit card debt and no large installment credit purchases on my credit report. I was finally able to get financing for a 2000 Toyota Camry Solara SE. It was a 2 door fully loaded car that cost me about $23,000. It was a very nice riding car and had no major mechanical issues. The Solara lasted for over 8 years and had over 200,000 miles.
In 2006, I was in a totally different situation and was looking for a new car. I had a better credit score and a lot less debt. I decided this time to get the car I wanted. So, I bought a 2006 Lexus GS300. This is an all wheel drive four door sedan which cost me about $52,000. So far it has held up well and is a nice ride. But I found myself thinking. Is a Lexus really worth that much more than a Toyota? Is a luxury version of an automobile really worth almost $30,000 more than a car made by the same company? Does a quieter ride and a few more options really justify paying a premium price?
I think that ultimately it boils downs to economic cost vs opportunity cost. It definitely makes more sense from a price standpoint to have purchased the Toyota. Fuel economy, maintenance, and cost per mile would have been cheaper. The place where I found it interesting is when I thought about it in terms of opportunity cost. If I had not purchased the car, I would have invested in a Vangaurd mutual fund. The fund I would have invested in is down $19,800 over the last two years. This made it a lot closer contest than I originally thought.
So, was it worth it? I really think that the answer depends upon the person. I would have to say that the Toyota still comes out ahead overall as the better value. But It only ended up costing me a little more to buy a car that I really wanted. I do find it ironic that the more expensive your possessions cost, the more money that people assume that you have. When in reality you actually would have more money if you didn’t buy the expensive items.