Well, now that I have got your attention here goes...

Many threads have asked the question why many Thai people are poor or can't seem to save any money for the future. The following example of wasteful spending of money on "flash" cars by Thais and foreigners alike goes some way in explaining the reason. We all know Thais and many other people as well are addicted to flash car brands (BMW, Mercedes-Benz, Lexus in particular) and couldn't imagine being seen driving (or being driven in) anything less. I found the following example in a financial publication and it's a great example how many people waste their money without even realizing it:

-------- How many people do you admire or respect because of the car they drive? Note I said "admire or respect," not "envy." No one! Get past the marketing and advertising and when you buy a car you're buying something very simple: a steel box with wheels that contains about 150,000 miles. You can buy an expensive box of miles, a mid-priced box of miles or a really cheap box of miles (read "used cars") and you'll generally get the same thing: 150,000 miles. The only difference is how much you pay to go each one of those miles.

If you save $10,000 by buying a Toyota Camry instead of a BMW and invest that $10,000 in stocks with an average annual return of 10%, at the end of 10 years (about when your Toyota is coming up on that 150,000-mile mark) you'll have $25,937.

At that point, save another $10,000 by buying a less expensive car, invest it, and the combined savings on those two cars will, 10 years from that second purchase, be worth more than $93,000. (That's $67,275 from your initial $10,000 investment 20 years ago and another $25,937 from your latest $10,000 savings.) Can driving a car that is $10,000 more expensive than another really be worth nearly $100,000 to you? -----------

Well is it!!! Of course, if doing this comparison in Thailand, you would end up with much more then $100,000 as the price differential between a Toyota Camry and a BMW 5-series is allot more than $10,000. The lost opportunity investment cost of this "trade" in Thailand could be 2-3x as much or up to $300,000

Edited April 20, 200818 yr by jonniebkk

If you save $10,000 by buying a Toyota Camry instead of a BMW and invest that $10,000 in stocks with an average annual return of 10%, at the end of 10 years (about when your Toyota is coming up on that 150,000-mile mark) you'll have $25,937.

what about me? i bought 2 Hondas two years ago. how many dollars will i have in 8 years?

I have a honda jazz, but I was going to buy a honda dream.

How much have I lost over the period of ownership.

invest that $10,000 in stocks with an average annual return of 10%

tell us more about these stocks Jonnie.

If a $80,000 BMW travels down the highway at 100km/h, with a head wind of 15km/h and it overtakes a $40,000 fortuna, what is the NPV and the IRR of overtaking in the left lane?

Sorry, just being a smart arse.

Agree with the flashiness aspet of being people needing to show off. However, my experience of merc drivers etc is that apart from being bad drivers, they tend to have loads of cash anyway. Sure they don't necessarily live in the most tasteful of places, but that is not a priority.

the problems as far as I can see are right down at the lower end. People and buying on credit motor bikes, pickups etc they can't really afford.

If a $80,000 BMW travels down the highway at 100km/h, with a head wind of 15km/h and it overtakes a $40,000 fortuna, what is the NPV and the IRR of overtaking in the left lane?

that's an easy one. here's the equation which solves the question:

Though I agree it is a shame when people buy high end cars they cannot afford, most people that spend $80k on BMW or Merc probably can. And if you have ever driven (or more preferably, been driven in ) one, then you would know why people that can afford them buy them, it is not really the status, it is the fact they are really, really nice cars.

TH

The article from which the example was taken is about "ordinary" people and how best to save and invest money. It was not meant for those who have already "made it" so to speak. The basic point can be extended to many purchases ordinary consumers make during their lifetime. Of course, the savings (lost investment opportunities) are greater the larger the purchase.

I think the problem for many people is they buy "more" then they need of many products...especially cars and houses (the largest lifetime purchases for most people). Then they wonder why they end up with little or no investments/retirement savings. I think it is a pretty big stretch to say that a 5-series BMW or E-class Merc is 3x better than a high-line Camry. In particular, it's hard to make the argument that in the areas that are important in car ownership - safety, reliability, and comfort - that this is the case. And when you consider the lost investment opportunity costs of the example, that BMW/Merc is NOT costing its purchase price but 2-4x as much.

The 10% annual stock return is an average, of course.

It's just food for thought...the numbers speak for themselves.

Edited April 20, 200818 yr by jonniebkk

Arent people just paying a whole lot more tax to the Thai govt. when they buy a BMW/Audi over a Japanese brand car.

Anyone who needlessly pays tax is either stupid or filthy rich.

The really daft thing is that they'll buy a merc and still have holes in the house roof rather than getting a Toyota and fixing the house up.

I also know that when you try to sell a service or product a good conversation object is the car you drive.

As my service is for the transport business i regulary rented expensive cars when visiting a possible client. Starting a company is not easy and with limited money getting new clients fast is very important.

I just parked my rented mercedes, jaguar, porsche, ferrari right in front of their office.

The sales talk changed soon in a talk about the car, how fast, is it expensive, etc. The sales part of the talk were short and effective.

As i am not really car crazy it did not bother me to bring the car back and drive back home in my trusty Opel Corsa 1.5 diesel. :D

I would buy from the one in the Opel Corsa 1.5 diesel as the one in the Jag obviously is having too fat margins on his product/services..

That said; while driving a nice car is nice, I fully agree that what some (be it Thais or others) are sacrificing is their financial independance/retirement stash for that flash effect.

CHeers!

If a $80,000 BMW travels down the highway at 100km/h, with a head wind of 15km/h and it overtakes a $40,000 fortuna, what is the NPV and the IRR of overtaking in the left lane?

that's an easy one. here's the equation which solves the question:

I don't think those cars are *quite* small enough for that equation to apply, Naam...

The really daft thing is that they'll buy a merc and still have holes in the house roof rather than getting a Toyota and fixing the house up.

HELP!!!! I've got a Toyota and holes in the house roof too!

There have been dozens of threads on how much money is needed to retire in Thailand... And here you come along and solve the whole problem!!!... Sounds like I buy 3 Toyota's and I'm a millionaire!!!

If a $80,000 BMW travels down the highway at 100km/h, with a head wind of 15km/h and it overtakes a $40,000 fortuna, what is the NPV and the IRR of overtaking in the left lane?

that's an easy one. here's the equation which solves the question:

But only in 2d naam ? In 3d it becomes d^2/dx^2 + d^2/dy^2 + d^2/dz^2. Of course, what you really need to do is use the 4d Klein Gordon, or even more correctly move to the quantum field theoretical approach (QFT).

Glad I read this ... I feel richer every time I step on a Baht Bus

Naka.

Glad I read this ... I feel richer every time I step on a Baht Bus

As long as you pay the "correct" fare. There is an investment opportunity cost to paying that extra 5 baht over 20 years that might add up to a new Honda Wave moto

even more correctly move to the quantum field theoretical approach (QFT)

chapeau, hats off. my respects Dragon!

SMART PEOPLE DON'T DRIVE THEIR MONEY :D

Come on, luxury cars share in overall Thai market is about 1%, far less than the share of people with money.

I once noticed that CitiPlatinum card holders VIP parking at the Mall was occupied mostly by average Accord or SpaceWagons.

It's a non-issue.

Don't forget that a car is part of a business presentation, too.

Don't forget that a car is part of a business presentation, too.

Is that what the salesmen tell you

For the dealer maybe...as for most buyers, it sez to most people there are over-spenders and likely in debt!

Come on, luxury cars share in overall Thai market is about 1%, far less than the share of people with money.

I once noticed that CitiPlatinum card holders VIP parking at the Mall was occupied mostly by average Accord or SpaceWagons.

It's a non-issue.

Don't forget that a car is part of a business presentation, too.

That last part is very very true. If you read my post it worked a treat. I only rented them, as owning something that depreciates that quickly is not very smart especially for a small business.

If you have the money lying around, why not, if it makes you happy.

If you have the money lying around, why not, if it makes you happy.

If that is truely the case then it is fine. The problem with most "luxury" spending is that it is done by people who can't really afford it - whether it be flash cars, Luise Vietton purses, or Armani suits. Most of these people are trying to live a lifestyle (prompted by advertising and the media in general) that they can't really afford.

I mean, Buffet still lives in some modest house in Kansas that he bought like 50 years ago or something.

If you have the money lying around, why not, if it makes you happy.

If that is truely the case then it is fine. The problem with most "luxury" spending is that it is done by people who can't really afford it - whether it be flash cars, Luise Vietton purses, or Armani suits. Most of these people are trying to live a lifestyle (prompted by advertising and the media in general) that they can't really afford.

I mean, Buffet still lives in some modest house in Kansas that he bought like 50 years ago or something.

Not sure what you are basing your statement that "most" people buying luxury goods can't afford them? All the people I know that buy luxury stuff, certainly can afford it.

I believe Mr. Buffet also owns a multi million dollar home in Laguna Beach.

TH

If I don't spend my hard earned, spare millions on a 'nice' car it will get wasted on the upkeep of water buffaloes, rubber plantations and beauty salons.

These days, I get a bit more pleasure out of a car.

Interesting post. Thanks for sharing us. I'll have to start saving now, on PTTEP stocks maybe.

If you have the money lying around, why not, if it makes you happy.

If that is truely the case then it is fine. The problem with most "luxury" spending is that it is done by people who can't really afford it - whether it be flash cars, Luise Vietton purses, or Armani suits. Most of these people are trying to live a lifestyle (prompted by advertising and the media in general) that they can't really afford.

I mean, Buffet still lives in some modest house in Kansas that he bought like 50 years ago or something.

Not sure what you are basing your statement that "most" people buying luxury goods can't afford them? All the people I know that buy luxury stuff, certainly can afford it.

It's called wishful thinking. People like to rationalize that they aren't that far behind the curve and that anyone seemingly ahead of the curve surely must be in debt or barely getting by.

The problem with most "luxury" spending is that it is done by people who can't really afford it - whether it be flash cars, Luise Vietton purses, or Armani suits. Most of these people are trying to live a lifestyle (prompted by advertising and the media in general) that they can't really afford.

I see... you've shown your cards...

I'd have to go with Heng on this one re: his wishful thinking post.

Lots of $$$ in BKK jonnie -- you'd be surprised. Don't assume that people living above your standard (way above) are living a life they can't afford.