Attending college and getting by on just $13,000 per year meant I had to count and track every penny. So tight were my finances that I not only "knew" when I had taken a girl to dinner, I FELT it in my finances. I could literally feel $30 poorer the week after I took a girl out because I couldn't afford as many groceries. This level of poverty has many benefits as it does drawbacks, but one thing it did provide me with was deadly accurate ability to assess whether or not somebody was supporting themselves or living off of somebody else.
This came in particularly useful when you had some idiotic college student claim they were "independent" (notably girls) while they drove a new car. Within a few questions you found out they "may have" been paying for their tuition, but daddy was financing the car
and the credit card
and the health care
and the rent
and the gas
and the groceries.
Fastforward to today and this skill still serves me well, especially when it comes to commercial lending. I already know, 9 times out of 10, based on how somebody acts, how much they brag, and how well-spoken they are whether or not they are a viable client, likely to pay us back, or some poser schmoe on the brink of bankruptcy that has (like President Obama) mastered the art of talking a lot, yet saying nothing. The fancier the suit, the nicer the car, the larger the balance sheet, the more he smiles the more likely he's insolvent and on the verge of bankruptcy.
However, it wasn't always that way because until I got some experience I made one erroneous assumption - if you drove a nice luxury car like a Beamer or a Mercedes then you MUST have had money. Who would afford such frivolous luxuries unless they were spectacularly wealthy?
It wasn't until I saw the balance sheets of the Denny Heckers and Adam LaFavre's of the world did I realize it was quite the opposite. The VAST majority of luxury cars you see on that highway are 100% financed to the hilt. The people driving them are MORE LIKELY to have a lower net asset value than the local waitress cocktailing at the local bar and certainly a lower credit score than your average blue collar worker in the Bakken oil fields.
Still, faux rich posers, trophy wives and criminal real estate developers aside, I have a question - who buys brand new BMW's? Let alone who buys brand new cars?
The reason I ask is because I can't plain fathom spending the $50,000 on a brand new luxury car. Whether you have the money or not, isn't $50,000 a tad excessive? Couldn't you buy a brand new Toyota for the fraction of the cost, better reliability and lower maintenance costs WITH money to spare? Money that could be spent on other items thereby improving your standard of living? Heck, the extra $30,000 could put a kid through most of bachelors degree at a 4 year institution. Why do people buy brand new cars, let alone, why do THOUSANDS of people EVERY YEAR buy brand new luxury cars? Why is it so common when it just does not make sense?
This is a question that I haven't really spent the time to research and answer, but has nagged me for the past 2 decades. Thankfully, somebody answered it. And (as I feared) the answer will not help us improve economic growth or close the trade deficit.