About 20 years ago, a partner of mine was shopping for a luxury car. I had been reading the car mags and was very excited about a brand-new generation of luxury cars being introduced by Toyota and Honda. The new Lexus and Infiniti sedans had been strategically targeted by their Japanese manufacturers to compete with Mercedes and BMW (Cadillac was already far behind), and they were infinitely superior in virtually every specification. They were better– and they were cheaper.
Any rational car buyer who took the time to study the facts would conclude that the only sensible thing would be to buy “Japanese.”
I made the argument to my partner and gave him all the supportive details to back up my case. He was impressed with everything he read and promised me he’d buy a Lexus or Infiniti when his lease expired. I was happy to have saved him about $20,000.
About two weeks later, he pulled into the parking lot with his new vehicle: a Mercedes Benz!
“Why did you get the Mercedes?” I asked him.
“I know it wasn’t the smart thing to do,” he admitted, “but I was worried about my neighbors. Everyone who’s anyone in my development drives a German car. I didn’t want anyone to think I was having money problems.”
“But you know the Japanese cars are better. And a better value!”
“Yes,” he agreed, “but a fellow has to be able to hold his head up high in his own neighborhood.”
This man is one of the toughest, shrewdest, most fiscally conservative businessmen I’ve ever known. But to him — as to so many others — there is an intangible value to the Mercedes brand name that goes beyond rationality.
Brand names may signal to the world, “Hey, I have money,” but they don’t necessarily indicate good judgment — or good taste.
We pay a premium for a brand name. In some cases, it’s just 10% or 20% over what we would pay for comparable quality (think candy, dry cleaning, plane fares). In other cases, it’s 50% to 100% more (think cosmetics, detergents, medicines, hotels). And sometimes we pay double or triple (think clothing, handbags, booze, guns, wine).
But if you don’t need the credibility that a brand name provides — in other words, if you have some style of your own — the premium you pay for it is a total waste of your money.
Here’s an interesting thing about brands: The rich and famous don’t need them. They already have the prestige that brands promise, so they can wear, smoke, and drive whatever they want. Ironically, that makes those things fashionable and coveted by people who really can’t afford them.
I don’t mean to imply I’m not guilty of brand-name dependency. I have a very expensive Cartier watch that tells no better time than a $19 Seiko and breaks down every six months. Still, I love it. It makes me feel good every time I put it on.
I suppose what I’m saying is simply this: Every once in a while, it makes sense to take an inventory of how much — and on what things — you are “overspending” for the prestige and comfort of brand names.
Are you a brand-name buyer of any of the following things?
* liquor or wine?
* sound equipment?
* computer equipment?
* sports equipment?
* beauty products?
The list goes on and on, if you think about it.[Ed. Note. Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]