Chris Uggen's Blog: cars, age, and inconspicuous consumption

Saturday, November 24, 2007

cars, age, and inconspicuous consumption

according to the 2004 survey of consumer finances, the wealthiest americans do not appear to be flaunting their wealth with expensive vehicles. the median market value of vehicles held by households in the top 10 percent of the u.s. wealth distribution was about $30,600 and the median value for the bottom 25 percent was about $5,600. there is a bit of selectivity into car ownership of course, with about 93 percent of the wealthiest decile owning one or more vehicles relative to about 65 percent of the least wealthy group. still, the difference in median values seems small to me, given the enormous discrepancies in total assets (about $1.6 million for the top 10 percent, relative to about $7,700 for the bottom 25 percent).

having just perused the special luxury vehicles section of my thanksgiving-day strib, i figured that the typical top-decile garage must contain, say, a two-year-old black bimmer for him and a new lexus for her (perhaps with a bow on top). but such vehicles would cost at least double the $30,600 in total household vehicle holdings.

to get a look and feel for the cars available at each level of wealth, i searched at $100 plus or minus the medians and stuck the corresponding pictures on the chart above. to standardize a bit, i began with 2006 models (working back to 2005 when no cars were available at the price) and only assumed one car per family. these are the first passenger cars to come up within 25 miles of my zip code:

_0% to 24.9% $____7,700 assets: $_5,600 2005 nissan altima
25% to 49.9% $___84,500 assets: $11,900 2006 chevy cobalt
50% to 74.9% $__257,300 assets: $17,400 2006 kia amante
75% to 89.9% $__600,200 assets: $22,600 2006 nissan altima
90% to 100 % $1,572,600 assets: $30,600 2006 cadillac sts

the caddy is nice, i suppose, but it ain't no bentley. and i'd have to squint pretty hard to find any sort of hierarchy among the vehicles in the other wealth classes. plus, many middle-class and wealthier families have two or more vehicles.

does the relative equality in vehicle values constitute evidence against veblen's theory of the leisure class? given the centrality of cars in american culture, i would expect vehicle purchases to signify conspicuous consumption, with RVs, i suppose, to indicate conspicuous leisure.

here are three candidate explanations for the pattern:

1. a threshold problem. perhaps the top 10 percent isn't all that meaningful and the big jump might come for the top 1 percent or 1/10 of 1 percent.

2. a measurement flaw. hmm. no obvious problems that i can spot.*

3. the life course. ah! i bet that's it. age is closely related to wealth accumulation, so it might be the case that cars are a poor (ahem) vehicle for signalling status among older americans. moreover, households with retirees likely own fewer cars and replace their cars less frequently than households with workers in the full-time labor force. to the extent that the NADA blue book value is low for ten-year-old lincoln town cars and mercedes e-classes, it might bring down the median value of vehicle holdings for the top wealth group. finally, there's likely a cultural explanation as well, as car culture is perhaps more salient to youth and young adults than for folks my age or older.

so, i'll opt for an age-graded life-course theory of vehicle consumption until i see some evidence to the contrary. if i ever find myself selling luxury cars, however, i've got a good target demographic in mind.

*survey respondents were asked to provide the year, make, and model of each of their cars, vans, sport-utility vehicles, and trucks. this information was then used to obtain market prices from data collected by the national automobile dealers association and other sources.

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At 6:07 PM, Blogger Anomie said...

i think the use of a vehicle to signify conspicuous consumption fell out of favor with the wealthy as soon as nonwealthy individuals started pimpin' their rides with floorlights and spinning hubcaps and whatnot. paying too much concern for your car is now an identity marker for the lower classes; the posers, if you will. And, of course, the teenagers.

At 5:38 PM, Blogger Tom Bozzo said...

You shouldn't completely discount the threshold problem. Super high-end cars (say, with stickers north of $100K) are directly marketed to very high fractiles of the wealth distribution -- they may be indirectly pitched to car-nuts of ordinary means for halo effects. Also, there is a measurement issue with leasing, which accounts for a large fraction of purchases in luxury market segments (e.g., something like half of BMWs sold in the U.S.) though not for the car market as a whole.

What I don't like about Anomie's hypothesis is that ride-pimping is not really a new phenomenon. See: "Bitchin' Camaro" by the Dead Milkmen (1984). For that matter, the Ford Model A in my wife's uncle's garage, now restored to better-than-new shape, had been originally purchased 50 years ago for conversion to a hot-rod.

I tend to see more of a 'widening gap between rich and super-rich threatens American Dream' phenomenon afoot. That is, "entry luxury" cars like the BMW 3-series are so common as to be totally invisible, status-display-wise. I actually thought that the invisibility of my sainted '98 M3 was a feature and not a bug, but apparently the Market disagreed and the subsequent models have been getting more differentiated and much more expensive as a result. Then the revivals of ultraluxury brands like Bentley and Aston Martin, plus the proliferation of AMG Mercedes-Benzes with race-car horsepower and six-figure stickers is to some extent an effort to sell exclusivity to rich snobs who don't like that lesser Joneses can swing the lease payments on a 3-series.

This isn't to say that there don't remain pockets where showing off wealth automotively is considered uncool (Madison, Berkeley) and people who can buy anything opt into Priuses.

Among middle-American oldsters, the purchase of Cadillacs and Lincolns is probably intended as a status display. The interesting question is what happens as well-off boomers join the white hair club.

At 11:20 PM, Blogger christopher uggen said...

anomie, i'd guess there's an education gradient at work here. academics are so soul-stiflingly homogenous in their automotive choices that anything out of the ordinary is marked as deviant.

tom, i agree re: the widening gap between the rich and the super-rich. few americans at the 90th percentile of the wealth or income distribution think of themselves as rich. i've got a funny story about my trip to the lincoln dealership ("welcome, youngster!"), but that's probably a post for another day.


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