Mythbusting Lexus
I just have a fleeting thought to share right now. I'd have more to say, but I've felt like I've been hungover all day. I didn't stay up particularly late last night, nor did I drink. But here I am, feeling like I've been run over by a bus and wanting to off myself. Not really, but you know the feeling.
Anyway, as I sit here trying to nurse this apparent hangover and staring at a television showing some obscure football game I care nothing about, I am curious about something. How many people could afford to buy their significant other a Lexus sport utility vehicle for Christmas? In a commercial that's now been shown at least two dozen times this afternoon, a husband gives his wife a brand new Lexus RX (including a big red bow on top, of course!) for Christmas. The wife is totally surprised by this gift (partially because the husband lied about being hung up at work over the phone to get her outside)
The Lexus website shares with us that 2008 RX starts at $37,000. Including financial aid checks (which, in a way are negative income in the longterm) and free agent summer teaching assignments, Amy and I make considerably less than this each year, so certainly this advertisement is not aimed at us nor our demographic group.
Okay, duh. Well, assuming that financing would be in order to make this a Merry Christmas, what would the payments be on the base model? You know, the model that's nearly impossible to find in stock at the dealership because they want people to buy all the options, and the one that, in this case, is $37,000.
Well, a couple more assumptions are in order here. For one, we have to assume that there's no trade-in of any sort. This is generally unlikely, but remember, the lady in the ad was supposedly completely surprised. This means that, in order for it to be a surprise, the couple had not talked at all about getting a different car. In addition, if this car truly is for the wife, even though it's assumed to be a replacement for her car, if the husband is smart he hasn't sold off her car just yet. I couldn't imagine what Amy would say if I took the Volvo, a car that's in both of our names anyway, and got rid of it without asking. The husband would likely be risking a Bobbitt-style reaction if he had gotten rid of a car that the wife was in any way attached to.
So, no trade-in, and we'll just assume that there's no down payment either for the same reason (spending a signficant portion of savings without discussion would certainly merit a similar reaction, right?) With these variables, and an average new car interest rate of 6.38% spread over four years, the monthly payment for this base model Lexus RX is $1,170.89, not including taxes or other fees. Add a small 7% sales and usage tax, and this payment jumps to $1,252.85.
Most financial advisories suggest that no more than 25% of a family's take-home pay should be spent on automobiles. (Rent/housing takes up the lion's share, with no more than 35%.) Let's assume the family has no other car payment (also unlikely if they have the tastes necessary for a new Lexus). This means that the family must have a take-home pay each month of at least $5,011.40, or about $60,000 per year. Not impossible, right? I mean, that's firmly within the middle class, certainly.
Well, not quite. First of all, that's take-home pay. If we account for insurance and taxes and retirement funds, we can safely assume that 30% of the family's gross income went out the door before they ever saw it, meaning their gross income was $85,909.71. Now, we're into upper-middle-class territory, and remember, this is a sort of best-case scenario, where the family can just barely afford this car. But much like the possible problem that would be caused by trading off my wife's car without her permission, taking on a debt load so significant for a surprise holiday gift without her permission, one that our family would just be barely able to afford... that would get me in trouble as well, right? Most husbands would agree.
So, how in the world do we figure out what category of people actually give this damn Lexus RX as Christmas gifts? We have to assume that the purchase of the Lexus is something that financially wouldn't make waves in the family budget. Of course, if this is the case, chances are the husband has enough cash sitting in his swimming vault to simply take an envelope to the dealership and not deal with financing. That's not really quantifiable, though. Let's say that this family is going to get financing, is trading in another similar luxury car to replace with this Lexus, and that doing so isn't going to break the bank.
I'll say in this case, then, that the total automobile financing in such a family would be less than 5% of the family's income. Of course, since this family is more "normal," we're going to say that the husband also drives a rapidly depreciating piece of machinery that he's still paying off as well, so let's halve that transportation budget for our Lexus gift. We'll assume the trade-in factor is nil, no negative nor positive equity, which is also unlikely considering the way that such families Simple math now, since we've cut the portion of the budget made up by this purchase by 90%. This means that the family must be making $50,114.90 per month take home, or $601,139 per year take-home, or gross $859,978.02 per year.
According to the United States Census, only 1.5% of households make $250,000 or more (there's no higher category), but that this percentage accounts for a whopping 1,699,000 households. No, that's not the $859,978.02 that is really necessary to make such a gift possible. Since we can't really be terribly precise about subdividing this income bracker further, I think we very conservatively can say that maybe half a million households can afford this luxury. Of course, this says nothing about what number of this half-million are partial to Lexus products, nor anything about what portion is in "need" of a new car, nor anything about how many of these families have female householders that wouldn't still be insulted by a husband buying such an extravagent gift, let alone a car she's never had a chance to drive first.
(And of course, how many of these are watching football games on Sunday afternoon on television anyway?)
Apparently, the ad schemes are effective. Lexus reports that some 10% of its sales in December are holiday gifts. Hrm... that's the holiday spirit! Give a luxury car to someone who doesn't really "need" anything. At the same time, millions starve. I don't get that.
Now the only question is, where do people get those fucking obnoxiously huge bows? Does the dealership throw those in?







