Value is largely intangible

At work, my mind tends to wander while I complete my assignments. Sometimes my mind goes in crazy directions like wondering how old Spongebob Square pants is. As it turns out, he is roughly 27 years old. I think about random facts like how much Serena Williams or Justin Beiber could bench press. I've wondered if grenades really can explode if you shoot them with bullets. Mostly, I think about absolutely useless and trivia information.

One day, I was thinking about value. After all, cost and value aren't necessary the same. I really enjoy coffee and a cup of coffee at McDonald's costs one dollar. It costs one dollar, but if it costed $1.50, I would still buy it. In some cases, I would pay $2 or $2.25 for a cup of coffee. I guess that is what I value a cup of coffee.

Then I started thinking about cars. I absolutely hate luxury cars. Not because of how they drive or perform, I hate luxury cars because they are an insane waste of money. As of today, 2014 BMW 5 series start out with a selling price of $50,000. To compare this price with the price of a new car, a 2014 Honda Civic starts off with a selling price of $18,000. $18,000 is the price of a new Honda Civic, the same model but older years will be cheaper.

At $50,000, I could easily buy a 2014 BMW 5 series, but I could never justify it. I could only justify buying a luxury car if I had more than enough money for the rest of my lifetime. Despite this opinion, BMW's and other luxury cars are quite common. I'm sure everyone sees a couple of them every day while commuting. So every time I see a luxury car, I think of this video from Cappy. Most of the people that drive these cars don't completely own them.

At that point, I started thinking about cost versus value. A new BMW costs $50,000 but as soon as you drive it off the lot, it becomes a used car and immediately the value goes down.

$50,000 isn't just the cost of all the materials that go into the car. If you took a new BMW and got it going to 70 mph and crash it into a brick wall, that car will smash into thousands of pieces. Theoretically, you could collect all the pieces, all the metal, plastic, and rubber and collect it into the pile. You will have all the same materials as a brand new BMW but the value of the car drastically goes down. At that point, the value of the car is just going to be scrap materials. Maybe you can get a few hundred dollars for it. The same can be said for any car. Smash a 2014 Honda Civic into a brick wall, the value goes from $18,000 to a few hundred dollars.

When anyone spends $50,000 for a car, only maybe a few hundred dollars to a few thousand dollars of that value comes from having the ability to drive. The reason for this is that a used car can be purchased for a few hundred to a few thousand dollars.

A few more thousand dollars of value comes from having a new car that most likely won't have mechanical issues for a couple of years.

The bulk of the value of having a luxury car is the appearance of status. Of all the things a man could spend money on, it is never a wise decision to waste $40,000 to look like you have one million dollars. That $40,000 could have been spent on much more useful things like your living expenses or investments that could provide a good return in the future.