After 17 years and 171,000 miles, my wife and I just traded in the best car we’ll probably ever own: a black 2001 Acura MDX sport utility vehicle.
We bought it new. My wife – then a stay-at-home parent – did all the research and can take full credit for the purchase decision.
We got on a waiting list in January 2001 and took possession in June. After installing a car seat for our then 2-year-old son, we drove the MDX home.
Then we drove it all over America. Multiple trips to the East Coast. Christmas in New Mexico. Countless trips to other Midwest destinations. Four moves to new homes in other states. Brutal Minnesota and Wisconsin winters.
It shouldn’t have worked out. The MDX was not only Acura’s first SUV, but 2001 was also its first year of production. We were tempting fate.
But the only time the car ever stranded us, it was our fault. We left an interior light on in a Chicago parking garage. Then we went on a week-long train trip. The battery was stone dead upon our return. Roadside assistance saved the day.
Our MDX was not without flaws. At 125,000 miles, it needed a new transmission. (Ouch.) But our decision to spend about five thousand dollars to replace the tranny was looked at in context.
The car was otherwise fine. We knew its service history. We were unlikely to quickly find another car we liked so much. So even in failure, the car’s value to us was revealed even more clearly.
The new transmission has been fine ever since. And overall, Honda Motor Company (Acura’s corporate parent) got the MDX right: they’ve sold over 1 million of them worldwide.
An important part of the car ownership experience is service. And our Acura dealers – four overall – have been magnificent. They have literally never tried to upsell us.
They’ve suggested used parts instead of new when they were functionally equivalent and far cheaper. They’ve warned us away from scheduled maintenance that “corporate” clearly wanted but which they knew was redundant.
So, our MDX experience raises an interesting economic question: what do you call an item that – in hindsight – you would have paid more for simply because you – and the seller of that item – totally underestimated how much utility you’d get?
In fact, there is a term for that: a “merit good.” The concept of a merit good was introduced in the 1950s by economist Richard Musgrave. It’s often used to describe an item with underappreciated externalities.
An example would be a vaccination. The individual getting the vaccination gets a direct benefit – they won’t get a specific infectious disease. But society also benefits because of herd immunity.
Higher education is another example: it’s easy to underestimate the benefits of a college degree since the cost is up-front and the benefits are typically far in the future.
But a merit good can also simply be something that is better than the buyer realizes. And the MDX is just one example in my own life.
I own a pair of $30 Crocs my wife bought me for Christmas ten years ago. I wear them every single day around my home office.
Had I known how comfortable, practical and long-lasting they were going to be, I’d have paid $300 for them. (Let’s pause for a moment to acknowledge that people spend $300 for uncomfortable shoes all the time.)
My late mother had an uncanny ability to buy last second Christmas gifts that turned out to be solid gold. When I was 18-years-old, she bought a $1.99 spiral-bound notebook and wrote every name, address and phone number from our extended family in it and gave it to me.
I still use it today, 40 years later. No batteries or electronic updates are required. I would have paid a thousand bucks for it given how much I’ve used it.
So with perfect foresight in 2001, would we have paid more for the Acura? Probably. A little more. But it’s also fair to say that cars overall were far more reliable and safe in 2001 than they were 20 years earlier.
And the same is true today versus 20 years ago. In short, everybody was underestimating the utility of new cars in 2001, including the manufacturers and dealers who sold them.
In late December we traded in our MDX for a 2016 Honda Pilot that was just off a three-year lease. My wife, now a working professional, will be commuting in it. She’s looking forward to streaming her favorite podcasts from her iPhone via Bluetooth.
The Honda dealer credited us $300 for our MDX toward the new car. A pittance, and as you now know, unreflective of its value to us.
But privately selling an older car like ours, even in “as-is condition,” might have exposed us to liability when the first few items stopped working.
So off we go in our (almost) new Honda. Will it last for 17 years? Hopefully. Will gasoline-powered cars be obsolete by then? Probably. Will cars be driving themselves in 2033? Partially. Will some of us love our reliable old cars? Definitely.
Photo Credit: Barry Randall