The Endowment Effect and Why I Have So Many Vehicles

From roolrool at Flickr Creative Commons

It's confession time: we somehow own five motorized vehicles.  As of March, we are in possession of a 2006 Toyota Matrix, a 1997 Jeep Cherokee, a 2006 as well as a 2007 Yamaha Vino 125cc scooter, and, most recently, a 2008 Kawasaki Bayou ATV.  What the hell is going on here?

I have to admit that I am embarrassed by this collection of vehicles.  Even though they are all paid for, I have some explaining to do.

• The scooters are used most frequently; my wife rides the older one, the 2006, to campus nearly every day.  We purchased the second scooter for $850 when we saw an ad in Craigslist from someone who apparently didn't know what they had: a scooter with less than a thousand miles in new condition.  It costs less than $30 a year to insure and gets 80 mpg.  The thought at the time was that the old scooter could be sold for that same $850 once its university parking permit runs out in August, or could simply be kept until it gives up the ghost and then we'd transition to the new scooter.  For now, the second scooter is my first choice of transportation if I'm not taking my bike.  Still, why not just take the bike all the time?

• The Matrix was purchased about a year ago as a commuter car.  We love it: we can average 37-39 mpg combined, it can haul whatever we need, and it was cheap.  But since I started working from home 2 months ago, it is barely driven.  We're putting maybe $25 in gas in it per month now (and spending between $40 and $50 for all vehicles).  There is a part of me that thinks going without a car might be a possibility now that I work from home, but we are nowhere near ready to pull that trigger.  

• The Jeep Cherokee was my wife's first car from back in high school, and since the time we purchased the Matrix, it was never really driven.  It just sat.  When it is driven, things break.  It's also a salvage title so it would sell for something less than $1,000.  We currently rent it to our housemate, the same one we rent our spare bedroom to, for a whopping $50 a month: enough to cover the insurance and put a couple bucks in our pocket and to help out a friend who doesn't own a car.

• The ATV was inherited about a month ago from my wife's grandfather.  The plan is to get it running, and then sell it, along with the trailer that is sitting in our garage.

I list these out because, I have to be honest, individually I didn't think much of the acquisition of each vehicle.  When gas went over $4 a gallon back in 2008, we thought, "Let's be smart and buy a scooter to save on gas."  Years later, I was driving the Jeep to work every day, paying four figures every year in repairs...so I thought, "Hey, let's buy a fuel efficient hatchback and keep the Jeep as a backup."  Then when a great deal on a scooter was advertised while I was inexplicably looking at scooters on Craigslist every day, we jumped at it immediately, justifying it as a low-cost and preemptive replacement for our current scooter.

Oddly, it was the gifted vehicle, the ATV, that finally brought the ridiculousness of the situation to light.  When I looked outside and saw this preposterous fleet of vehicles at our disposal, I just felt shame.  In most regards, we have done a fairly good job of eliminating waste from our financial lives.  We use a budget.  We don't have debt.  We invest between 60-80% of our take home income.  Yet in this regard, we are giving the neighbors a chance to look across the way and shake their heads.

So, we need a plan to trim the fat.  Here is one option:  maybe even a wussy, halfhearted one at that.

1. Fix and sell the ATV & trailer by the end of May, 2013 (down to 4 vehicles)
2. Sell the old scooter by the end of September, 2013 (down to 3 vehicles)
3. Sell the Jeep once our housemate stops renting it from us. (down to 2 motorized vehicles: one car, one scooter)

The third step is the trickiest in my mind, because the Jeep will net very little in a sale (conservatively, between $500 and $1000) because of its salvage title.  I have fantasies of keeping the Jeep in the garage, registering it as Planned Non-Operation, avoiding the costs of registration and insurance, and learning to work on it.  But I have a lot of dreams like that that.  Even though the Jeep would cost us very little in real dollars under this plan (say, less than $50 per year), why should I keep things that I don't use, even if I would not get much in return for a sale?  (That's another blog post in itself.)

I'm also hesitant to give up the second scooter, even though it's pretty rare that both my wife and I are simultaneously using the scooters.  This happens, maybe, once a month.  I think the hardest part for me is that I would rather have the thing, this working scooter that I like to ride and that doesn't cost me much of anything to own, than the money I would get for selling it.  

I know why I am having trouble with the idea of getting rid of these vehicles, even though one of them is never driven by anyone except our renter, and the other is, literally, a duplicate of a scooter we already own.  This is the endowment effect at work: the stupid thing that happens in my brain when I overvalue something simply because I own it.  Show me a funny t-shirt and ask me to buy it, I'll probably pay no more than $15.  Give me the t-shirt and then ask me to sell it tomorrow, and I won't take less than $25.  Over time, I hoard things, not because I love my trinkets, but because I overvalue them.  The endowment effect prices my stuff out of the market for my stuff.

If I had no vehicles today, but a pile of money, there is no way I would ever logically decide to buy a Jeep, a Matrix, two scooters and an ATV.  Yet ask me to sell some of them, and even give me the choice of which ones, to get a pile of money, and I hesitate.

Someone save me from myself.