It's Expensive Because It Was Cheap!

This is one of the odd features of buying old stuff on the used market: sometimes things become expensive because they're cheap.

Let me 'splain. Sometimes things are great bargains on the used market. They become popular and sought after because they're great bargains. Influencers recommend them as good bargains, and the echo chamber parrots the recommendations until it's common knowledge. People follow along, and seek these bargains out. And then, with market forces working in their usual way, competition for these great bargains...drives the prices up. So then people find themselves competing to pay a lot for something that, originally, everyone wanted because it was cheap.

Weird.

Here's a similar thing. There was a CD/SACD player, I seem to recall, that sold by the bushel because it was good and also very cheap. But then what could the company do as a follow-up to its success but produce a more deluxe, expensive player? At which point people were saying, wait, I only wanted one of those in the first place because they were cheap; why would I want "the same thing only better" if it's also more expensive? (The company went out of business. No room to move, I guess.)

Sometimes companies do such a good job of branding themselves in their chosen niches that they have trouble moving out of them. Volkswagen once tried to create a luxury car to compete with Mercedes-Benz, and from what I hear it did a good job—the car was called the Phaeton, an old word once applied to certain kinds of horse-drawn carriages. (Before that, it was the name of the ne'er-do-well offspring of a water nymph and the sun god, who was given the keys to the family car and drove the chariot of the sun off course, scorching Earth. Maybe Phaeton's driving that chariot again now, who knows.) VW evidently failed to consider why anyone buying a high-prestige car would want one with an "everyman" nameplate. Kia ran into the same problem with its K9, a car that tried to hide its doggy associations by having its name disguised as the K900 in the US. (No one was fooled. I like dogs, so I would have preferred the straight-up "K9." I'm usually in the minority about things like this.) It's apparently a nice luxury car. But one little problem: it's a Kia.

Sometimes there's a more basic, stripped-down version of a desirable product that's sold as a "good enough" budget version for students or beginners. "Entry level," they're sometimes called. Fewer of such budget models sell, so that, later, when neither version is made any more and perhaps the company is out of business altogether, the budget version is scarcer. And scarcity drives the price up.

An example of this is the Bronica SQ-B medium format film camera. The "B" was for "basic." It was originally an entry-level, less fully-featured variant of the SQ-Ai aimed at students and newcomers to medium format, sold as a kit. Well, now they're more rare, so they go for higher prices than the SQ-Ai.

All versions of the Leica R4 are cheap now, but when people still wanted them, the simpler, stripped-down R4s, originally prized because it was more accessible to people who had less money, actually became more desirable than the fully featured R4. The value-to-price equation flipped upside down.

Related to this is the upside-down valuation of some collectibles. Imagine a book author. Her first book sells poorly because it isn't very good. Later she hits her stride, writes masterpieces, and becomes famous. Enthusiasts collect her works. The problem then becomes that a collection can only be complete it if includes all her books, including her first, unpopular one—which are scarce because nobody bought them when they were new. But there are lots of collectors, and now all those collectors need that first book. Again, scarcity in the face of demand drives up the price, until that author's worst book is selling for ten times the price of any of her other books.

That's the reason why some early Japanese Leica copies—originally cheaper knock-offs—sell for more than the real Leicas they copied.

And then there's the "latest is best" phenomenon. A product is introduced, achieves success, runs its course, and is superseded. Eventually, all of the models of a given line or product type become outmoded and old. But then the used market still prefers the latest version because it's assumed to be "the best." It had the latest revisions, right? And the last models remain the newest. I haven't checked lately, but for a long time you had to pay more for a Leica IIIg because it was the last Leica screwmount camera.

But c'mon, it's a screwmount camera. They're all ancient now. The IIIg was discontinued the year John F. Kennedy was elected President. Does it really matter if something is 60 years old vs., say, 68 years old? But "latest-is-best" seems to survive in peoples' minds even as time goes on.

Still, of all these little weirdnesses, and others like 'em, "expensive-because-it-was-cheap" seems the strangest.

So when you encounter something in the used market that seems to be popular and selling for high prices, don't just assume that it has to be good because the price is high and/or it's in demand. You also need to do enough due diligence to figure out why the price is high and why it's in demand. It might be for some reason other than what you assume.

Mike

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Featured Comments from:

hugh crawford: "OK here is an example.

"In 1955, '56, and '57, Porsche decided that they needed to sell a low-end car. Cheap paint, no side windows, no carpets, cheap seats, a joke of a roof that was a collection of sticks and a tent to go over it, optional hubcaps, even a cardboard interior I think. They called it the Speedster. They also sold a Coupe with lux everything. Fancy adjustable seats made of leather stuffed with horsehair, wool carpet, glass windows, chrome bumpers and hubcaps. Every attempt to make it look expensive and a list of options that goes on and on.

"Here is a comparison of the prices when new and what they sell for now. Note that the Coupe is listed with no options which is sort of a joke because I have never ever seen one with no options, and the Speedster was not offered with any options.

1957 Porsche Speedster
Original MSRP $3,215
Low Retail $179,600
Average Retail $255,000
High Retail $439,800

1957 Porsche Coupe
Original MSRP $3,665
Low Retail $58,500
Average Retail $95,600
High Retail $151,200

"As you can see the cheap one was the one to buy. Even today collectors are wary of no-sunroof 911's from the '60s and '70s because they are worth enough more that people have the sunroof welded shut when they restore them.

"P.S. I often am astonished at the Pentax K1000 selling at higher prices than the much much nicer K2."

Crabby Umbo: "I'm with Hugh! As a Pentax 'fan,' I'm amazed how a camera as rough and clunky as the K1000 costs more than the more refined KM and K2. Sure, I get that it was the camera of choice for people in college learning photography, but that means there are zillions of them out there! I have a few, but I got them cheap/free. I've always maintained that if you had a SP500 (which I see all the time on eBay for 50 bucks in mint shape) or other Spotmatic, you pick up a K1000 and say: 'what happened?' I.e., the Spotty's being butter smooth and the K1000 being loud and clunky. The 'now cheaper' KM has a shutter closer to the old Spotmatics, hence much smoother, it seems. Go figure...."

Robert B: "Anecdotal saying about the Phaeton here in Germany was that it was constructed around a perfect air-conditioning system because one of the owners of VW, Ferdinand Piëch, late offspring of the famous Porsche family, was extremely shy of cold air drafting over his bald head. Seemed to be a bad selling story for a Veblen good. But I know some professional drivers who loved that car especially for long distance rides, not least because of its comfortable, electrically driven massage seats...."

hugh crawford: "More about that VW Phaeton.

"Ferdinand Piëch was chairman of the executive board of Volkswagen Group in 1993–2002. He was also the grandson of Ferdinand Porsche. And before he was kicked out of Porsche by his cousin (you could write a book. Several have already been written), designed the 917 among other things.

"He wanted to build a really nice car that was better than Bentley, which VW owned. The Phaeton is basically a Bentley Flying Spur, built on the same production line, with a nicer interior. The air conditioning vents disappear behind the wood in the VW when not in use. Not particularly utilitarian, but it shows how determined they were to make the interior not look like a pinball machine.

[Comparison of Bentley Flying Spur and VW Phaeton]

"Mr. Piëch generally got what he wanted. He had 12 children including two with his cousin's ex-wife, which gave him more shares in Porsche than the cousin that kicked him out. Then he married the nanny.

["The Porsche Story: A Fierce Family Feud" from Der Spiegel]

"He was also responsible for the Bugatti Veyron. But the Phaeton was the real poke in the eye to the rest of the automobile world. Because it was a VW, not a Bentley, Lamborghini, Audi, or Bugatti.

"I met him once. Scary guy."

Comments

[Joe Holmes]

Some car makers try to avoid that "everyman nameplate" issue by creating a new brand. Toyota's luxury line is Lexus, for one example.

And at the other end, some manufacturers try to keep from being underpriced by creating a new brand that's cheaper. I once saw some knockoff sticky pad notes that were considerably cheaper, but when I inspected the label, I saw they were actually made by 3M, the makers of the original, more expensive Post-It notes. The Post-Its brand remained untainted.

This whole issue of pricing is tricky.

[Christer Almqvist]

I do not think you had "to pay more for a Leica IIIg because it was the last Leica screwmount camera". I think it was because it had a much improved finder, like the one on the M3.

[hugh crawford]

I often am astonished at the Pentax k1000 selling at higher prices than the much much nicer K2.

[Shhhhh! :-) --Mike]

[Mike Plews]

Interesting point about Kia automobiles. A year ago my 07 Honda CRV was just hitting 350,00 trouble free miles when I was T-Boned by a deer. It was a total write off.
I needed another vehicle to commute to work and wanted something cheap and with three rows of seats to take care of grandchildren.
I knew that Kia cars had improved a lot over the last few years and ended up leasing an AWD Sorento with the basic 4 cyl engine.
I did not expect a lot out of it, just a serviceable transport appliance.
I was surprised at the build quality, particularly the interior. Feels a bit like a poor mans Audi.
I also did not expect the car to handle as well as it does. It turns out there is a reason for this. Kia hired an suspension engineer named Albert Biermann away from BMW to freshen up the handling on this car and it shows.
I got a pretty good deal on my Sorento in part because it is a car that generates zero car lust. It is not nor will it ever be a Dino 246.
Kia may be about to turn the corner on it's image issues. When I leased mine they were just starting to take delivery of the Sorentos big brother the Telluride.
It's a monster and compared to it's competition is dirt cheap. A year ago they were selling them straight off the truck and I think that is still the case.

[Malcolm Leader]

The bitterness of poor quality lingers long after the sweet taste of low price has disappeared.

[David Dyer-Bennet]

I actually saw a Phaeton parked near a restaurant I used to go to a lot (they've closed since then). Not a neighborhood where you'd expect a Phaeton or anything in that price range. Yeah, from everything I hear it was a very fine car, probably one of the better bargains in that band (if you're not buying for the blatant prestige).

The "expensive because it was cheap" situation you describe looks to me to be largely mediated by people doing poor research—taking people's advice, rather than their information and forming their own conclusions.

[Daniel]

Our 82 VW diesel pickup is now worth 6-10 times what it sold for new. Still runs well and gets 46-52mpg. All the older diesel rabbits are going for a lot more than when new. Don't even look at the older VW vans... You can get a new Sprinter for what some of them cost now.
Products that do the job and last usually go up in value over the years. Still use the hand drill for many projects and it is a 4 generation hand me down.

[You might enjoy the book "The Same Axe Twice," about problems and issues in preservation and restoration. The title comes from an anecdote about a farmer who had a 100-year-old axe. He said the handle had only been replaced four times, and the head only twice. --Mike]

[Jeff]

Toyota (Lexus), Honda (Acura) and Nissan (Infinity) figured out the Kia dilemma. Leica had a problem in the opposite direction with the Summmarit M lens line, which was priced and marketed as an entry/budget product, despite the fact that it performed as well or better than the Summicrons (less flare or focus shift, for instance). So the whole line was recently discontinued. I think if the prices were doubled, and marketed like other Leica lenses, the line would have been a great success.

[David Mackenzie]

KIA solved the stigma issue on their “luxury” cars by renaming them as Genesis. They are actually very nice cars.

[Andy Wilkes]

Re "The Same Axe Twice", readers in the UK will relate to 'Trigger's Broom'. You can find it on YouTube.

[David Lykes Keenan]

Re: Leica screw mount cameras. I've always preferred the second to last IIIf over the last IIIg.

[Dale]

Bronica SQ-B selling for more than the SQ-Ai? Makes no sense. The free market will do what it does, and I respect it. But that makes no sense at all...

Dale

[Mark Sampson]

It doesn't always work. Toyota introduced a less-expensive brand, Scion, to appeal to younger (and less wealthy) buyers. Basically re-purposing JDM models not sold here... that worked ok for a while.
But sales dropped "after the new wore off" and as of this year Scion has quietly disappeared.

[Antony Shepherd]

Couple of years ago I bought a Leica IIIf, having realised I could get one of those and 5cm collapsible Elmar for significantly less than a IIIg body alone would have cost.
So I figured I'd take the saving over the slightly larger viewfinder and it's a lovely camera.

[Thomas Mc Cann]

The British motoring correspondents have an annoying habit of referring to Lexus as Toyota Lexus.Never hear them talking about the VW Bentley or the BMW Rolls Royce or the Indian Jaguar (now owned by Tata Motors)

[Pieter]

Some other comments point to how some Japanese motor brands eventually did break into the "luxury" or "exclusive" segment by rebranding. VW did it by buying Audi, and Porsche, and also Bugatti, Lamborghini and Bentley!

Has the same thing happened in cameras? The only big merger or buy-out of recent times that I can think of is Ricoh buying Pentax.

[bokeh]

In collecting the first and last of something always commands a premium even though they usually are not the best.

[Trevor Johnson]

Of course, the shutter in the SP500, (my late father bought me the body new), was the same as in the Spotmatic, except to differentiate the SP500 from the more expensive camera, Pentax simply didn't inscribe a '1000' shutter speed setting on the SP500.

[Andrew]

Old Pentax cameras have been on my mind recently.

My late father used an SP1000 throughout my childhood. I used it a lot in my teenage years. I recently dug the SP1000 out and sent it to Eric Hendrickson for a tune up. Eric emailed me this morning to say the camera is on it's way back to me, with new light seals, calibrated meter and new battery cap. I look forward to running some HP5+ through it.

While I was discussing the SP1000 with my wife, she wondered whether her grandfather's Pentax K2 was still in our house somewhere. She used it in art school but hadn't seen it in years. I had a hazy recollection of the camera. After a few minutes of poking around in the basement, I found a black K2 with 55mm and 28mm lenses in excellent condition. I took some photos with it over the weekend and marveled at the lovely viewfinder and split-image focusing patch. Almost like using a rangefinder!

[Jeff]

The original Speedster wasn’t designed just to be lower priced than the coupes and cabriolets, it was designed for casual racing and was produced on the suggestion by the famous North American importer, Max Hoffman, who especially saw a big opportunity for the Southern California market. And he was right; it was a big hit there, not a budget failure by any means. Hoffman was a smart guy and influenced other automotive successes.

https://en.m.wikipedia.org/wiki/Max_Hoffman#Career

[Speed]

Regarding hugh crawford's excellent comment about Porsche Speedster and Porsche Coupe prices ...

It should be noted that 3652 model year 1957 Porsche Coupes (today's less expensive car) were manufactured vs. 1170 model year 1957 Porsche Speedsters. I don't know how many are still alive.

http://autoeclub.com/porsche-356-manufactured-stats.htm

Price is determined by both demand and supply and varies until the market stabilizes. I believe that Porsche figures out how many cars they can sell, manufactures one or two fewer and raises prices. :)

[Crabby Umbo]

Mark S., I LOVED the original Scion xB (the real 'box'), and I owned a 2005, so did my sister, so did my pals (theirs, a 2004). No car was ever easier to get into or out of, or more utile. There are many stories on-line regarding how Toyota "fixed" the 2004-2006 'real-good', and no one wanted the far less quirky, far more fuel using latter models. The peak sales period was 2006, and all down hill from there.

As a long time Toyota driver (since 1975), I was amazed and upset by the quality level of the car. Making something less expensive is OK, making a lot of stuff crappy and under your brand image was stupid!

Majority of the auto door locks breaking within 4 years; metallurgy so bad the wheels would rust so that they wouldn't hold air; alternator, starter, and water pump breaking within a 1000 mile period, and about 50,000 miles early than usual; EVAP system that broke and had to be repaired almost every 2 years (or my car wouldn't qualify for emissions). I could go on and on.

After a lifetime of driving Toyota (1975-2020), Toyota's "American Car Think" on the Scion line disgusted me so much, I'm currently driving a brand new Kia Soul. Toyota, I didn't leave you, you left me! And I'm not alone! I walk in a neighborhood where 10 years ago you would have seen a Toyota in every drive-way...all Subaru now!

[robert e]

Fascinating post and discussion.

"taking people's advice, rather than their information and forming their own conclusions" -- David Dyer-Bennett

I think this describes many markets, in a nutshell. The issue of imperfect or asymmetric information is easy to understand. Not so easy is the idea that we blind ourselves willfully--most of us seem to prefer reputation (advice, branding, ratings...), association and good stories over useful data. This preference isn't necessarily wrong, in certain cases or to certain degrees, but most of us seem unwilling to discriminate much.

hugh crawford's story of the Phaeton reads like a classic case of cutting one's nose off to spite one's face. Unless I'm mistaken, by this time Bentley, Audi, Lamborghini and Bugatti all belonged to VW, yet its Chairman still held a grudge?

Like others, the post reminded me of Lexus and Infinity. And at the other end, I think we all get that many house brands at discount grocery chains are supplied by better-known brands or their suppliers.

When it comes to cameras, I'm curious about those photos of an older HCB with the "low-end" Leica CL. Did he adopt it as his main tool or was that a brief try-out?

[Richard]

Mike, sorry for being off topic here, but I wanted to ask you if you’d write something about your experience with that Cambridge Audio Network Streaming component that you mentioned a month or two ago. Is it really worth all that money or should we just listen through our computers or phones?

[Hi Richard, unfortunately I sent it back unopened. I realized that my new stereo was making my tinnitus worse. So I decided not to follow through with the plan to build a system. --Mike]

[Zack Schindler]

I worked as a grip on the introductory film for the Cadillac Cimarron in 1982. I remember turning to one of my co-workers and saying "what a piece of crap. It is just a poorly rebadged Chevy". They are not in the it's expensive now because it was cheap category and that is a good thing. https://carbuzz.com/news/rebadged-disasters-cadillac-cimarron

[Crabby Umbo]

Interesting to note that the 1957 Corvette would have put you back $3176.00, and compared to the Speedster, would have been a rocketship! Although certainly NOT a rocketship you could have handled on the curves as well as a Speedster, but your corner mechanic could have worked on it.

For sheer fun, you could have had a Triumph TR-3 for $2625.00 saving a lot of 1957 money over both of these! After owning a TR-4 for a while, and almost going bankrupt on a GT6 Mk3, I still always wanted a TR-3!

[Crabby Umbo]

BTW, Triumph TR-3 Baby-Faced Corner Killer!

https://drivetribe.com/p/baby-faced-corner-killer-triumph-G0aX8gn6SSqACDjbWBwiJw?iid=au5AAqFuTEGq4HLHOtyeDg

More powerful than the Porsche!

[Very cool. By the way, you don't have to include the question mark or the stuff past it in a link URL. Works fine without it. --Mike]

[Douglas Chadwick]

People have pointed out that the Leica 3G is desirable because of the improved finder. But I agree that the price is still too high, you may as well buy the worst Leica M (yes M4-2 I am looking at you!) if you are spending that sort of money.

But I do recall that at the time the Leica R4s was considered to be significantly more reliable than the earlier R4 cameras, and reliability was a serious issue for the series.

[Steve Hutchison]

I once encountered a Phaeton owner. He was sold the car at a discount I believe as he was the owner of Dynaudio, and they had recently signed a deal with VW to supply their high end audio speakers. Wilfried described to me in some detail how the car “simply went” when moving away from a standing start. He also praised the economy from its enormous W12 Diesel engine.