If money were no object, what car would you drive? Mercedes, Bentley or Maranello Prancing Horse?
These are what we think of as “cars for the wealthy.” However, the reality is a little different.
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In a recent blog, personal finance personality Suze Orman has some very honest advice for people looking to buy a car right now.
“Please don't pay extra.”
Here's why she's not the only one with that opinion.
According to U.S. News & World Report, based on factors such as the development of Memorial Day sales and dealers clearing out old inventory to make room for new models at winter and spring auto shows, This month is said to be a good month to buy a car.
If you're looking to buy a car, it's worth noting that new and used car prices are expected to fall this year as supply chain issues and inflation begin to ease, according to research from financial giant JPMorgan. .
But then the question arises: what should I buy?
Toyota, Honda, Ford?
According to a 2022 study by Experian Automotive, many wealthy people simply don't drive luxury cars.
The study found that for people with household incomes above $250,000, 61% do not drive luxury brands. They drive Toyotas, Fords, and Hondas just like the rest of us.
Other studies have shown similar results.
Customer experience and market research firm MaritzCX found that the Ford F-150 pickup truck is the most popular vehicle in the U.S. for people making more than $200,000 a year.
In fact, even the ultra-wealthy may not be splurging on rare cars.
Mark Zuckerberg, co-founder of Meta (formerly Facebook) and who has a net worth of $49.5 billion according to Bloomberg, is frequently seen driving a Honda Fit hatchback. Amazon founder Jeff Bezos continued to drive a Honda Accord even after becoming a billionaire.
Legendary investor Warren Buffett is also frugal when it comes to cars.
“You have to understand, he keeps the car until I say, 'I'm getting embarrassed, it's time to buy a new car,'” his daughter said in the documentary.
no need to show off
We tend to associate wealthy people with extravagant lifestyles, at least that's what social media gives us.
However, in real life, this is not always the case.
read more: Over 65% of Americans don't shop around for better car insurance.In that case, a month he could be charged $500 in premiums
Personal finance expert Dave Ramsey says that for people who have built first-tier wealth (which he defines as a net worth of $1 million to $10 million), the cars they drive are “modest.” “There is rarely an attendant,'' he points out. be moved. “
“It's usually a used Camry or a nice used Honda or some kind of old pickup truck,” he said on an episode of The Ramsay Show.
“That layer of wealth, the people who achieved $1 million to $10 million, that's how they did it and they didn't do it for you. They're not mad at you. But they don't care what you think. They didn't live their lives to impress others.”
Simply put, they're not going to catch up with the Joneses.
Suze Orman says your objectives should be simple when buying a car now, especially given the rising cost of car ownership.
“Your goal is to buy the least expensive car. That should lead you to a used car rather than a new car,” she wrote.
Will cheap cars make you rich?
There are several reasons why you should think twice before purchasing a luxury car.
The first is depreciation. A car starts losing value from the moment it leaves the dealer's lot. According to US News, the average depreciation rate for all vehicles over the first five years is 49.1%, but depreciation costs for luxury brands can be higher. The average five-year depreciation rate for a Mercedes S-Class is 67.1%. For the BMW 7 Series, this is a whopping 72.6%.
Additionally, luxury cars can be more expensive to maintain and insure than economy cars. So what you need to fork out will be more than just the purchase price. Additionally, luxury cars can be expensive to repair once the warranty period expires.
Remember that there is also an opportunity cost. The more money you spend on expensive cars, the less money you need to put into your investment portfolio. This potential benefit can double over time, creating an opportunity cost.
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This article is for information only and should not be construed as advice. PROVIDED WITHOUT WARRANTY OF ANY KIND.
