The rich are known for spending their money lavishly. This may come in the form of mansions in popular areas or exotic trips to places only the super-rich can afford. But when it comes to luxury, there's one thing the rich don't typically buy: cars.
Read next: 4 Affordable Car Brands You Won't Regret Buying in 2024
Check it out: 4 genius things wealthy people do with their money
Why is this the case? It's not that they can't afford name-brand cars. Certainly, the idea that a car is too expensive or too costly doesn't factor into the equation. But you wouldn't have a cheap used car parked in your garage either. Usually, wealthy people avoid luxury brands and opt for reliable cars for their daily transportation.
Here are 6 reasons why rich people don't buy luxury cars, some of which may surprise you.
Depreciable assets
The rich, like most of us, know that a car's value drops dramatically the moment it leaves the dealership, so why would they spend extra money on something that won't give them anything in the long run?
Kevin Huffman, personal finance expert and owner of Criminal Trading, cited an article from Kelley Blue Book that states luxury cars can depreciate up to 20 percent in value in the first year.
“When you've worked hard and built up wealth, you want to hold onto that money for as long as possible, and losing 20 percent of it in the first year on a new car is not a good way to do it,” Huffman said.
“One of the main reasons that wealthy people avoid luxury cars is because they depreciate rapidly,” says David J. Greiner, president of the Greiner Law Firm and former president of Greiner Buick GMC. “Cars are not an investment that generally appreciates in value, and luxury cars in particular lose a lot of value when they depreciate. [it is] “Many wealthy individuals prioritize investments that will maintain or even increase in value.”
Read more: The 8 fastest depreciating hybrid cars
Practicality
Owning a luxury car is fine if you only use it for special occasions or for fun, but how often do you drive that expensive car down a busy highway, to the local grocery store, or just to run everyday errands? For the rich, it's just not worth it.
“Practicality” is a big factor, according to Derek DiManno, founding financial advisor at Flagship Asset Services.
“Luxury cars are [offer great] “As a status symbol, many people prioritize functionality and value for money over flashy cars,” DiManno says. “They may choose a car that offers superior performance, advanced technology and reliability without the hefty price tag that often accompanies luxury brands.”
Investment Mindset
The 1% don't think about losing money on purchases like cars, instead they focus on making money through investments that will generate big returns.
Greiner explained that many wealthy people tend to operate with an “investment mindset”, meaning they put their money into buying something with the hope that it will appreciate in value in the future, generating a profit.
Instead of luxury cars, “they may choose to allocate their funds to assets such as real estate or stocks,” Greiner said, noting that wealthy buyers of luxury cars “are choosing cars that will retain their value over time or classic cars that have the potential to appreciate in value.”
Subtle status
Another reason the wealthy refrain from buying luxury cars is because they “prefer a more understated style and avoid overt displays of wealth that may attract unwanted attention or display their wealth in a way that some wealthy people find offensive,” Greiner said.
Keeping a low profile is key for the wealthy, according to Rhett Stavendek, CEO and founder of Leverage Planning. “In a shaky economy, showing off an expensive car can draw unwanted attention,” Mr. Stavendek said.
Greiner said the wealthy clients he worked with “prefer to keep a low profile and choose high-quality but unspectacular cars.”
“They were less interested in the brand and more interested in a car that offered luxury in terms of comfort and technology,” Greiner said.
Experiences over things
The rich can buy anything they want, but truly unique experiences are a bit more difficult to come by, which is why they spend their money on luxury trips around the world, life-threatening adventures, and anything else they can't find in a store or at a dealership.
“Affluent individuals prefer to spend their money on experiences rather than things, and they know that the memories and personal growth they gain from travel, hobbies and educational pursuits are far more valuable than a car that will depreciate,” Huffman says. “Affluent individuals may prefer to spend their money on fulfilling experiences rather than a car that will sit in their garage and depreciate.”
EVs are the future
The old wealthy looked to luxury cars and other status symbols and signals of wealth. The new wealthy are looking to the future, and when it comes to cars, they see electric cars as the wave of the future.
“Many wealthy people are looking to the future, especially with the rise of electric vehicles. They are often attracted to the latest technological innovations rather than traditional luxuries,” Stavendek said.
“At Leverage, we've seen a shift where the cutting-edge, eco-friendly features of cars like Tesla are becoming the new luxury car standard,” he explains. “Luxury cars may still get the attention, but we're seeing more practical, future-oriented people looking elsewhere.”
More from GOBankingRates
This article originally appeared on GOBankingRates.com: 6 Reasons Rich People Don't Buy Luxury Cars
