“Why Rich People Drive Cheap Cars” might seem paradoxical to many. After all, isn’t wealth often associated with luxury vehicles and opulent displays? Yet, as we delve deeper into the world of the affluent, we uncover surprising truths. From Sam Walton’s old pickup truck to Jeff Bezos’ Honda Accord, many of the world’s wealthiest individuals have consistently demonstrated that their choices in transportation are driven by more than just financial capability. This article explores the intriguing reasons behind these unexpected vehicular preferences among the rich.
While luxury cars and opulence often go hand-in-hand with the image of the wealthy, it’s not uncommon to find affluent individuals driving modest vehicles. Let’s delve into the reasons behind this seemingly paradoxical behavior.
“I just don’t believe a big showy lifestyle is appropriate. Why do I drive a pickup truck? What am I supposed to haul my dogs around in, a Rolls Royce?” – Sam Walton
Sam Walton, the founder of Walmart, was known for his frugality and down-to-earth nature, which was reflected in many aspects of his life, including his choice of vehicle. Despite being the head of a multi-billion dollar empire, Walton drove an old 1979 Ford F-150 Custom pickup truck. This wasn’t just a publicity stunt or an occasional drive; it was his regular vehicle.
Jeff Bezos still drove a Honda Accord long after he was a billionaire.
“What’s with the Honda?” Bezos was asked in a 1999 60-minute interview.
After a laugh, Bezos, who, according to The New York Times, owned roughly $10 billion in Amazon stock in 1999, responds, “This is a perfectly good car.” [1]
Known for his frugality and simple lifestyle, the car that the renowned investor and billionaire drives as of his last known purchase is a modest 2014 Cadillac XTS. Although this car is far from the luxury vehicles that one would typically associate with the rich and famous, it reflects Buffett’s humble nature and tendency to prioritize value over extravagance.[2]
Buffett will buy and keep a car for seven or more years, so he is technically driving a used car most of the time. He only upgrades when his family urges him to. His favorite holding time for a vehicle is forever.[3]
Now that we’ve looked at the frugal habits of billionaires, let’s look at the type of cars self-made millionaires drive based on research.
Frugality and Financial Discipline
One of the most common traits among self-made millionaires is their penchant for frugality. Many attribute their wealth accumulation to disciplined spending habits. By saving and investing wisely, they’ve managed to amass significant wealth, and this discipline often extends to their choice of vehicles.
“The Millionaire Next Door: The Surprising Secrets of America’s Wealthy” by Thomas J. Stanley and William D. Danko is a seminal work that delves into the habits and characteristics of wealthy Americans. The authors conducted extensive surveys and research to understand the behaviors and choices of self-made millionaires. One of the areas they explored was the type of cars these millionaires drove, and their findings were quite revealing.
Here’s what the research in “The Millionaire Next Door” discovered about the cars self-made millionaires drove:
- Most Drive Modest Cars: Contrary to the popular belief that millionaires drive luxury cars, the research found that most millionaires drove less expensive, domestic, or second-hand cars. Brands like Ford, Toyota, and Honda were more common than high-end luxury brands.
- They Buy Instead of Lease: Most millionaires in the study preferred to buy their cars outright rather than lease them. This aligns with their general aversion to taking on unnecessary debt.
- Older Models Over New: Many millionaires were found to drive older models and keep their cars for several years before replacing them. This reflects their frugal nature and understanding of the rapid depreciation that new cars undergo.
- Value Over Status: The choice of car for many millionaires was based on weight, reliability, and functionality rather than status. They often looked for vehicles that offered good value for money and would last long.
- Not Impulsive Buyers: The millionaires studied were not impulsive buyers. They took their time researching and often negotiated hard to get the best deals, reflecting their careful approach to spending and investing.
- Low Percentage of Income Spent on Cars: Another interesting finding was that millionaires, on average, spent a meager percentage of their income on cars. This contrasts sharply with many non-millionaires who often spend a significant portion of their income on a vehicle.
The research in “The Millionaire Next Door” shattered many stereotypes about the wealthy. It revealed that self-made millionaires often live below their means, prioritize value over luxury, and make financial decisions based on long-term benefits rather than short-term gratification. Their choices in cars are a clear reflection of these principles. People who become rich value their money and don’t waste it on luxury cars or the depreciation of new vehicles early in their journey to building wealth. These frugal habits stick with them for the majority of their life.
Avoiding Depreciation
Cars, especially the luxury kind, can depreciate rapidly. A brand-new car can lose a significant portion of its value when driven off the lot. For the financially savvy, this immediate loss in value is a deterrent from investing in luxury vehicles. Large car payments can destroy the ability to build wealth; people who stay buried in car debt and depreciation tend not to get rich in the first place.
Understated Lifestyle
Not every wealthy individual desires the spotlight. For some, driving a modest car is a conscious choice to maintain a low profile, avoiding the potential pitfalls and pressures that can come with overt displays of wealth. Most millionaires are undercover; you never even notice them. This is most true in the early stages of their wealth-building.
Practicality
Beyond the glitz and glamour, a car’s primary function is transportation. Some wealthy individuals prioritize functionality, reliability, and utility over luxury and aesthetics. The mega-rich prefer drivers and private jets over exotic cars. My son once asked me what my dream car was; I said, “Uber Black Car Service.” I don’t even want to drive.
Avoiding the “Keeping up with the Joneses” Trap
Lifestyle inflation is a genuine concern. As one’s income increases, so can expenses, often unnecessarily. By resisting the urge to upgrade constantly, many self-made millionaires ensure they don’t fall into the trap of living paycheck to paycheck despite a high income. Wealthy people don’t get rich by spending all their money on depreciating assets to impress their neighbors. This is a great way to divert your ability to build wealth with the habit of trying to drive the nicest car possible.
Emotional Attachment
For some, cars are more than just machines; they’re memory vessels. The car they’ve had since their first big break, or the one they drove on memorable family vacations, might hold sentimental value that no luxury car can replace.
Environmental Concerns
With growing awareness of environmental issues, some affluent individuals opt for vehicles with a smaller carbon footprint. This might mean choosing a fuel-efficient model or even an electric vehicle over a gas-guzzling luxury car.
Insurance and Maintenance Costs
Luxury cars often come with luxury maintenance bills and higher insurance premiums. For those who prioritize value and efficiency in spending, the ongoing costs associated with high-end vehicles can be a deterrent.
Setting an Example
Wealthy parents, in particular, might drive a modest car to set an example for their children. They aim to instill values of humility, frugality, and the idea that self-worth isn’t tied to material possessions.
Safety Concerns
High-end luxury cars can sometimes be magnets for unwanted attention, theft, or vandalism. Driving a more inconspicuous vehicle can be a strategic choice to avoid these risks.
Personal Values and Beliefs
Materialism isn’t universal. Regardless of their financial status, some individuals prioritize other aspects of life over luxury goods, choosing to invest in experiences, relationships, or philanthropy instead.
Cultural or Regional Norms
In certain cultures or regions, ostentatious displays of wealth might be frowned upon or even seen as disrespectful. In such places, even those with considerable means might opt for more modest vehicles to align with societal expectations.
Why Even Billionaires With Lavish Lifestyles Don’t Care About Cars
Even for the ultra-wealthy billionaires, flaunting luxury cars might seem trivial when they own assets like yachts or private jets. It’s like the average person boasting about a new bicycle when they already own a car. The benchmarks of luxury are different for them; while luxury cars might impress some, they pale compared to the allure of a private yacht. Beware of anyone trying to impress you with the car they own online. I have never seen an actual billionaire on social media trying to show off their personal car. They care about net worth and empire building, not the vehicle they own.
Key Takeaways
- Value-driven Choices: Many affluent individuals prioritize long-term value and practicality over short-lived luxury.
- Understated Wealth: Not all wealthy people feel the need to showcase their affluence through ostentatious displays.
- Asset Perspective: For the ultra-rich, luxury cars might seem insignificant compared to grander assets like yachts or private jets.
- Grounded Principles: Despite their immense resources, many wealthy figures remain rooted in their original, humble principles.
- Beyond Materialism: The true measure of wealth for many isn’t just material possessions but the values and philosophies they uphold.
Conclusion
The world of the wealthy is often misconstrued through a lens of extravagance and luxury. However, a deeper dive reveals that many affluent prioritize substance over show. Their vehicular choices, far from being mere modes of transport, symbolize a broader philosophy: that genuine value isn’t always found in the most lavish items but often in the most practical and meaningful ones.
The car one drives is often less about financial capability and more about personal choices, values, and circumstances. The next time you see someone driving a modest vehicle, remember: there might be more to their story than meets the eye.