Quiet Wealth: 4 Reasons Rich Drivers Often Skip Luxury Cars
Many luxury vehicles cost upwards of $100,000. Some luxury cars, like Bentleys, Lamborghinis or Ferraris, can cost even more. Given the exorbitant price tag, you wouldn't be alone thinking only the rich can afford these cars.
Of course, just because rich people can afford them, it doesn't mean they actually buy them. Many high-net-worth-individuals actually opt for more economical or understated cars like Toyotas or Hondas.
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If money's not an issue, then why do rich people still drive inexpensive cars? Here are the biggest reasons.
1. Depreciation
Cars depreciate over time, and pricier vehicles tend to depreciate even faster than others. This makes luxury cars a poor investment for those who would rather use their money on more meaningful things.
"The problem with cars is that they are a depreciating asset. That means when you put money into your cars, you are losing money," said Jay Zigmont, Ph.D., CFP and founder of Childfree Wealth. "Rather than putting money into fancy cars, many of my clients are investing in themselves and their amazing lives. For example, while my clients may have a simple car, they take amazing vacations."
2. Reliability
Just because a car is more expensive, that doesn't mean it's more reliable. Many luxury vehicles are built to last about the same amount of time as their nonluxury counterparts. Even this isn't a guarantee of safety, though.
What matters more than status or the price tag is, more often than not, how safe the vehicle is.
"Most of the millionaires I've worked with drive reasonable, unassuming cars," said Zigmont. "There are a lot of Toyotas and Acuras in rich people's garages. Their focus is on a reliable vehicle, not a showy one."
"Some wealthy individuals prioritize practicality and functionality over luxury," said Loretta Kilday, senior attorney and spokesperson for Debt Consolidation Care. "They opt for reliable, well-built cars that suit their lifestyle and transportation needs rather than flashy high-end vehicles."
3. Frugality
Not everyone who's rich was born with the proverbial silver spoon. Oftentimes, the path to gaining wealth starts with a frugal lifestyle.
"Many wealthy people became wealthy because they were frugal. They lived a lifestyle that allowed them to build wealth, even if they weren't making a lot of money. Even after someone becomes wealthy, they'll keep some frugal habits if they make sense," said Melanie Musson, finance expert with Clearsurance.
"It makes better financial sense to drive a reliable basic car than to pay five times the price or more for a luxury vehicle," she continued. "Luxury vehicles don't tend to last longer or retain value any better than an average car."
4. Different Priorities
Even if the money's technically there, many wealthy individuals prefer to invest it in other things.
"Some [rich people] prioritize financial prudence and long-term wealth accumulation over ostentatious displays of wealth," said Kilday. "Instead of spending money on expensive cars, wealthy individuals who choose to drive more modest vehicles [often] focus on building their investment portfolios."
"Wealthy people would often rather spend the difference in money on an appreciating asset," Musson added. "They may invest in artwork or other collections. They could invest in their home, because homes tend to appreciate."
Like anyone else, many rich people also prioritize their health or experiences over material possessions. If a buying a cheap vehicle means they have extra money for other, more fulfilling things, they're more likely to go with those over an extravagant vehicle.
But of course, everyone is different. What one person might prioritize could be completely the opposite of what someone else does.
"The key is to figure out what matters to you," said Zigmont. "If owning an expensive car is part of what makes your life amazing, do it. If not, focus on reliability and put the money into things you really care about."
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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