Which cars do rich people drive? A recent study found that the answer is: cheap cars, hands down. It’s worth asking, who’s driving your wealth around, you or the car dealer?
It might surprise you to learn that rich Americans, people who could pretty easily buy any make or model they like, tend to drive inexpensive cars. A study by car pricing site TrueCar found that eight of the 10 best-selling autos in the country’s 10 wealthiest ZIP codes averaged less than $40,000.
Even when it comes to luxury, which cars do rich people drive? Not the ones you might think.
The two outliers were luxury makes, Mercedes and BMW, but the models chosen were middle-of-the-line for each — the Mercedes E Class at less than $50,000 and the BMW X5 SUV at just over $56,000. Both models have higher-end versions that top six figures, fully loaded. And rich people avoid them. (How do you think they stay rich?)
Five of the top 10 cars bought by America’s richest are made by Honda or Toyota, and two of those models were the lower-priced Accord and Camry, models more commonly associated with grandmothers and starting-out college grads.
Knowing which cars rich people drive matters. The takeaway is clear: Your money should work for you, not for the salesperson. If you buy a car beyond your means and, worse, finance that pricey ride, you are throwing good money after bad.
Exactly the same thing happened during the housing boom. Far too many middle- and lower-income buyers threw borrowed money at real estate, then compounded the error with expensive upgrades throughout. Granite countertops, stainless-steel appliances, fancy pools and outdoor decks, usually bought with illusory home equity loans.
Very much the same thing happens on Wall Street. Constant TV advertising sells the idea of the upwardly mobile investor, the smart young thing (actually, a poorly paid model) sitting behind multiple computer screens, breezing through the trading day in a spacious, well-appointed home. A nice illusion.
Behind the fancy charts and blinking screens is a grinning salesman. Click, commission. Click, another. Keep on trading, he says with a smile, you can win this game.
In reality, you can’t. The research shows that nobody can, over time. The biggest and most well-run investment funds do not trade compulsively. They carefully watch costs. They manage risk by diversifying and rebalancing in an orderly fashion. They have, in short, an investment policy. Not a strategy, not a trade, but a serious, long-term plan.
Like the rich American in the paid-up Camry, they smile and glide by the fray trying to keep up appearances. Asking which cars do rich people drive, to them, is a silly question.
They know which cars, and they have the investment game in the bag, too. You should do the same.