6 Reasons the Rich Don’t Buy Luxury Cars
The rich are known for spending their money on luxury. It might come in the form of mansions in desirable neighborhoods or on exotic trips in locations that only the uber-wealthy can afford. However, one thing the rich typically do not purchase in terms of luxury is cars.
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Why is that the case? It’s not like they couldn’t afford to have some name-brand automotives. Truly, the idea of a vehicle being too costly or overpriced wouldn’t be a factor in the equation. But they’re also not likely to have cheap, used cars parked in their garage. Typically, the rich avoid high-end car brands in favor of reliable vehicles to get around on everyday trips.
Here are six reasons the rich do not buy luxury cars. Some of them might surprise you.
Depreciating Asset
The rich know, as most of us do, that the second you drive a car off the lot, the value of the vehicle drops drastically. So why would the rich spend extra money on something that is not going to make them any in the long run?
Kevin Huffman, personal financial expert and owner of Kriminil Trading, cited a Kelley Blue Book article that stated luxury cars lose up to 20% of their value in the first year.
“Someone who has worked hard to build up wealth will want to hang on to their money for as long as possible, and losing 20% of it in the first year of driving a new car is not a good way of doing this,” Huffman said.
“One primary reason the affluent might shy away from high-end luxury cars is due to rapid depreciation,” said David J. Greiner, Esq., president of Greiner Law Corp. and former president of Greiner Buick GMC. “A car is not typically an investment that appreciates; it loses significant value, especially luxury models, the moment [it is] driven off the lot. Many wealthy individuals prioritize investments that hold or increase in value.”
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Practicality
Owning a luxury car is one thing if you take it out only for special occasions or for a fun reason. But how often are you planning on driving your high-priced vehicle on busy highways, to the local grocery store and just to do your daily errands? For the rich, it’s just not worth it.
“Practicality” is a big part of it, according to Derek DiManno, the founding financial advisor at Flagship Asset Services.
“While luxury cars [offer great] status symbols, many individuals prioritize functionality and value for money over flashy vehicles,” DiManno said. “They may opt for vehicles that offer superior performance, advanced technology and reliability without the hefty price tag associated with many of the luxury brands.”
Investment Mindset
The 1% are not thinking about losing money on a purchase like a car. Instead, they’re focused on growing their money with investments that will have a significant return.
Greiner explained that most of the wealthy tend to operate with an “investment mindset,” which means when they put their dollars into a purchase, they expect it to pay off down the road with increased value.
Instead of luxury cars, “they might choose to allocate funds towards assets like real estate or stocks,” Greiner said, noting that his wealthy clients who do purchase high-end vehicles choose ones that “maintain more of their value over time or even choose classic cars that have potential to appreciate.”
Subtle Status
Another reason for the wealthy to forgo the purchases of luxury vehicles is a “preference for subtlety and avoiding overt displays of wealth, which can attract unwanted attention or signal affluence in ways that some wealthy individuals are uncomfortable with,” Greiner said.
Staying under the radar is key for the rich, according to Rhett Stubbendeck, the CEO and founder of Leverage Planning. “In uncertain economic times, flashing a pricey car can draw unwanted attention,” Stubbendeck said.
Greiner said rich clients he has worked with “would choose high-quality but less flashy vehicles, as they preferred to keep a low profile.”
“They were more interested in vehicles that offered luxury in terms of comfort and technology rather than branding,” Greiner said.
Experiences Over Things
The rich can buy just about anything they like. What is a little bit harder to obtain is a truly one-of-a-kind experience. That’s why they’ll spend money on lavish trips around the globe, death-defying outings and just about anything else that can’t be found in a store — or at a dealership.
“The wealthy would rather spend their money on experiences than on things. They know that a memory or personal growth gained from travel, a hobby or an educational pursuit can be far more valuable than a depreciating car,” Huffman said. “The wealthy might rather spend their money on an enriching experience than on a car that will lose value on their driveway.”
EVs Are the Future
Old money looked to status symbols and signals that showcased their wealth, including but not limited to luxury cars. New money has its sights set on the years ahead, and when it comes to cars, the rich see electric vehicles as the wave of the future.
“Many of the wealthy are looking to the future, especially with the rise of electric vehicles … They’re often more fascinated by the latest tech innovations than traditional luxury,” Stubbendeck said.
“At Leverage, we’ve seen a shift where cutting-edge and eco-friendly features in vehicles like Teslas are becoming the new luxury standard,” he explained. “I’ve seen that while luxury cars might still catch some eyes, the practical and future-focused minds are looking elsewhere.”
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