We recently sold our family’s mainstay, a 1997 Toyota 4 Runner 4 X 4. I bought the car new as a reward, a merit badge, in recognition of The Millionaire Next Door hitting No. 1 on The New York Times Bestseller List. The car was like a good friend; it never let our family down. Even though it had 180,000 miles on it, everything worked. The paint was still nearly perfect.
We were surprised with the large number of prospective buyers who contacted us shortly after it was listed on the internet. Private sales, person-to-person, of motor vehicles are growing. It is no wonder. According to Automotive News, the average profit per vehicle that dealers made from a used car sale was $2,269 for the first five months of this year.
Two of the potential buyers are worthy of discussion here. Prospective buyer #1 was male, age 36, married, father of 3. He and his wife both work full time. The couple was in the process of discarding the two late model vehicles which they currently owned. Why were these people interested in buying a 13 year old, $5,000 used Toyota? It was not because they were in dire financial straits nor were they depressed about the prospects of “downsizing.” As the young man explained he and his wife had good paying jobs, but they were on a treadmill making loan payments including one on each vehicle. At the end of each month after paying all their bills, they had little or nothing left to invest. They couple was determined to become financially independent. Selling their two expensive vehicles and investing the more than $30,000 in equity that they would receive was a start. According to the couple the encouragement and method for doing this came from Dave Ramsey’s Financial Peace University program they attended at their church.
Prospective buyer #2 was a male, age 26, engaged, who had just sold his late model, fully loaded pick-up truck. He walked away with over $20,000 equity in the truck that he wanted to enhance his nest egg for his upcoming marriage. He was a civil servant for the federal government and a moonlighter [income producing student housing business]. He felt that in the small college town where he lived he could get all or most of his money back on the ’97 4 Runner even if he sold it in two years.
Prospective buyer #2 bought the car within 5 minutes of seeing it. The first prospective buyer did not buy the car because he wanted a 7 passenger SUV for carpooling use and he bought one.
Not all people who “trade down” like the these two buyers feel ego deflated or encounter loss of self esteem. Those who plan to build wealth by downsizing and investing actually encounter enhanced pride and new confidence. It is all part of taking control of our life and not being controlled by consumption and the hyper use of credit. It took billions in advertising and marketing dollars to convince us that happiness and self esteem can be purchased in stores with loans and credit cards. And such beliefs cannot be changed overnight. It is important to have a mentor who can help you change and then guide you to financial freedom.