Ranger X. Rich was profiled in an earlier blog. I met him “as we hiked out of the large parking lot adjacent to the wilderness area.” He was in the process of ticketing those who had not paid to park in the lot [under the honor system]. He believes in the “rich first system” when distributing tickets. He seeks out prestige makes of motor vehicles to ticket first because he thinks that rich people don’t pay taxes, they don’t pay to park. And Ranger Rich believes that rich people drive prestige makes of cars. But, as I pointed out in the blog and in Stop Acting Rich,
The median price paid by millionaires for their most recent acquisition was only $31,367. The typical price paid by decamillionaires was $41,997. . . . many millionaires drive so-called common, nonprestige makes of cars; . . . .
But what if Ranger Rich is like many people who define rich in terms of income instead of net worth? Certainly many drivers feel the need to display their socioeconomic achievements by acquiring prestige makes of motor vehicles. They may think that those who are successful in generating high incomes drive luxury brands. And correspondingly drivers of more common makes have dull normal income credentials. But the hard data suggest that the level of prestige of a car and the income of its driver are not anywhere near being perfect correlates. In fact, many drivers of luxury makes have neither the levels of income nor net worth which would qualify them as high economic achievers.
Along these lines, Joann Muller, writing for Forbes.com, poses “what the rich people really drive.” She defines rich people in terms of income, not net worth.
. . . the richest people were the most likely to buy luxury brands [39% for people with household income above $250,000 vs. 8% for those people who earn less than $100,000 a year].
. . .61% of people who earn $250,000 or more aren’t buying luxury brands at all.
Her analysis indicates that those households with high incomes are more likely to drive luxury cars. But just because someone is driving a luxury brand it does not necessarily mean that the driver has a high income or a high net worth, for that matter.
I estimate that there are 2.5 million households or nearly 2.2% of the total that have annual realized incomes of $250,000 or more. Using Ms. Muller’s estimates that 39% of “the rich” buy luxury brands, one can estimate the number who do so, approximately 975,000. Ah, but this population is much smaller than those households who drive prestige makes but have annual incomes under $100,000. About 30 million households have annual incomes in the $50,000 to under $100,000 bracket alone. Translated: 8% of 30 million = 2.4 million who are buying luxury cars but are not in the so-called “rich” category. This population is nearly 2.5 times the size of the high income/luxury vehicle buyer.
Could it be that it is the pseudo affluent, the aspirationals, who are keeping the manufacturers of prestige makes of motor vehicles in business?