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Millionaire Next Door Myth #4: Used Cars

By Thomas J. Stanley on Feb 28th, 2012 in Studying the Wealthy

Over time the facts and words found in The Millionaire Next Door sometimes get twisted.  It is a myth that most millionaire next door types only buy used cars.  In fact, for every one millionaire that is used vehicle prone there are two who tend to buy new vehicles.   Yet I am often asked why I devoted so much “ink” to this minority segment.  Within the used vehicle prone segment, there are two subsegments.  One, the most illuminating, is the UVPS [used vehicle prone shopper] which makes up about 20% of the total millionaire next door population. 


When asked how he gets a “good deal” when acquiring a motor vehicle, the UVPS’s number one response is “buying used cars via aggressive shopping among private owners, dealers, leasing companies, etc.”  But there is much more to this story than just the acquisiton of motor vehicles.  The UVPS segment represents literally hundreds of productive habits, financial lifestyle patterns, and attitudes.


In fact, the UVPS segment is more productive in transforming income into wealth than any of the other vehicle acquisition groups among the millionaire population.  Interestingly its members are more likely than the norm to have incomes under six figures.  Most households in America will never generate a high income.  Of course income is a correlate of net worth.  But understanding this the UVPS members are determined to accumulate wealth via playing great financial defense, stretching their dollars of income in the most productive manners.  For example, they spend less than 65% for their motor vehicles than is the norm for the other millionaire types. 


The UVPS types are well integrated into their residential communities.  This is a key factor in explaining their orientation towards selecting suppliers.  They live by the rule that:


The most economically productive people patronage the best suppliers of services.


The hallmark of this segment is its tendency to use high grade, locally owned independent repair shops for maintenaince, repairs, and evaluation of prospective vehicle purchases.  As an important side note, UVPS segment also patronizes the top local/mom-pop appliance dealers and repair services, plumbers, electricians, roofers, etc.  These suppliers charge less than more conventional service types.  They consistently receive the highest evaluations for quality and integrity from the UVPS segment. 


When interviewing UVPS respondents about automobile servicing often they say, “I only deal with Butch” or “Sal is the one.”  The Butches and the Sals are not easy to find.  Or as one respondent told me, “just before you enter the village you will come to the light at the 4-way and you will see on your right a narrow alley between two old brick buildings.  Drive in the back, take a hard left; there you’ll see garage door openings, cars everywhere!  Ask for Sal.  Don’t be fooled by his appearance or the decor.  He’s the best mechanic around.”

10 responses to “Millionaire Next Door Myth #4: Used Cars”

  1. Bo says:

    I would be interested in seeing how long millionaires hang on to their vehicles. I don’t remember seeing that data in the past.

  2. Del says:

    I’ve got to wonder the root of why so many people distort and twist the information.

  3. Tim Rosanelli says:

    I am definitely Used Car Shopping Prone. I’ve never owned a new car. Since the car is older, cost associated with insurance is lower too. My last car, we paid $1500, drove it for seven years, and drove it 150,000 miles. That means it cost us 1 cents per mile. You can’t beat a deal like that.

  4. CJ says:

    Dr. Stanley. Have you ever given thought to spending more time explaining the habits of those who earn less than six figures who have accumulated the million dollar wealth threshold? For example, provide the detailed steps that those who are “buying used cars via aggressive shopping among private owners, dealers, leasing companies, etc.” as well as other thoughts and habits.

    • jake says:

      very easy. compound interest. if you save 2000 a year at 12 percent interest for like 40 years you will have about a million dollars. so if every 20 year old kid would put away 2000 a year till they were 60…

  5. Chris says:

    I recall reading in The Millionaire Next Door about the car buying habits of millionaires. We all can agree that they aren’t splurging on Porsches and Range Rovers, but spending a little more and buying a used Mercedes Benz E-class and keeping it for 10-15 years and 200,000+ miles is not unusual. Of course you don’t need a well-made Mercedes to reach 200,000 miles – I know people with a Toyota, Honda, Lexus, Acura, and a GMC Yukon with more than 200K or almost 300K miles.

    The fact is that today’s modern or late-model cars are much better made than cars of the 80s and 90s. Buying a well-maintained vehicle for less than $15,000 in cash with close to 100K miles on it is not out of the question for me.

  6. Howard Roark says:

    CJ (February 29), In my case my net worth ten years ago was $250,000 and is now $1,400,000. I did not follow the Millionaire Next Door book recipe of low income, high net worth. I found a niche in my career by doing the same technical work I did before but doubling, at times tripling, my income since 2000. I earn in the six figures and at times earned above $200,000 a few years ago. With that, I determined I could not only save more money, but lower my risk. In my past while earning $65,000 per year my investments were 100% in stock mutual funds. Now I still invest in stocks, but since doubling my income in 2000 I also bought savings bonds, municipal bonds, and gold bullion. I reason that my asset allocation (provided I rebalance annually) will earn me an average 7.8% per year in the long run. So high income and lower the beta (fluctuation in the balance of my portfolio) by diversifying the investment and rebalancing – the two add up to how I got where I currently am.

  7. Terry says:

    I drove a Honda and a Toyota until I was debt free. Then I saved and bought a new Honda Van and a new BMW convertible. I usually keep the Honda’s for 100,000 miles and the BMW until they are within 5,000 miles of going out of warranty. Honda’s are cheap to fix. The German cars with active headlights etc are just too expensive to maintain outside of warranty. 🙂

  8. trucker says:

    I’ve never bought a new car in my life, however, most of my big rigs I’ve bought new (but for different reasons) and that’s turned out fine. The trick has always been to hire folks that take care of your stuff.

    My personal pickup (never owned a car, sorry) is almost 14 years old and still going strong. It was 3 years old when I got it to replace another truck that was almost 20 years old. I like that fact that I can go to any dealership in the country and pay cash for whatever I’d like but I’m not about to do that. I’ll let someone else eat the depreciation first.

  9. Greg says:

    I think the key is to live well below your means and invest the delta, regardless of what car you can drive. You could buy a new car every 5 years and still live well below you means. You could also buy a used car every fifteen years and live well below your means. Everyone’s situation is different and different options have different value to different end users. For some, buying new means getting the state of the art safety technology, that can often only be had in a new car, but buying that new car means holding it for a longer period, and a higher residual value at exit. The opportunity cost of buying the new car means less cash to invest today, and therefore foregone returns. But for many, the additional safety factor outweighs the forgone return (unless your MMM and you bother to calculate the additional safety factor times your expected age of death, and how many additional days of life this additional safety may “buy” you), but MMM also puts a cost to things like owning a dog. Many of us know that while you can try to put a price on everything, some things just can’t be valued in dollars and cents – such as owning a dog. I’m pretty sure MasterCard figured this out when they said “…For everything else there’s MasterCard.”

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