Last week a reader suggested that a review of previous research on the topic of motor vehicle purchases by millionaires was in order. And I agree. In Table 4-1, Motor Vehicles of Millionaires: Model Year in The Millionaire Next Door, I mentioned that nearly 1 in 4 millionaires (23.5%) owns the latest model year vehicle. Some readers interpreted this as meaning that the balance, more than 75%, of the millionaire next doors drive used vehicles. This is not the case. Most of the respondents who owned vehicles which are 2, 3 . . . 6 or more years old purchased them as new. I detailed much of this discussion in an earlier blog which bears repeating.
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 USVP [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 acquisition 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.”