Generally speaking, wealthy individuals enjoy spending money on luxury items like jewelry, purchasing mansions in upscale communities, or splurging on membership fees for exclusive clubs, as well as indulging in luxurious trips abroad. However, some wealthy people are reluctant to buy luxury cars, but why is that?
Wealthy individuals not buying luxury cars is not due to price considerations, as their garages are unlikely to house cheap second-hand vehicles. Wealthy individuals often steer clear of high-end automobile brands and opt for reliable vehicles for their daily transportation needs.
Here are five reasons why wealthy people do not buy luxury cars, as compiled by the gobankingrates website, and some of these factors may come as a surprise.
When a new car leaves the dealership, its value depreciates significantly. Most wealthy individuals are not inclined to spend extra money on something that does not provide any returns.
Personal finance expert and owner of “Kriminil Trading,” Kevin Huffman, cited the “Kelly Bluebook” article stating that luxury cars depreciate by 20% in the first year.
“One of the main reasons wealthy individuals may avoid high-end luxury cars is the fast depreciation rate,” said David J. Greiner, former president of Greiner Buick GMC and current president of Greiner Law Corp. “Cars are generally not an investment that appreciates in value, with luxury models especially experiencing significant depreciation as soon as they leave the parking lot. Many wealthy individuals prioritize investments that maintain or increase in value.”
While it is understandable to own a luxury car for special occasions or entertainment purposes, driving a high-priced luxury car on busy highways is not a common sight. Similarly, using a luxury car to go to the local supermarket or run mundane errands is not necessary.
Derek DiManno, founding financial advisor of Flagship Asset Services, emphasized the importance of “practicality” as a significant factor.
“Although luxury cars offer status symbols, many people value functionality and value for money over flashy but impractical vehicles,” DiManno said. “They may opt for vehicles with outstanding performance, advanced technology, high reliability, and reasonable prices.”
Super-wealthy individuals focus on increasing their wealth through investments to yield substantial returns.
Greiner explained that most wealthy individuals tend to have an “investment mindset,” meaning that when they spend money, they expect future gains and returns.
“They may choose to allocate funds to assets like real estate or stocks rather than luxury cars,” Greiner pointed out. He noted that affluent customers purchasing high-end vehicles would opt for those that have higher resale values over time, or even vintage cars with potential for appreciation.
Another reason wealthy individuals forego buying luxury cars is that “they prefer a low-key lifestyle and avoid flaunting their wealth unnecessarily” to steer clear of unwanted attention.
Rhett Stubbendeck, CEO and founder of “Leverage Planning,” emphasized that maintaining a low profile is key for wealthy individuals.
“In times of economic uncertainty, showing off an expensive car could attract unnecessary attention,” he said.
Greiner revealed that affluent clients he has worked with “choose high-quality but not excessively extravagant vehicles because they prefer a more discreet lifestyle.”
“They are more interested in cars that provide luxury in terms of comfort and technology rather than just a brand,” he added.
Although extremely wealthy individuals can purchase almost anything they desire, unique experiences are not easily attained. That’s why they opt to spend money on luxurious global travels, thrilling adventures, or things that cannot be found in stores or dealerships.
“Wealthy individuals prefer to spend money on experiences rather than material possessions. They understand that memories or personal growth experiences gained from travel, hobbies, or educational pursuits may be more valuable than depreciable cars,” said Huffman.
“Wealthy individuals would rather invest in enriching experiences than in cars that will depreciate once parked on the driveway,” he concluded.