Free Ebook.


« What to Do on a Home Final Walkthrough | Main | Avoid the Blame Game—Take Responsibility for Your Financial Affairs »

August 31, 2010

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

As a millionaire I have been using a company car the last 4 years which has been a BMW 525i and now, a Honda Accord. Interestingly enough where I live the BMW cost $105K and the Accord is $55k - excise taxes are very high! But personally speaking, it hasn't cost me a cent.

The wife drives a Honda City (slightly smaller than a Civic) that has just been paid off after 4 years on a low interest loan- no avoiding interest by paying early so we kept the payments going. That car cost $23K USD new.

I'd probably spend up to $50k for a used BMW if I was back in the USA.

-Mike

Well, later in the chapter that the above quote came from, Stanley reports that millionaires like Toyotas, specifically Camrys, Avalons, and Highlanders. Since you want an AWD crossover/SUV, I guess if you want to drive like a millionaire the Highlander is your ride.

Looks like there are some good Toyota deals out there right now (I assume to counteract pedalgate). Unfortunately, they all seem to be leases and low-rate financing.


I am looking at the same sort of purchase. So far I am leaning toward the Mazda CX-9. Bit less pricey than the Pilot, on our test drives we liked the ride and handling - it has a car based chassis, and our previous experience with Mazda's is very positive.

YMMV

Highlander.

I assume the average age of his millionaires next door are weighted to 65 or older where driving an expensive car is of little desire. The point is a good point and I agree. From my personal experience, its all over the board but many dont drive anything that is 50k+. Some own a lot of cars however. "Winter car, summer car" "Investment cars/Classics" "Daily car. Fun car."

I deal with cars a lot. One thing I know for sure, Cars are black holes of money.

Thanks for posting this. It reminds me of why I drive a 13 year old Jeep with 250K. Paid $1,600 for it 6 years ago. I however do all my own mechanic work, so rust is usually the only thing that makes me move on to another vehicle.

I do usually keep the wife in something newer and safer (more airbags. abs, etc.). Currently a Mazda3, been a great car, but the whole family thing (2 kids) has us shopping for a Honda Pilot. I was a highlander fan over the older Pilots, but the new Pilot re-design is nicer than the Highlander in my opinion. Either one is a good choice.

Go look at a Subaru Forester. You can get the premium with all weather package and all options for 24k. Its a great deal and a great car.

Good article. It definitely taps into a pervasive attitude of many Americans around cars and to a certain extent other consumer goods. I do property inspections as part of my job in commercial/multifamily real estate lending and I can't tell you how many times I've inspected really rough residential properties in rough areas in California where a tenant will be driving a new luxury car/SUV and live in a place that looks like it is going to fall down. Its hard to understand.

As for the vehicle decision, I just shopped for a Toyota. Was shopping for hte Highlander, loved it, have friends with them and they love them, but ended up with a Venza. The Venza is a crossover SUV based on the Camery and Highlander platforms. Its great. Its more sporty. Got it for a great price and great financing. Just a thought...

Ken --

I currently have a Forester and love it. But my kids are getting bigger and it's too small for all of us to travel in comfortably.

As a multi-millionaire I drive a 1991 black opal Mercedes 560SEL that looks like it just came out of the showroom. I love the classic body style and the feeling of security that a large, heavy, rear wheel drive car provides and also the acceleration of a 5.6 litre V8. My wife drives a 1998 artic white Mercedes C230, she really wanted a Honda Accord but I talked her out of it - I drive her car when she isn't using it. My previous car was a Honda Prelude. I think Honda makes great automobiles and in the past I have also owned two Civics and an Accord, all of which were troublefree with tight engines that never leaked oil. Being an ex Brit I always wanted a Jaguar but the story goes that you have to buy two because one is always in the shop - now Jaguar is owned by an Indian company and has lost its former appeal.

The two worst cars I have ever owned were a 1958 Buick Century with so much chrome that it looked more like a mobile juke box, it also had a Dynaflow infinitely variable transmission - DynaSlush would have been a more appropriate name. The other car we never liked was a 1974 Ford Maverick. The Buick cost me a small fortune in replacement parts and the Ford's engine tended to die when you stopped at traffic lights - very disconcerting - it also had a vinyl roof, what a disaster they turned out to be. My American car experiences came in the days when their plan was to sell you an inexpensive car but make money by using parts that were designed to rust out or fail after 2 or 3 years, just like American tires in those days. It took the French and the Japanese to show us that tires could last 50,000 miles.

If I were rich, I don't think I would necessarily want to advertise it by buying a Mercedes... But a good reliable car/SUV would be nice (Honda, Toyota or maybe even a Ford).

As for which auto to buy:

Honda Pilot, it's top ranked and looks much cooler than the new highlanders (they change the Toyota model and I don't like it anymore).

Toyota Highlander or Hyundai Santa Fe. :-)

I can't imagine spending more than $30,000 on any vehicle - I'd have panic attacks watching out for the ton of crappy drivers in Houston...

I'm personally looking into a small, fuel efficient car in the next few years - just waiting for my Chevy Aveo to die the slow death it's been working on. :-)

I own a 2004 Highlander and just purchased a 2010 Honda Pilot to replace a 1999 Camry Solara. We were looking for something with a 3rd row seat to cary friends and family together. We looked at both the Highlander and Pilot and the Pilot seemed much bigger inside than the Highlander. Riding 3 people in the 2nd seat is easy in the Pilot and looks somewhat challenged in the Highlander. 3rd row seat had better leg room in the Pilot too. I've had no problems with the 2004 highlander but just liked the feel of the new Pilot during test drives. We ended up getting a good deal on a Pilot back in March and jumped on it. Just hit 5000 miles and have had no problems. Other than recall I just received to reprogram sunroof computer :(

Used your tactic of getting quotes by e-mail first and got a great price.

Buy a Subaru Outback :)

I'd look at some of the new Ford vehicles - they've gotten a lot better in the last few years, and the quality they're putting out now is, at a minimum, on par with the Hondas and Toyotas.

I'm not a millionaire (yet) but do make a good income. My wife and I bought new (which I do not like, but she was more comfortable with a new car - we just had a baby at the time). We bought a 2009 Honda CRV - the base model 4-wheel drive. We negotiated the heck out of the deal (the KBB value is still over what we paid). We're happy and planning on holding onto the car for a while. It sounds like you want something bigger.

I was considering the Rav4, but didn't think the higher price was reflected with better-quality. So we chose the Honda.

I do hear good things about Ford these days, so maybe consider those too.

You also may want to consider RENTING each of them for a couple of days. It's a fairly cheap way to have a good test drive on your streets and living your life.

Good luck!

Get a Lexus RX (this is just a fancy Highlander). I owned one (purchased used of course) and LOVED it. Sold it only to accomadate a larger family. Purchased a Honda Pilot (used) and have found it to be reliable and practical thus far.

I've got 2 kids and a 2008 Honda CRV. It's basically a station wagon, but more fun to drive. I looked at the Pilot but decided it was much bigger than I needed.

Some American cars "might" now be almost as good quality as the traditional solid vendors like Honda, Toyota etc, but my view is, why risk it? I live in an area of the country where if your car breaks down you might freeze to death. So my priority is reliability.

I own a 2007 GMC Acadia and, while it did have a few first model year jitters, I have still loved the look and the ride. $32 - $36k now I believe.

I rented a Ford Flex about a year ago to drive to Memphis. I was blown away by the amount of interior room (held 5 of us very comfotably) and the ride. Will be on my next "check out" list.

Take a look at the Toyota RAV 4. Depending on how many kidlets you have, that is. It has room for several passengers and it will carry plenty of cargo. Gas mileage is in the more or less acceptable range.

Moi...traded the Mercedes in on a Camry. For city driving, the two are more than comparable, except that retailers don't raise the prices when they see you pull up in front of the store. On the open road, the Camry doesn't accelerate from 60 mph the way a Mercedes will. But if you drive that way, you probably won't live long enough to enjoy it, anyway. ;-)

Factors that seem to make a big difference are "where you live", "your age group" and "your marriage status". The first involves the climate and the type of area in which you live, the second is often related to the image you want to project, and the third has to do with the practical aspects of transportation.

The most popular and admired automobile in the young, hi-tech community in Silicon Valley is without any doubt the BMW, in the older hi-tech community it is the Mercedes, and for practical transportation needs it is an SUV, and it doesn't seem to matter which one. In the "where you live" category, if you drive into the most affluent neighborhoods, it's almost all BMWs and Mercedes with Lexus the runner up. Most people that travel the 250 miles to the Sierras in the winter for skiing have a 4 wheel drive vehicle for hauling the whole family back and forth, and avoiding the use of chains. In our case, now in our mid seventies, our cars never leave the valley any more and we are never on the freeways after dark - there's just too many drunks and crazy drivers out there after the clubs and concerts close and the traffic is a lot heavier than 20-30 years ago. For our long vacation trips we take a shuttle to the airport. For day trips we go with a senior group by motor coach.

Personally, I'm with you on buying a new car and keeping it longer. I know it makes better financial sense to buy a certified used vehicle, but my first car was a used Toyota Corolla and it was a LEMON. It was under factory warranty and they tried to solve the mechanical problems, but never did.

Good luck with your search. We have a Toyota Highlander now, but the Honda Pilot or Buick Enclave have more space.

I would go with the Buick Enclave or GMC version of it.

I recently purchased a used 2008 Ford Escape. The price was right (less than KBB)and it has been a great car for us so far. It is awesome in the snow and ice. It is small. Probably too small if we had more than one kid and wanted to take a road trip. Around town the size is perfect. Gets decent mileage too.

I don't know if it's available in AWD, but we bought a Ford Flex and we love it. Handles very nicely and very roomy. Gas mileage isn't great in the city, but we get 22 mpg on the highway - which isn't bad for a 7 passenger vehicle.

We buy new Toyotas every 7-10 years; we always own two cars and stagger the buying. We hope to continue this practice, as all our cars have been trouble-free. We also are extremely lucky to have had an excellent mechanic to do routine maintenance. I have never had to take cars to dealers for any reason and like it that way.

Another Pilot owner. A low mileage we bought about 18 months ago (used for us), and so far - 20k miles for us and 50k overall - I don't have any complaints about it.

As Old Limey noted, cars have become much more reliable in the last 50 years. For this reason, I like to buy a car with around 60,000 miles on it, in excellent condition, and run it another 60K or so. The only times this hasn't worked out were when I was assigned overseas or the vehicle was destroyed by flood or accident.

I have only ever paid cash for my vehicles, so my budget has grown over the years - from $1000 per vehicle in 1985 to $25,000 per vehicle today.

Any time I have set out to buy a car, I have had a dollar figure in mind, and have ALWAYS felt I got better value by buying a used vehicle. When my budget was $1000 there was no new-car option, but at $25,000 I have the choice between a rather average new vehicle and a spectacular used one.

I paid attention to reliability statistics from sources such as Consumer Reports, and have mostly bought Toyotas. I have only broken down once in 25 years of driving - and that was when I ran out of gas, which is an inexcusable dumb-ass thing to do.

I read once that only the wealthy can afford to buy a used vehicle, and I think that is because many people cannot manage the risk of laying out occasional large sums for repairs, so would rather pay far more in regular monthly payments.

Those who assume most Lexus, BMW, Mercedes drivers are not wealthy - you may be right. But some of us are - and frugal too! Our two current vehicles are a 2007 Lexus RX 350 with 45K miles, and a 2006 Lexus SC430 with 80K. Each cost around $25,000 when we bought them.

To FMF: I still don't "get" your insistence on a new car. For a guy who haggles over his monthly cable bill, I see a major inconsistency. But - if you insist on going new, then either of your choices (Toyota or Honda) are great.

I would buy a Viper, because they are not on every corner.

But I like fast cars. And loud music. And money.

So I suppose it depends not on how much money you have, but how you came to have it.

If you plodded and saved and followed the rules and woke up 70 and rich...well you might think one way.

If you inherited it, or won it, you might think another.

If you worked your ass off for it, took risks, and took the unconventional route and actually did something impressive that most others could not mimic, then you might think even another way.

I would buy the vehicle that excites you the most, because being excited is one of the most important emotions you can have, more so than security, or safety, or reasonoability.

What excites you.

That's an awful lot of winking and smiling for one article. ;)

Bought a 2009 Honda Pilot last month and love it. 3rd row seating, 4500 lb towing capacity, 250hp, V6, 252 ft lb torque, seats 8, all seats fold down flat if necessary to give you huge cargo space. Drives real smooth. Gotta go with the 2009 or later model though!

"3. I thought people reading the Wall Street Journal were smarter than that. $75k? Yikes!!!"

Perhaps a better conclusion is that readers of the Wall Street Journal (if the survey by the WSJ was in fact of readers and not a random sample of the population) don't consider those with a net worth around $1 mil as being "rich". Considering the cost of living in many areas of the country, a $1 mil net worth means little more than owning one's own home, if that, nowadays. A couple approaching retirement with a net worth of $1 million might be able to withdraw ~$40,000 a year for the rest of their life, a comfortable, but not exactly extravagant sum that one associates typically associates with being "rich".

"The Wall Street Journal found that 35% believed that in order to qualify as being rich a person must drive a car that costs $75,000 or more. If I applied this $75,000 threshold to the millionaires whom I surveyed, more than 90% would fail to qualify."

Nope. You're comparing apples and oranges. The median price paid for the most recent motor vehicle purchased by a millionaire is not the same as the median price of millionaires' most expensive cars! The rich can (and do) drive several cars, and just because Mr. Money Bags' most recent purchase was a BMW 1 series for his daughter or a safe Toyota minivan for the kids, it doesn't mean he doesn't also have a 7 series or a 911 Turbo in his garage for himself! It's unfair to assume that millionaire's most recent car purchase price is the price of the most expensive vehicle in their garage.

Considering this, it's quite plausible that a large portion of whom the general populace considers "rich" do indeed drive a car which costs (or cost) more than $75,000.

We shopped for a car in the same segment as you two years ago (3 row SUV, AWD), and we ended up in a Ford Taurus X (now supplanted by the Ford Flex). Ford's quality has been consistently high over the past decade, surpassing Toyota in some measures. I found that the Highlander had three things going against it. First was that you can only fold the entire third row as a whole. You couldn't fold half of it. This greatly reduced the ultility for us. Second was that there was little room behind the third row. This means that with all the seats in use, there wasn't much cargo room. Also, in case of a rear collision, there isn't much safety margin so to speak. Third is that it didn't seem as roomy in the second and third rows.

Shopped the Pilot and the Acadia, too. I didn't like the way the Pilot drove. It seemed too truck like and not as nimble as others. At the time the Acadia was new and I am always leary of buying a car in its first model year. Also, I found it to by kind of pricey compared to other models.

The Taurus X had a good, car-like ride, plenty of room and flexibility, and the price was reasonable compared to others.

Your question "should I buy, a Honda Pilot, Toyota Highlander, or something else?"

I hope you're joking! As a fellow Michigander driving anything other than a GM or Ford would be sinful. Toyota and Honda are just overpriced foreign crap :p

@Michael: I hope you are joking! As a fellow American, buying a GM or a Chrysler would be even more sinful. Another post here talks of responsibility and not being a victim. Why would I support a company that failed to take responsibiliy for decades of terrible mismanagement, but instead went cap-in-hand to the government for a bailout?

Just stirring the pot :)

As a multi-millionaire with zero debt, I subscribe to the theory of buying a new good, safe reliable vehicle every 9 or ten years. I always pay cash for my vehicles and don't believe in leasing (almost as bad as paying someone interest on an auto loan). I don't really like the idea of buying used cars unless you can get a great deal on a very low mileage vehicle, preferably from a private party. The vehicle I drive is an Acura MDX. I am very happy with it despite the fact that it tends to be a gas hog. I have owned a few American cars in the past but my experience was so bad that I will almost certainly never own another one. The last debacle was a 2005 Dodge Caravan. It was very useful and a decent vehicle for about 4 years of minimal usage. Then everything began to break. Every month or two, we found ourselves putting at least $500 into repairs of all sorts. So much for "buy American" although I might be tempted to buy a Ford at some point in the future based on how that company has apparently focused on quality. Nice looking vehicles also.

Many previous posts are correct in that vehicle ownership, unless you're a collector of classic cars, certainly shouldn't be considered an investment. It's an expense just like paying your utility or grocery bill. By the way, the overall key to attaining some reasonable degrees of wealth, aside from inheriting it, is to spend less than you make, invest conservatively, shop smartly, and always be a bit of a tight ass. The worst thing to do, which seems to be the American way, is to ratchet yourself into debt, specifically credit card debt. Now that the real estate market is defunct, the average American has nowhere to turn in order to pay off his/her credit card debt.

By the way, Troy (above) sounds like kind of a dork. Anybody agree?

Michael --

As soon as GM or Ford develop a vehicle as reliable as the Highlander or Pilot and similar to them in style, performance, size, etc., I'll consider it.

@JMike and FMF: I would be very interested in knowing why you like to buy new cars. I understand that many Americans like zero-interest financing, leasing, etc., and can't do basic financial calculations, but you don't fit that profile.

Do you think it is financially advantageous, safer, more reliable, or do you like the latest features? Or do you just not like the idea of sitting on the same seat as some sweaty unknown previous owner :)

Mark --

I've detailed my reasons in posts here and there in the past, but the issues come down to:

1. I like having a new car that no one esle has driven (and I know there aren't hidden problems).

2. I can afford it (I pay cash.)

3. Reliability is a big key for me. There's lots of time/hassle/cost associated with repairs that I don't want to have to deal with.

4. I don't want to take the time/effort/cost to check out several used cars through mechanics to make sure they are in good shape for purchase.

FMF -- I am fascinated, because we obviously have very different assessments of the risk and how we value our time.

On 1: It's certainly true that no-one else could have damaged the new vehicle due to driving habits or poor maintenance. I always ask the owner if they have maintenance records before I even go see the vehicle. If not, I don't even spend the time to see it. Hidden problems often show up in new cars as well, though, so you're not quite home free. A "new-enough" used car will still be under warranty, so you have the same protection in both cases. If you find a vehicle that has been dealer-serviced, the entire maintenance and repair record will be available online and you can ask the owner to send you a screenshot of that.

On 2: The fact that you can afford to pay cash actually makes a used car an even better deal for you. You are not dependent on incentives and low-interest financing to make the deal look good.

Your last two points are the two that surprise me most because you strike me as the type of person who is prepared to spend a little time to save money.

On 3: The dollar cost of repairs is bound to be far less than the additional cost of buying new versus used. (A 2010 Corolla costs $16000 versus a 2007 at $9000 - I can buy a lot of repairs for $8000!)

The time and hassle clearly depend on how you value your time, and on the number of repairs. Many people vastly over-estimate the amount of repair required on an inspected, recent-year used vehicle.

On 4: You will probably only take ONE vehicle for inspection. If you test-drive it, and follow one of the basic checklists yourself (takes less than 30 minutes), you will eliminate the real dogs. Your mechanic is really only checking for hidden defects. Even if I have to take 3 days, and pay for three inspections, I am prepared to do it to save a few thousand dollars.

Mark-

Very well said. I'm a huge believer in used cars. However, I'm much more educated on cars and their maint than the average car shopper. Simply because I'm very interested and enjoy the subject.

FMF
I know you have narrowed your search to the Pilot and Highlander, but I have to recomend the Chevy Equinox. It's worth taking a look at it. GM and Ford are making very high quality vehicles which in some cases surpass their Japanese competition.

Response to Mark's Question,

I would be hard pressed to even convince myself that it is financially advantageous to buy new cars. I rationalize the economic impact however by keeping my vehicles for approximately 10 years. This way, the steep part of the depreciation curve only occurs once every ten years as opposed to three times during that period for someone who bought a new car every 3 years. And yes, I do enjoy the new technological features every ten years. I also try to keep my cars in near "showroom condition" to prolong the period where I feel like I'm driving a new car. I have learned however that keeping a car in almost mint condition has a very small impact on the selling price at the end of ten years. Even low mileage has only a small impact vs nominal mileage. The car's condition and low mileage do however make selling it a much faster process.

Been driving a 1995 Acura Integra since 1998. It still corners better than everything else I've ever driven. With a new baby, we just traded in my wife's 1999 Escort for a 2004 Honda CR-V.

We are not millionaires, but hope to be 6-figure-aires by the end of the year. For us, the 2004 new-to-us car is great.

I've never spent more than $12,750 on a car. I'll buy a new vehicle when the mortgage is paid off and retirement is fully funded, but not before then.

At that point, I will find the nicest hybrid/electric/high MPG vehicle that can comfortably take a family of four on a week's vacation.

Well, between the Pilot and Highlander, I'd go Highlander.

Other than those two, I'd consider the Nissan Murano (good potential for better discounts, and it was just voted as one the lowest stolen vehicles of 2009-2010) or Nissan Pathfiner (an established model where they've worked out the kinks).

I'd also take a closer look at the new Jeep Grand Cherokee. I'm not a Chrysler fan, but it is based on a Mercedes platform, so hopefully there's a greater potential for good reliability.

Funny, I live in Michigan and have worked for 2 of the big 3.
my family has had two very bad experiences with Ford, so the last car I bought was a Hyundai Santa Fe. I will have to be honest, I would like to buy a GM for my next car, but my Hyundai is running without any problems that I will really have to think about it. I can tell you that I will most certainly not buy a Ford ever again. Both cars were in the shop longer than they were on the road, and believe me, an unreliable car make it more difficult to reach one's net worth goals.

Friend of mine just bought a 1 yr old Subaru Tribeca, it's a mid-sized SUV. We drove it 1800 miles from NY to TX in 30 hours. Pretty nice ride!

Not having a car payment adds so much flexibility in my budget. 200-300 dollars that I can use as my "splurge" money, invest, or pay off debt with. Driving beat up old cars FTW!

For those of you still reading this, I drove both the Highlander and Pilot this past weekend.

The Highlander had more "zip" but the second row doesn't really seat three people (at least very comfortably/securely -- the center section can be removes -- do you want to sit on that?).

The Pilot was nicer, but also bigger (it was a tight fit in our garage) and the ride wasn't as smooth.

So I'm going to look at the new Forester tonight. I currently own one (and love it, BTW). It's not as big of a vehicle as we'd like, but it may be the best alternative we have.

Stay tuned.

Until five years ago, I drove a 1992 Honda Accord that I dearly loved for almost a decade. I teared up a bit in late 2005 when I was in a fender bender that 'totaled' it. I could afford a payment on a new car, but I simply didn't want one! My friends were all driving new BMWs and Lexuses (leased, of course) but I was happy in my '92 Accord EX with 286,000 miles on the clock!

On a related note, I have always been a huge fan of country music superstar Martina McBride (you know her from the SunnyD commercials if not from one of her countless hits over the last 18 years). Imagine my surprise when I read an interview with her in a magazine back in 2004 and they asked her what kind of car she drives. Her answer- a 1992 Honda Accord that she and her husband bought to celebrate her debut album and contract with RCA. Despite selling millions and millions of albums, she still drove that Honda. Then a few weeks ago, my mom called me after seeing her interviewed on a morning show...to tell me that she is still driving that 1992 Honda Accord to this day! She said she loves how it drives and it's been paid off all these years, buying another car didn't make sense! She also said that they just had to pay to have the transmission replaced, so she plans to keep driving it at least another decade or so!

She is one celebrity that will always have her millions, long after she retires!

The comments to this entry are closed.

Enter your email address:

Delivered by FeedBurner

Disclaimer


  • Any information shared on Free Money Finance does not constitute financial advice. The Website is intended to provide general information only and does not attempt to give you advice that relates to your specific circumstances. You are advised to discuss your specific requirements with an independent financial adviser. Per FTC guidelines, this website may be compensated by companies mentioned through advertising, affiliate programs or otherwise. All posts are © 2005-2012, Free Money Finance.

Stats