As undoubtedly will many of you guys.......

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Frugal Millionaire with a Mercedes? I

Posted on November 2nd, 2010

Motor vehicles today are more expensive than ever. You would think that it would be just the opposite since the economy is currently floundering. In 2006 Americans purchased approximately 16M new passenger vehicles. But not this year. Now it is more like 10-12M. Manufacturers have significantly reduced their production so there are fewer "leftovers" and other traditional bargain offerings. In fact, the dealer margin, not necessarily the msfp, on new cars now is higher than I can ever remember. Plus, most new car dealers don't have enough used cars to meet demand. Correspondingly the prices of both used and new cars have significantly increased over the past two years.

It is always important to be frugal when making a car purchase. In The Millionaire Next Door, four types of millionaire car buyers were profiled [pp. 109-139]. I believe that this discussion is more relevant today than ever. Of the four types of buyers, one stands out as the most frugal and most productive in transforming dollars of income into dollars of wealth. On average their latest motor vehicle purchase represented less than 0.7% of their net worth. This group is referred to as the "used vehicle-prone shoppers." Its members buy only used cars and/or are aggressive shoppers of vehicles offered by individuals as well as a variety of dealers, leasing companies, financial institutions, consignment companies, auction companies and agents, Internet listing sites such as Craigslist, etc.

Used vehicle-prone shoppers are extremely patient people. They are the most likely of all millionaire car buyers to take months to find the best overall deal. They never seem to be in a hurry to buy. In some ways, they are always looking for a deal. They are in a semi-searching/buying state all the time.

I recently received an e-mail from an engineering professor who is a used vehicle-prone shopper and is a multi millionaire next door type.
"I'm an outlier. . . about millionaires next door driving luxury cars. I drive a Mercedes Benz diesel. Did not buy it new. . .

As a college student I was hitchhiking around Europe. In Germany a fellow with a diesel Mercedes Benz gave me a ride on the autobahn at 200 k per hour. I loved the car and decided that I would own one someday. But from 1988 to 2008, I drove a 1981 Buick that was a hand me down from my uncle. Still ran well but was becoming impossible to find parts. . . .

I started looking for a car on our local Craigslist website. I kept coming back to a 1980 diesel Mercedes 300SD sedan. The owner wanted $5,000 in August of 2008. It did not sell. He kept listing it at lower prices. It still did not sell. By January of 2009, it was listed for $2,000 or best offer."

Footnote: in Stop Acting Rich, millionaires (those with investments of $1M or more) paid the equivalent of only 1.4% of their investments for the motor vehicle they most recently purchased.

- Thomas J. Stanley, PhD

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'06 E320 CDI
'17 Corvette Stingray Vert

Hes an engineering professor, thats why

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1981 300SD 512k OM603

FOR ANYONE THAT DIDN'T SEE/READ PART I OF THE 80 300SD MERCEDES-MILLIONAIRE........

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'06 E320 CDI
'17 Corvette Stingray Vert

Meh, not surprising. Although buying new and keeping it until it gets junked is the best way to do it. This way the previous owner doesn't get a chance to screw it up. My dentist does that, right now he has owned his 2000 S430 since it was new, in a few years he will probably buy a new SL as a daily and turn the S430 into his boat car/beater.

My friends dad does this with Lexus, he buys new and drives them until 250k-300k miles and donates or junks them. He just junked his wife's Honda Odyssey, 260k miles and the 3rd trans was starting to go south, it wasn't worth another 3k rebuild.

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2006 CL500
1969 280SE
2023 Ram 1500
2026 Genesis GV70
2007 Tiara 3200

What the "HIGH-ROLLERS" ignore is the beating the vehicle takes in it's first 3 years. There's NO way to get around throwing tens of thousands of dollars in money away.

Further, those dollars can never ever be recouped. Balance sheet millionaires can afford to throw that kind of money away without repercussion - if they're really net worth millionaires, that is. Many are not....they just "act rich," totally basing their new automobile purchase on being; "income affluent," not "balance sheet affluent."

Just like nearly everyone else (almost 9 out of 10 people) driving a newish Mercedes.....are not balance sheet millionaires...

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'06 E320 CDI
'17 Corvette Stingray Vert

No these people have a lot of money. If you buy an older car you don't get the big initial write off which is nice, plus its an old car. Not everyone is willing to put up with driving one, more so if you can easily afford a new one.


Its all relative, my uncle just spent $20k on faucets for his new beach house, which he will only occupy ohh 6-8 months out of the year at best. Whats $20k, that won't even cover the property taxes. Nice faucets though, they are hand made in Italy. So whats a $60k MB? That's $30k in plumbing fixtures (nice toilets!) and some appliances.

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2006 CL500
1969 280SE
2023 Ram 1500
2026 Genesis GV70
2007 Tiara 3200

I'm just not impressed with high income / big spender individuals anymore. I haven't been since 21 years old. I outgrew it.

I'm enamoured with how individuals accrue high net worth, $1M+.

Not even remotely interested with how an income affluent individual of any age runs through money, how they spend it on second homes, bathrooms, toys, or silly new cars. Any 16 or 18 yr. old can do that.....

A multi-millionaire net worther that stays at Motel 6es in Florida, or drives a 28 yr. old MB diesel - now that's the type of individual you're likely to learn something valuable from....

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'06 E320 CDI
'17 Corvette Stingray Vert

They are decamillionaires.

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2006 CL500
1969 280SE
2023 Ram 1500
2026 Genesis GV70
2007 Tiara 3200

I bet there are quite a few millionaires on this forum.

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Ben
1987 190d 2.5Turbo

Do you admire this behavior? To me, it's fairly disingenuous. A man who prides himself on his keen investment acumen fails to properly protect his most valuable investment - himself.

In 2008, the average three-year-old car on the road contained a raft of safety improvements that would make even the largest 1981 Buick seem a veritable death trap in comparison. Front and side-impact airbags, ABS, electronic stability control and halogen and HID headlights were nowhere to be found on the LeSabre or Electra 225 option list for 1981.

I recall a few years ago when a prominent businessman in my area was killed in a relatively low-speed accident in his early-Eighties Fleetwood Brougham. It was a one-vehicle head-on collision in which he suffered head injuries that probably would have been mitigated by an airbag - if his car had been equipped with one. No doubt his beneficiaries received an incrementally higher distribution of the estate proceeds due to his ill-conceived frugality. He found out the hard way that you can't take it with you.

I'm impressed with people who don't have a negative net worth. That's becoming rarer as well.

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1985 500SL Euro w/ AMG bits 130k
1984 300SD Turbodiesel 192k
1980 240D Stick China 188k
2001 CLK55 AMG 101k
2007 S600 Biturbo 149k Overheated Project, IT'S ALIVE!!!

That's rare indeed. Especially since 25% are upside down in their home mortgages.

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'06 E320 CDI
'17 Corvette Stingray Vert

I would have to agree. With more in the making I am certain.

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'06 E320 CDI
'17 Corvette Stingray Vert

They should be buying lunch then....

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'06 E320 CDI
'17 Corvette Stingray Vert