We recently sold our family’s mainstay, a 1997 Toyota 4 Runner 4 X 4. I bought the car new as a reward, a merit badge, in recognition of The Millionaire Next Door hitting No. 1 on The New York Times Bestseller List. The car was like a good friend; it never let our family down. Even though it had 180,000 miles on it, everything worked. The paint was still nearly perfect.
We were surprised with the large number of prospective buyers who contacted us shortly after it was listed on the internet. Private sales, person-to-person, of motor vehicles are growing. It is no wonder. According to Automotive News, the average profit per vehicle that dealers made from a used car sale was $2,269 for the first five months of this year.
Two of the potential buyers are worthy of discussion here. Prospective buyer #1 was male, age 36, married, father of 3. He and his wife both work full time. The couple was in the process of discarding the two late model vehicles which they currently owned. Why were these people interested in buying a 13 year old, $5,000 used Toyota? It was not because they were in dire financial straits nor were they depressed about the prospects of “downsizing.” As the young man explained he and his wife had good paying jobs, but they were on a treadmill making loan payments including one on each vehicle. At the end of each month after paying all their bills, they had little or nothing left to invest. They couple was determined to become financially independent. Selling their two expensive vehicles and investing the more than $30,000 in equity that they would receive was a start. According to the couple the encouragement and method for doing this came from Dave Ramsey’s Financial Peace University program they attended at their church.
Prospective buyer #2 was a male, age 26, engaged, who had just sold his late model, fully loaded pick-up truck. He walked away with over $20,000 equity in the truck that he wanted to enhance his nest egg for his upcoming marriage. He was a civil servant for the federal government and a moonlighter [income producing student housing business]. He felt that in the small college town where he lived he could get all or most of his money back on the ’97 4 Runner even if he sold it in two years.
Prospective buyer #2 bought the car within 5 minutes of seeing it. The first prospective buyer did not buy the car because he wanted a 7 passenger SUV for carpooling use and he bought one.
Not all people who “trade down” like the these two buyers feel ego deflated or encounter loss of self esteem. Those who plan to build wealth by downsizing and investing actually encounter enhanced pride and new confidence. It is all part of taking control of our life and not being controlled by consumption and the hyper use of credit. It took billions in advertising and marketing dollars to convince us that happiness and self esteem can be purchased in stores with loans and credit cards. And such beliefs cannot be changed overnight. It is important to have a mentor who can help you change and then guide you to financial freedom.
Looks like #2 knew what he wanted!
I am so glad I found this blog — The Millionaire Next Door was a book I’d always heard about when I was in high school (I’m 28) and when I finally read it a few years ago, it set me on the financial butt-kicker track. That was around the time I also discovered Dave Ramsey, The Millionaire Mind, and other uncommon common sense financial input.
My husband and I traded down in car a few years ago when we got onto the Ramsey plan. He had a paid-for, three year old Honda Civic that we sold in order to pay down a huge chunk of our student loans. (That’s all the debt we had.) While my husband drove our other, older car, I worked about seven miles from home and my employer offered a free public transportation pass, so I actually rode the bus from the spring until the snow season came. We then bought a 1997 Civic that was in great condition — even the paint was nearly new!
It took us 13 months to pay off all our debt, thanks to that bump, and because our cars have been so well cared for, we still haven’t had to replace either one.
I guess a lot of ego is tied up in our cars, but I have to say that there’s a real boost that comes from feeling secure and in control.
dealer markup is crazy. just using craiglist makes the least knowledgeable buyer aware of the difference in price between private sale and dealer purchase.
none of my friends get this whole ‘downsizing’ to upgrade wealth mentality. true that it’s embarrassing when my ’99 saturn is smoking out the rear (no pun intended) but the embarrassment is worth it when we’re throwing $1,200 into a savings account every month. zero debt. zero status, but i tell you it’s worth it. in eight years when im thirty they’ll see why. thanks doc!
I love our $4,000 cash car, it’s a 2003 Ford Taurus with 148,000 miles but looks and runs great. We also have a free and clear 2004 Lincoln LS for my real estate business.
I’m glad I found The Millionaire Next Door and Dave Ramsey, I wish I would have acted sooner.
Jason (32, M, 1 kid)
I love my Escalade. I bought it when it was two years old and paid 1/2 of original sticker.
I hope that more people read this and do the same thing. Trying to impress others, whom you do not know is not worth ruining your financial future for. Simply investing the $400 a month you would be spending on car payments could easily make a young man a millionaire someday.
Thank you Dr. Stanley for enlightening us with the fact that most people driving luxury cars aren’t millionaires. Before you, I thought these guys were the successful ones. Though I’m sure some are the ultra rich, I know that the majority are not!
I would surmise that most people who see me in my 11 year old Chevy pickup would never guess that I earn $150k yearly, and live in a paid for house (I’m 35). They probably think I’m just some guy barely making ends meet. But as I’ve learned in your books that can be a good thing!
As stated about self esteem and ego by living what looks like the good life: “… to convince us that happiness and self esteem can be purchased in stores with loans and credit cards.”
That statement is the epitome of the hyper consumer.
I will have to say that Thomas Stanley’s first 2 books changed our lives over a decade ago. I (too) find great pleasure in finding treasures in the most unassuming places. Especially vehicles, which we are actively looking for now. And even “just missed” a few deals by literally minutes. Sometimes the chase is fun too. Kelly Blue Book “in hand.”
It amazes me at the ego people have on cars. I recently moved up in vehicles, went from a 1990 Toyota 4Runner with 285000 miles to a 1993 Chevy pickup (6 cylinder 5 speed) with 160000 miles.It is rust free and needed about $500 in repairs, which I did myself.
My friend just purchased a 2004 GMC 4×4 loaded truck for $12000, not including interest on the loan he took out to buy it.He was bragging about the great deal he got, I asked him how about the payments and interest he was paying, he didn’t think of it that way, just the $12k initial cost of the vehicle.