Early in my career I wrote an article entitled
“Why You’re Not as Wealthy as You Should Be.” It was published in Medical Economics and later extracted for Reader’s Digest. Much of the details were later incorporated into my books. Those who have accumulated significantly less wealth than the norm for their respective age and income cohorts [income statement affluent-IAs] have much in common. And it’s not just about the fact that they live above their means.
How one spends his dollars of income is also related to wealth accumulation. Here is one example of this from the automobile market.
There is a significant correlation between where one ranks on the wealth index [WX], that is actual net worth versus the expected within one’s age and income cohort, and one’s credit score. Those in the balance sheet affluent category [BAs] have substantially higher credit scores than those in the IA category. BAs are highly concentrated in the so-called prime credit score segment. It is just the opposite for those in the IA category. They are concentrated in the subprime population.
A recent report published in Automotive News detailed the proportion of prime versus subprime buyers of new cars manufactured by the major automobile companies operating in the United States. Those new car buyers who purchased motor vehicles manufactured by Honda had the lowest proportion with subprime credit. Toyota was second.
In a previous blog, I discussed Consumer Reports‘ “table of tables.” It depicted the long term quality/endurance characteristics of motor vehicles by manufacturers over the past 10 years. And guess what? Motor vehicles manufactured by Honda and Toyota ranked at the top along what I refer to as the quality dimension. Both had significantly fewer problems especially after the 5th year of operation. By the 10th year Honda and Toyota break far from the pack. The manufacturers who had the highest concentration of buyers with subprime credit were among companies with makes having the highest incidence of mechanical problems.
By definition, IAs spend more and save less than BAs. But it also appears that IAs tend not only to live above their means but also tend to purchase automobiles that have a history of rapid depreciation and significantly more problems over time.
Makes of vehicles manufactured by Honda and Toyota have among the highest resale value in the industry. Certainly their reputation for quality/endurance is well documented.
7 thoughts on “Manufacturer with Smallest % of Subprime Car Buyers: Honda”
This is interesting because I think it tells some specific things about the BAs that I can change about myself. They do the research. They think about their major purchases with a long-term time frame. They understand that a car is an expense not an investment and to choose cars that minimize expense over a long period of time. Good stuff, thank you Dr. Stanley
They are both reliable, indeed. Toyota has had many major recalls over the last few years, including one announced today. Are recalls included in the stats for mechanical problems or is that not considered a factor? Do you just go by the overall record of mechanical problems that don’t deem proactive measures by the manufacturer as part of the equation? Also, just curious where Hyundai falls in this mix? My spouse got one two years ago and loves it!
Last century 😉 I was living in Germany and decided I should buy a German car (BMW, Mercedes, etc.). I did the research (primarily Consumer Reports) and Honda had the same quality as BMW/Mercedes (occurrence of repairs needed). The kicker was that when one needed to repair the BMW/Mercedes it was significantly more expensive than the Honda. I bought a Honda. My current Honda (CR-V) is 12 years old and my teenage daughter has already claimed it as hers once she completes her driver training. I’m very comfortable having her drive my “old” car both in terms of reliability and safety. Doing the research (and shopping around for the best deal) has kept Hondas in our family for over 20 years now.
I have a credit score of 801, drive a 13 year old Mercedes-Benz sedan powered by a very fuel efficient turbodiesel engine, that I paid cash for. While a new Honda may have marginally better reliabilty, I would not want to be subjected to a collision with another car while in a Honda – or any Asian car for that matter. I’ll struggle by with my very safe and reliable Mercedes-Benz turbodiesel sedan, versus buying anything small and Asian in origin. Mercedes-Benz is among the safest cars made in the world.
I agree with part of the article. We are BA with 2 Hondas in family with one 13 years and 230k miles and other 12 years and 153k miles. Older car will be given to our son when he starts driving next year.
I don’t agree with part of article about credit score. Even though we are BA, we borrowed money heavily from credit card as well as home equity to participate in business partnerships which have impacted our credit score.
That exactly the reason, I have problem with counting credit score as a factor to determine credit worthiness of someone. It does not look into situation where person is borrowing money in order to generate more income (and wealth in the process).
I was going to buy my fifth Accord (I’m old), but they were so expensive and so UGLY, that I kept looking. Looked at Toyota (also expensive and less ugly but still ugly) and couldn’t decide what to do. To my amazement, I read that Hyundai has beaten out both Toy and Honda in JD Powers and a variety of reliability (and so on) metrics. I bought a Sonata (SE — cause I thought the ‘regular’ Sonatas just SWAM around corners) and love it! I think the resale value will be less than for a Honda — but I’m gonna keep it to ten-plus years, so who cares!?
I disagree with Sam R. I was in an accident in a 2010 Honda Pilot where the vehicle rolled over onto its side. I walked away without a scratch. The side curtain airbags deployed, as well as the driver’s seat side airbag. I will definitely be buying another Honda when I get ready to purchase my next vehicle, mainly because of the safety reasons and quality of vehicle for the price.