The Millionaire Next Door

Car Buying from The Millionaire Next Door

Toyota did very well on my acid test, i.e. the home cooking index.  I learned about the acid test from millionaires whom I interviewed.  Before buying my first Toyota 17 years ago, I did a lot of research.  Plus I drove through the employee parking lots of several Toyota dealerships.  I found that nearly all the employees drove, you guessed it, Toyotas.  Sure, employees have incentives to consume “home cooking.”  They get discounts.  But not all dealers of brands X, Y and Z cars have their employee parking lots filled with the home team brands.  Not eating one’s own home cooking is telling to me.

And here is some more home cooking.  My wife drives a Z71 Chevrolet Tahoe that sits next to my Toyota 4 Runner.  I purchased it and the one before that at the largest Chevrolet dealer in America.  And, yes, I did drive through its employees’ parking lot . . . many times.  Nearly all of its employees drove Chevys.  And perhaps most important, all the more than two dozen mechanics did the same,  mostly full size pickups and SUVs .

The Tahoe is very reliable, big, heavy and protective.  I have believed for quite some time that the full size GM SUVs and full size pickups are the best of their class worldwide.  Note that Chevrolet Tahoe was given the top grade in the most recent J.D. Powers “Most Reliable Models” study of the population of 3-year old vehicles.  USA Today praised it as “General Motors makes the most reliable [full size] pickups and SUVs.”  The 2010 4 Runner was listed as the most reliable midsize SUV.

We have never considered owning a European luxury motor vehicle.  Most are of high qualitiy, but dollar for dollar our Tahoe and 4 Runner are much better values. You may find it interesting that “Mercedes-Benz USA. . . 359 dealerships . . . survey of dealership employees . . . 15,000 participated. . . discovered that 70 percent of dealership employees had never driven one of the brand’s vehicles.” (Diana T. Kurylko, “Mercedes’ Cannon: Customer service is our top priority, Automotive News, January 21, 2013, p.29)

And what about a Porsche?  Yes, it is the ultimate in engineering and performance but very, very expensive.  Porsche ranked 2nd just behind Lexus (a Toyota make) in the same J.D. Powers study.  Yet I believe that even this is somehow related to Toyota.  I recall years back that Forbes published an article about how Porsche completely modernized the way it produces cars.  The same theme was more recently echoed in The New York Times:

. . . Porsche bet the farm on the Boxster.  But to have any chance at making money on a $40,000 sports car, Porsche had to hire former Toyota engineers – again, almost unfathomable – to tear down, revamp and modernize the entire company.

Everytime I see a Porsche drive by I do a word association, i.e. Porsche! Toyota!

10 thoughts on “Car Buying from The Millionaire Next Door”

  1. Tom,
    You are a millionaire. Why are you and your wife driving these late model trucks that are gas guzzlers and not ten year old frugal cars from Japan? What does a college professor and his wife need trucks for?
    In your last book you recounted moving into a neighborhood that was rife with high earning, balance sheet paupers. Why do you do these things? Are you being seduced by these Paupers? Why not locate some business owners living in modest surroundings and moving there?
    These are your people.

  2. Linn, those are some pretty silly questions. Why not enjoy the wealth you’ve accumulated? Why not drive something nice you can easily afford? Frugal is relative to your capacity for economic offense and defense. Some people may need extreme economic defense to achieve financial independence, but even then, they only need it within reason.

  3. Ultimately what you need to achieve financial independence is:

    Income (highest for your ability in 40hrs/wk so you can have a personal life)
    Control your monthly expenses so that you can Save and wisely invest 15% minimum of this income. If you can save a higher percentage that would be even better if possible.

    Cars don’t really matter. If I can save $50k per year does it matter if I drive a 10 year old Toyota or if I want to lease a brand new Mercedes S550?

    If you have a hard time saving then you have two options; reduce your expenses and/or increase your income by changing careers.

    Wealth building is simple: make an income then save and grow a portion of it to build wealth over time. The younger you start the less you need each year.

  4. It’s all about the net-worth, bey-bey!

    The more you don’t spend on silly cars/SUVs, the more you can plough into wealth-building instruments like rent-producing real estate and stocks.

    Some people need the crutch of looking-rich, whether they are or not, doesn’t really matter. Fancy cars cost $, and produce zilch wealth.

  5. I see Linn’s point… The Tahoe and 4 Runner may be reliable and low maintenance, but these “big, heavy” vehicles are indeed gas guzzlers. Therefore, they’re quite a bit more expensive to operate than equally reliable mid-size sedans. So in that sense, these big vehicles are splurges and are excessive in their own way. Obviously Dr. Stanley can afford the extra cost of fuel, and it’s his choice how he wants to spend his extra money. But others who are on tighter budgets, have long commutes, or are simply not interested in spending more money than necessary to operate a vehicle would be a lot better off with more fuel efficient cars.

  6. A long time ago I found Toyotas and Hondas at the top of the list of best buys in Consumer Reports. Out of four cars I had in my life, I drove Toyotas for over 20 years. My current only car is a Toyota now on its eleventh year. Interesting tidbit is the Japanese deflation has been going on for over two decades. At the very same time, Toyota stock enjoyed an average annual gain of roughly 7%. I am not sure about Toyota’s upper end Lexus brand, but I do know I have very vew maintenance problems with my Toyota. Repairs on upscale japanese imports are very costly. My friend’s Infiniti is one example. I look at having a small Toyota economy car as allowing me more freed up money to invest in a stock index fund. In five years I might redeem the shares, get rid of my Toyota, and buy a new Toyota with the proceeds. Also I like having a small car to park in tight spaces (I generally live in densely populated metro areas).

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