The Millionaire Next Door

Leasing: A Popular Substitute for Wealth

In Stop Acting Rich, I profiled the “aspirationals” (people who act rich . . . but actually aren’t rich).  Perhaps Shakespeare was referring to these people when he said “all that glitters is not gold.”  Yet many Americans are guilty of judging the wealth of others based on whether or not they drive prestige makes of motor vehicles.  Judgments of this type are often inaccurate.

Last month Automotive News reported that the vice president for Mercedes-Benz Financial Services indicated that leasing accounted for half of all sales of new Mercedes-Benz vehicles.  Further, this 50% figure is rather consistent in good times and in bad. 

How does this 50% figure compare with the lease versus purchase ratio for all those passenger vehicles acquired in America?  It is much higher than the norm.  Over the past decade leasing accounted for approximately 20% of all new passenger vehicles that were acquired. 

But what about the acquisition methods employed by America’s millionaires? According to my national survey database of millionaires, overall only 11.3% [about 1 in 9]  leased their most recently acquired vehicle.  Also, only 13.8% of millionaires indicated that they leased a Mercedes-Benz [Toyota 8.0%].

In fairness to Mercedes-Benz, nearly 1 in 10 millionaires reported that his most recently acquired vehicle was a Mercedes.  And the large majority [86.2%] of them purchased their Mercedes instead of leasing it.

If the aspirationals are really interested in emulating those who are truly rich, they may wish to purchase instead of lease their motor vehicles.  But by definition aspirationals are much better at spending income rather than accumulating wealth.

3 thoughts on “Leasing: A Popular Substitute for Wealth”

  1. Leasing can make sense if you buy a car for which your budget allows you to afford the monthly payment, and then lease that same car for the lower amount and save the difference. Unfortunately, most people figure out what their budget allows them and then lease a car for that amount. That’s why there are so many Mercedes on the road — half of those people should actually be driving Toyotas.

    Dr. Stanley, is there a rule of thumb for how much a person should spend on a car (perhaps as a percentage of income or net worth?).

  2. Third option: Why not pay yourself the car payment, live with your current car awhile longer, and periodically upgrade as the cash builds up? You will have a larger “difference” because leasing OR monthly loan payments both include hefty profits for the finance companies. This is why millionaires pay cash for vehicles…or, better said, paying cash for vehicles helped them become millionaires.

  3. It is truly ironic that during a time when cars are more reliable than ever, people choose to lease their motor vehicles. I drive a paid off 2003 Camry with 87k miles on it and no hint of mechanical problems. I see no reason to trade it in. When I save enough money, I will purchase a newer used sports car in cash to share the miles as I am a driving enthusiast. My fiancee just purchased a new car. A Toyota Corolla for $16k that is being paid off on a 0% interest loan. We both make six figure salaries and I still do not see the need to waste our money. Weddings and houses are expensive.

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