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I’m Sorry, But Your Car Isn’t Impressing Me

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Do you think people are impressed by what you drive? To be honest, some might be, but I most certainly am not. In fact, if you work in a low-level job and are driving around in a brand new Lexus, I would lose all respect for you. When I see someone that is earning more that $100,000 a year driving a used Toyota or Honda, these are the people I respect. ‘What does it really matter?’ some of you might ask. I definitely have my reasons.

The Poor Impressing the Poor

Imagine three friends of yours that have varying social class. For instance, let’s say your friends names are Sam, Jamie, and Alex. Sam earns approximately $25,000 a year, Jamie has a salary of $60,000, and Alex earns a very respectable $150,000 per year. If you wanted to prove that carrerayou were a success, it would give you the best feeling to impress Alex, the friend that is already a success, right? You really want to buy a new luxury vehicle, but you yourself only earn $35,000 a year.

There is absolutely no way that you can save up the cash to buy this $40,000 vehicle, but you find one that is your dream come true, and you believe that it would really impress your friend Alex, who has a slightly older model of the same car. After the salesman checks your credit, you discover that you just barely have enough money to lease this luxury car for a year. You sign the papers and can’t wait to show off your new ride to Alex. When you roll into Alex’s driveway, do you know what he’s thinking? “Wow, what an idiot. There’s no way he can afford that car. He’s going to be poor for the rest of his life.” To your dismay, Jamie will most likely think the same thing; but when you drive past Sam, the $25,000 a year man, his jaw drops and starts drooling over your car. He can’t believe how nice it is and is totally envious of you!

This scenario happens all the time. It’s a case of the poor impressing the poor and no wealth ever comes from it.

What Do the Wealthy Drive?

Sure, some wealthy people have luxury cars, but they never buy a vehicle that has a value equivalent to a full year’s pay! In fact, many of them wouldn’t spend more than 20% of their yearly pay on a new car.

[Related Article: What the Rich People Really Drive]

Nearly half of the wealthy (those earning $500k or more) still like to drive Hondas, Toyotas, and Volkswagons) and are never impressed by those that spend all of their money on expensive luxury cars. Do you know how many people can really afford to buy a brand new BMW? Not very many. In fact, over 85% of BMWs on the road right now are leased. They aren’t actually owned at all!

Why the Poor Stay Poor

These luxury vehicles are one of the major reasons why the poor stay poor today. They lease them in order to feel important and wealthy, but what it actually does is drive them deeper into poverty! I mean, think about it. If you have an extra $400 per month and sign up for a vehicle lease that’s $380 a month, you only have $20 a month to work with. It’s pretty difficult to get yourself into a financially successful position with only $20 a month. In order to get truly wealthy, you need to delay your gratification, increase your cash flow, and invest your extra dollars to propel yourself into a better future.

Do you know anyone that drives a car that is keeping them poor?

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AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

20 Comments

  1. That’s true. Most “poor” people think that way, and maybe that’s why they don’t get to improve their financial situation.

    • I absolutely think that’s why they don’t improve their financial situation. They want to look rich just like everyone else, but it’s at the expense of their future.

  2. I bought a new car 6 years ago and went into some serious debt, so I was the idiot in the story. I did have enough brains to not get a very expensive car though and I will drive it for many years.

    In the past years I realized the importance of not wasting money on ‘status items’ and it helps us have a better financial situation. I do know a family that has 5 cars (all with car loans), who can barely afford the insurance, while the taxes they owe for their small firm haven’t been paid in 2 years. When the s… will hit the fan, I really don’t see them in a good light.

    Sure, many neighbours are impressed with this, while we actually think they did a very stupid thing. 2 cars were enough (one of the sons lives in another part of the city, so I would expect him to have his own car).

    • Haha. Don’t worry dojo! It happens to all of us. I’m glad to hear that you’ve grown since then and your perspective has matured. Thanks for the comment!

  3. Walking around my neighborhood I can see quite a few people that are likely poor because of the cars they have in the driveway. It isn’t surprising given our culture, but it is sad.

    • Exactly. Many people thinks their cars make them look rich. Most of the time it does exactly the opposite.

  4. I totally agree with you, Derek. I’ve noticed that a lot of the people in my area driving the BMW’s and Lexus tend to rent the apartmentt while the people owning the houses drive around in Toyota’s and Honda’s. This may be a case of what you wrote about a while back: Big hat, no cattle? LOL Thanks for the reminder to not go out and buy a fancy car when my Toyota breaks down…if it ever breaks down. 🙂

    • It just doesn’t make any sense does it. When you see someone driving a BMW, you assume that they’re going to pull into their mansion. Nope, more often than not, they pull into a crappy old apartment. Thanks for the comment Dara!

  5. Derek, I love this article because it’s so true!! I see so many people, some friends included, who buy cars that they can’t afford. It’s just amazing to me and I have almost fallen for it too! I have a 10 year old PT Cruiser and I’m determined to pay in cash for the next car. It will be something that I can afford to pay in cash for.

    • Glad you liked the article Monica! I have so many friends that have just talked themselves into buying a spanking brand new car that costs way more than anyone should pay. They don’t understand the long=term ramifications of their decisions, but you do! Great job Monica.

  6. I’m now impressed by people with good jobs who drive old cars. I recall years ago seeing a senior-level guy probably making $200k+ driving an Honda Civic that looked to be at least 10 years old. At the time, I thought he was lame. Now, I look back and realize how much common sense he actually had, and how he was absolutely making the right move.

    • Hahaha! I know what you mean Squirrelers. I used to think executives with lame cars must have spent their money on something else that was extremely stupid, like gambling or expensive restaurants. More than likely though, they just had a massive bank account because they didn’t care what everyone else thought!

  7. I’m actually proud of my clunker. I own it and the insurance is cheap because it isn’t worth that much. It makes me proud to drive it because I know that all my money saved is going to something much better. My wife drives a newer car that she bought before we got married and it amazes me how much it costs to drive a new car. It can be nearly as much as it cost to rent an apartment.

    • Me too! I still have my 2001 Honda Civic. It only cost me $2,500 and it is one of the best cars that I ever owned! I never have to get it repaired and the gas mileage is awesome. It’s going to be hard to part with someday…

  8. Derek:

    Love reading your advice and articles. However, is it not possible to have good finances AND a nice car. For example, I max out my 401k, save another 1.5-2k after tax. I am frugal when it comes to most expenses, such as eating out (never do, take lunch every day as well), and go out for drinks maybe twice a month. I guess my point is, if you are making good money, saving for retirement and saving cash reserves for emergency funds and investign on your own, is it such a bad thing to have say a 30-40k sports car if its a big desire of yours?

    • Sure it’s possible SBJ. I don’t mind when the ultra wealthy spend $30k on their cars, especially when they’re bringing in $500k a year. However, it doesn’t sound like you’re bringing in that kind of bacon. Are you paying cash for your cars? If you are, and you have a bunch of money invested in your future (and your emergency fund), then I’d say you’re fine. That just seems like a ton of money to spend on a car! My entire house only cost me $75k!

  9. I don’t know about cars, but when the new iPhone came out, the local news was interviewing people standing in line. They were in a low income section of the city and the man being interviewed basically said he needed the new phone because it was a status symbol. It was very sad to watch the interview.

    • Ahh yes, the iPhone. I was actually just in Goodwill the other day (looking for a cheap jacket like Ron Burgandy’s…but that’s another story) and it seemed like everyone around me had an iPhone! How is it that the poor and needy have money for a phone, but have to spend less than $5 on a coat that they need to keep them warm this winter… Doesn’t seem quite right.

  10. I once had a nice car on a lease hire contract – cost me a small fortune. When the contract expired, I bought a 9 year old volkswagen passat for the equivalent of 3 months lease payments.
    I now feel as though I’m driving a free car.
    I’ve had it two years now, and apart from a couple of new tyres and servicing it hasnt let me down once.

    • That’s an awesome story GRWM (well, except the part about your car costing you a small fortune)! I’m glad to hear that you decided to actually get rich rather than look rich. Congrats!


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