Why Rich Families Don’t Buy New Cars: Insights from Dr. Brad Klontz
We were honored to have Dr. Brad Klontz join us as the first guest on the Modern Husbands Podcast. You can read about his extensive background on our Modern Husbands Advisory Board page. While revisiting old podcast episodes, something from our conversation with Dr. Klontz really stuck out.
The ultra-rich look nothing like those who claim to be on social media. Many of them actually rent the cars, boats, and homes they claim are theirs in their videos. Click here and see where you can rent a content home in your area.
Families who do have wealth usually build and sustain it quietly, without showing off, and that insight resonated deeply with me because it’s how I was raised. I grew up in a home where frugality was the norm. My parents had no car debt and no mortgage. They paid for all college education. My father owns 23+ units and drives a 30-year-old truck. This is what we drove when I was a kid:
Dr. Klontz’s research gives us a window into why this mindset works so well, and how couples can adopt it in a way that supports their shared financial goals.
How the Ultra-Wealthy Spend
According to our conversation with Dr. Klontz, his studies found that people who started with little and went on to build significant wealth rejected status signaling. Instead, they invested in assets that grew over time and avoided the financial traps of lifestyle creep.
The High Cost of Keeping Up With the Joneses
Keeping Up With the Joneses is a financially harmful mindset fueled by comparison and exacerbated by social media. But as Dr. Klontz explains, this mindset drains wealth rather than builds it.
The emotional pressure behind comparison is real, so we have to constantly remind ourselves that our net worth is not the same thing as our self-worth.
The Financial Truth About New Cars, Furniture, and Clothing
New Cars Plummet in Value
The moment you drive a new car off the lot, it drops in value by up to 30 percent in the first year. Why? Supply and demand. There is a segment of society that will only purchase a new vehicle, and so once it's owned, the demand for your car plummets, and with it, the resale price.
Which cars depreciate the least?
If you or your partner have decided to purchase a new vehicle, you have decided to buy something worth 10% less within 10 seconds of driving it off the lot. On average, a car loses about 60% of its value after five years.
Several factors cause vehicles to depreciate so significantly.
Life of the vehicle. Vehicles can only run a certain number of miles.
Supply and demand. Only a segment of the population will buy a new vehicle, so as soon as a vehicle drives off the lot, demand declines faster than supply.
Newer models. When you buy a new vehicle, the next, improved model is only months away from release.
Depreciation does create a substantial buying opportunity in the pre-owned vehicle market.
The Car Edge Car Depreciation Calculator allows you to see the expected resale value of over 300 models for the next decade. (Note: their website included commercials)
Which cars last the longest?
According to Consumer Reports, these five cars commonly go over 200,000 miles:
Toyota Camry
Honda Accord
Toyota Prius
Honda CR-V
Toyota Sienna
Kelley Blue Book’s article How to Beat Car Depreciation has some good ideas. And if you’re in the market for a car, know that cars lose the most value during the first year of ownership: 20% on average.
Furniture Loses Value Fast
We're empty nesters. We sold our 4,500-square-foot home to live in an 1,800-square-foot apartment in midtown (Atlanta). I handled much of the downsizing, and I can tell you from firsthand experience that as soon as you buy furniture, it becomes nearly worthless on the secondhand market. If you don't believe me, compare the price of a relatively new couch at a garage sale to a new couch.
Despite every effort to highlight how much money we could save by keeping what we had for the new apartment, or buying gently used furniture, I couldn't convince my wife that it was our best choice. Nearly all of the furniture in our apartment is new because she wanted it to fit the new vibe, and I want her happy. And that's marriage: a constant series of weigh-ins on when to give in, stand your ground, or compromise.
Clothing Becomes Nearly Worthless on Resale
For some, it's true that when you look good, you feel good. I get it. I just started buying nice clothes. But goodness gracious, clothes become almost worthless after you buy them. Dr. Klontz mentioned that ultra-wealthy families often shop at second-hand stores or tailor older clothes to refresh them or fit them better.
What This Means for You and Your Partner
You and your partner may not always see these choices the same way. That's the case in our marriage from time to time. My wife focuses more on the moment, and I focus more on the future. Together, we balance each other out, and over time, we've influenced each other in how we spend.
I value frugality and practicality, like I was raised to do. But over time, I've gotten better at spending in the moment, especially on experiences with family and friends.
The other partner might want to spend more now, and that can be the right choice as well. What matters is that your shared values are your north star for spending choices.
Wrapping it Up
Buy Used Cars or Drive Longer
Furnish Your Home with Pre-Loved Pieces
Shop Second-Hand for Clothing
Have Values-Based Conversations as a Couple
The Full Modern Husbands Podcast Episode with Dr. Klontz
Professional Support
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