The modest cars of millionaires
Contrary to the common stereotype, most wealthy people aren’t driving around in flashy Ferraris and bright orange Lamborghinis. A 2022 study by Experian Automotive, found that the top car brands for households earning over $250,000 were Toyota, Ford and Honda.
Even billionaires opt for relatively inconspicuous cars. Warren Buffett reportedly drives a Cadillac XTS — no Bugatti for the Oracle of Omaha.
In other words, most affluent people who could splurge on luxury vehicles simply choose not to. Meanwhile, many ordinary consumers are stretching their budgets to the limit. A recent survey by CDK Global found that 57% of car buyers said they hit the top end of their budget, while 7% exceeded it.
The strain on consumers is also reflected in auto loan data. As of mid-2024, one in every 24 drivers with a car loan was paying more than $1,000 in monthly payments per vehicle, according to Experian — a ratio that has nearly quadrupled since 2020.
For many, the family car is becoming a significant financial burden. Here’s how you can avoid the growing auto loan crisis.
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For most consumers, cutting transportation costs is one of the most effective ways to improve their finances. According to a 2022 report by the U.S. Bureau of Transportation Statistics, transportation is the second-largest annual expense for the average household.
One way to reduce this expense is by purchasing a car that’s within — or even below — your means. Buying a used car, for example, helps you avoid significant depreciation and can lower transportation costs substantially. As of 2024, the average used car costs roughly $20,000 less than a new one, according to Edmunds.
To figure out whether a vehicle fits your budget, consider the 20/4/10 rule:
- Put at least 20% down.
- Choose a loan term of no more than four years.
- Keep all car related expenses below 10% of your gross income.
By setting up firm financial guardrails, you can avoid the auto loan debt trap many consumers are driving into.
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