Drive into the Whole Foods parking lot and you’ll see the latest BMWs, Mercedes, Audis, Porsches and Volvos. More relevant than what the 1% pay is the widening gap between the 1% and the rest of their fellow countrymen who struggle to pay food bills. Walmart.
So writes Elliot Schiff of Wilmette, Illinois in the letters section of the Wall Street Journal (Dec. 5, 2024; Dec. 6 print edition.) As you can see, I’m catching up on this month’s Wall Street Journals.
What is Schiff’s implicit assumption? These are people who drive the latest BMWs, Mercedes, Audis, Porsches and Volvos Are rich. Chances are many of them are rich; there’s also a good chance that many of them aren’t. In general, you don’t build wealth by buying assets that quickly depreciate in value. New luxury cars usually depreciate quickly. Schiff would do well to read The millionaire next door. I posted about it here. In response to a question from commenter TMC on that post, I got the book from the library and enjoyed rereading some of the stories and facts.
Here’s one that directly relates to Schiff’s point. It comes from table 4.1 of the book. 46.3% of millionaires had cars from this year or last year’s model. Only 37.6% had a car that was 3 years or older. And 18.9% had a car that was 5 years or older. Of course you would want to know what percentage of luxury cars named Schiff are owned by millionaires and the data in the book doesn’t tell us that. Also consider that $1 million when the authors wrote in 1996 would be just over $2 million today. Using the personal consumption expenditure indexwhich is a more accurate measure of inflation, the $1 million in 1996 translates to $1.77 million today.
So a reasonable question is: what percentage of the luxury cars in the lot Schiff observed are owned by people with a net worth of at least $1.77 million. I would give an even chance that it is less than 60%, and a 40% chance that it is less than 50%.