MR. J. S., CPA: NEW VEHICLE-PRONE DEALER LOYALIST
Mr. J. S. is one of three senior partners in a small but highly productive CPA firm. He is also a millionaire. Mr. J. S. enjoys buying new vehicles and is completely turned off by the idea of buying used cars. To him, owning a used vehicle is like wearing someone else’s old clothes. Mr. J. S. is a dealer loyalist in part because “[his] time is more valuable than shopping for a so-called big discount.” In addition, Mr. J. S. buys from a dealer with whom he does business.Again, networking and reciprocity are major factors underlying the motor vehicle purchasing habits of many new vehicle-prone dealer loyalists. How did Mr. J. S. acquire the motor vehicle dealer as his accounting client? By referring more than a dozen of his clients to the owner of the dealership before ever selling the dealer any of his accounting services. Previously, the owner had dealt with another accounting firm for years before realizing that this accounting firm had never referred one of its clients to him.Now the dealer and Mr. J. S. have a strong reciprocal bond. One of the great advantages of being a self-employed business owner is the ability to leverage your organization’s patronage habits. In the case of Mr. J. S., he also leverages his influence over several of his clients. He is the dealer opinion leader for many of his clients. Mr. J. S. makes it clear to each client he refers that the dealer is also a client. The dealer, in turn, is likely to give favorable service and price concessions to these clients. Over the past ten years, Mr. J. S. has essentially sold more than three dozen motor vehicles for his client, the car dealer. At the same time, the dealer has expended many thousands of dollars for accounting services from Mr. J. S.
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MR. T. F., STOCK BROKER: USED VEHICLE-PRONE DEALER LOYALIST
Mr. T. F. is a stock broker and a millionaire who enjoys purchasing late-model, used, luxury automobiles. After purchasing several models from the same dealer, Mr. T. F. had an idea: He would make a personal sales call to the owner of the dealership. Mr. T. F. first reminded the owner that he had purchased three cars from him in the past five years and had referred several of his clients to the dealer. Mr. T. F. then asked the dealer if he would reciprocate by giving him some of his investment business. The dealer’s response was very frank. He told Mr. T. F. that he sold vehicles to dozens of stock brokers and that he could not do business with all of them.
Mr. T. F. understood the dealer’s position. So he made a counterproposal. He asked if the dealer would be so kind as to give him the names of his top five suppliers:
Assume that you were asked to nominate the suppliers of the year in this state. Who would be on the top of your list? Who put the new roof on this place? Can I mention that you suggested I call him?
The dealer did refer several of his key suppliers to Mr. T. F. Mr. T. F. still buys his vehicles from this dealer and makes referrals on his behalf. In turn, the dealer refers business to Mr. T. F.
AUTHOR TOM STANLEY SELLS A CAR
Just before Christmas, I placed a classified ad in the local newspaper to sell my family’s Acura Legend. Prior to doing so, I called our dealer. He advised me about the upper-limit price I could anticipate receiving for the car, and that was the price that we advertised. I have always meticulously maintained our motor vehicles. Our Legend had nearly every conceivable option, including the so- called Gold Package. The car was always garaged. Our Acura dealer did all the prescribed maintenance and tune-up procedures. We even used Mobil One synthetic oil! The car had a good set of Michelin MXV4 tires with a few thousand miles on them. And, perhaps most important, we had purchased the car new. My classified ad outlined many of these characteristics.
Allow me to profile some of the characters who took the time to stop by and look over our car.
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Shopper One: a senior marketing officer, female
She arrived driving an Infiniti Q45. When I saw the car, I asked her why she was interested in a Legend, since her Q45 appeared to be nearly new. She told me that the Q45 was her husband’s and that they had purchased it used nearly a year ago. In fact, she had just finished looking over “previously owned” Legends and Infinitis at several dealers. She made it very clear that her household had a used- vehicle orientation. It was not particularly loyal to any make of automobile, but she and her husband did prefer a narrow set of vehicles. These included Acura Legends, Infiniti Q45s, and the Lexus 400 series.
The day she visited me, she had taken the afternoon off from work. She had a map of the Atlanta area and had marked the location of selected dealers and the addresses of private sellers. In this way, she made it very clear to me that she was well aware of many “compelling” opportunities.
It was obvious to me that this woman was very skilled in evaluating used cars. She immediately pointed to a small ding on the driver’s door. She examined the interior, the engine compartment, and the car’s sheet metal. Then she asked me why I had to sell the Legend. I responded by saying that “my teenage children have an aversion to four-door sedans. To them, a Legend is well suited for middle-aged, unexciting people like their parents! They would much prefer even a well-used 4x4 sports utility vehicle or a sporty two-door number.”
She paused and reflected on my comments. Now that I think about it, I suspect she would have preferred another answer. She would have wanted me to say that I was selling the vehicle because of financial obligations. This would have put her in a much stronger bargaining position. Nonetheless, she attempted to negotiate a lower price. She asked, “What’s the lowest you are willing to take for the car?” I responded by telling her, “If I don’t sell it in thirty days, I will consider lowering the price.” I then pointed to the portfolio in the front seat, which contained all the maintenance records, original window sticker, and so on. She turned around, got back in her husband’s previously owned Q45, and left. I never heard from her again. I am convinced that she found exactly what she was looking for—that is, a real deal on a late-model, used vehicle from someone who was in a hurry to sell.
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Shopper Two: a vice president at a regional financial institution, male
You may find it particularly interesting to learn this fellow’s specific job title. He was vice president of the motor vehicle leasing department. I guess you could say he had an excellent understanding of the true value of motor vehicles. He also understood the relative advantages of buying versus leasing. It seems that this expert on leasing new vehicles spends his time searching for deals on used ones.
Shopper Two was also looking for a real deal. He was interested in several makes of quality Japanese cars, but, like Shopper One, had no great loyalty to any specific make. He spent a considerable amount of time going over the maintenance and other records for the Acura. Then he asked the same question Shopper One did: “Without you hitting me on the head, what is the least you would take for the Acura?” I gave him the same answer I’d given Shopper One. He also left. I am still waiting for his call.
Shopper Three: a wealthy former business owner, male
Shopper Three was the most interesting of the people with whom I came into contact. When he called me, he mentioned that he was intending to drive his wife to a local shopping center. He asked about our location, which he found ideal relative to the shopping center. He and his wife arrived shortly after our phone conversation in a 5 series BMW. The car looked like it had just come out of a showroom. So I asked him about his need to purchase the Acura. He informed me that the BMW was his wife’s car. He then scrutinized the Acura from top to bottom.
While he was doing so, I had an interesting conversation with his wife. She informed me that her husband had recently sold his share in a successful software operation. They were millionaires. Her husband still acted as a consultant to the organization, but now he had more time to do other things. She also told me that her husband had never purchased a new car in the thirty years that they had been married. Apparently, he is in a semi-constant search for real deals on automobiles. He is particularly prone to purchasing quality used Japanese and German vehicles. But he is absolutely never in a hurry to make such purchases. Like many people in the used vehicle—prone shopper group, he gets immense pleasure from finding good deals from private sellers with too much car, too little capital.
I suspect that is why he spent time debriefing me. He asked me what I did for a living. He asked me how well my business was operating. Perhaps he had thought I was an out-of-work corporate executive. Why else would I be at home
in the middle of the afternoon in my khaki pants and flannel shirt? I told him I was an author, working on book number four. Then he inquired about how well my other books were selling. “Great,” I answered. He then frowned and asked the question of questions: “Would you be interested in knocking $1,500 off the asking price?” Again I responded, “Perhaps in thirty days if I don’t sell it before then.” I am still waiting to hear from him, too! He did seem impressed with the way I maintained automobiles, so just before he left, he asked if I intended to sell any of my other cars. He pointed to my high-performance Z28 Camaro. I had to turn him down on that offer, too.
Shopper Four: a schoolteacher, female
Isn’t it interesting that a disproportionately high number of used-car shoppers come from the ranks of teachers and professors? Shopper Four called me late one Friday evening. (When do weekend telephone rates go into effect?) She had a battery of questions to ask me. After this intense debriefing, she informed me that she lived several hundred miles from Atlanta in “cotton” country. She said she was in the process of calling many of the people who had listed Acura Legends in the Atlanta classifieds.
She promised to get back in touch with me the following Wednesday. She kept her promise and asked if I could fax her evidence that there were no outstanding liens on the vehicle. She also asked if it would be possible to have a more detailed list of the car’s accessories. I faxed her the title and a copy of the original window sticker, with prices and options. She then advised me that she planned to come to Atlanta that Friday and look at several vehicles that were for sale.
She and her husband, a successful cotton farmer, arrived at our house on Friday. They were driving a late-model Nissan Maxima. The automobile appeared to be in excellent condition. Shopper Four drove her husband and me around the community for about twenty minutes, test-driving the Acura. During that time I had a chance to debrief them. Why did they drive all the way from cotton country? Why were they interested in buying a used vehicle? Aren’t farmers supposed to be frugal?
It seems that this couple shops for a late-model, quality, used Japanese vehicle every two or three years. They find the prices and availability significantly better in the big city. (They are nearly 150 miles from the nearest Acura dealer.) They buy cars like mine and resell them in two or three years in their rural community for close to what they paid for .
Shopper Four and her husband convinced me that they were frugal. They arrived with a certified check in an amount that was $1,000 less than my asking price. The farmer, upon returning from the test drive, asked his wife, “Aren’t you going to try to negotiate with this guy?” She, in turn, said, “This fellow doesn’t need to sell this car. And it’s in great condition.” Her husband agreed. Thereupon, she handed me the certified check and ten $100 bills. After all the papers were signed and the deal was complete, she told me that my car sold for at least $3,000more at the dealer nearest her farm. I responded that her colleagues would likely be impressed with this car when she drove up to school on Monday. Her husband commented that the other teachers would really be impressed if they knew how little she had paid for it.
One comment he made was of particular interest to me: “My wife works with a woman who drives a new, comparably equipped MercedesBenz. She leased it for sixty months, $600 per month. Do you know how much cotton you have to grow to make those payments?”
A PROFESSOR OF THRIFT HAS UAWs FOR NEIGHBORS
How did Dr. Bill, an engineering professor who never had a total household income of more than $80,000, become a millionaire? He inherited nothing. He never won the lottery or hired an investment advisor who turned a few thousand of his dollars into a fortune. His success in accumulating wealth is based on living well below his means. This professor is a classic example of a used vehicle-prone shopper. But like most of those in this buyer group, he never neglected his family. He provided funds for his children’s college tuitions in full and more. He and his family live in a fine home in an upper-middle-class neighborhood. In fact, about 80 percent of his group live in homes valued at $300,000 to $500,000.
Dr. Bill’s goal always was to become financially independent, but he never wanted to become an entrepreneur. Often, entrepreneurs become wealthy by taking substantial risks and by leveraging the labor and talent of dozens, even hundreds, of others. Dr. Bill was never cut out to be anything but a professor. He is not alone. Most people in this country are not the entrepreneurial type. But this does not mean that they can’t become millionaires.
People often confuse our message about the relationship between being wealthy and being an entrepreneur. We’re not telling people to give up doing their own thing in medicine, law, accounting, and other occupations and join the
ranks of the entrepreneurs in this country. Don’t even consider such a change unless you really want to and are fully capable of succeeding. If you can generate a reasonably good income—say, twice the norm for households in America, or $65,000 to $70,000—then you may become wealthy one day if you follow the defensive strategy developed by millionaires who are used vehicle- prone shoppers.
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Most of Dr. Bill’s nonmillionaire neighbors have no household budget. They do no consumption planning. As a result, they have no restrictions on their domestic expenditures except one—the upper limits of their income. Yet these are the very types who are prone to whisper criticisms about frugal neighbors such as Dr. Bill.
Mr. Norman is an executive who lives in a $400,000 home in Dr. Bill’s neighborhood. His household income last year was in excess of $150,000. But he has next to zero invested in anything other than home equity, motor vehicles, and a corporate pension plan. Mr. Norman’s household has a net worth of under $200,000. Mr. Norman and his wife are each fifty years old. So are their neighbors, the used vehicle-prone shopper, Dr. Bill, and his wife. Bill earns only about half of what the Normans earn. But Bill’s household has a net worth that is nine times greater than the Normans. Can this be possible?
It’s more than possible. It is probable and predictable. Great offense and poor defense translate into under accumulation of wealth. But the Normans are not alone. There are many more under accumulators in their neighborhood than there are prodigious accumulators like Dr. Bill and his family.
UAWs like the Normans find it degrading to even think about shopping for a used car. To them, a used car is out of the question. Their neighbor, Dr. Bill, never felt degraded shopping for quality used cars. In fact, acquiring used “cream puffs” gives him great satisfaction. Over the years, he figures that he has saved enough buying used over new to completely fund one of his children’s college and graduate school tuitions.
Where did Dr. Bill buy his latest motor vehicle, a three-year-old BMW 5 series?
From Gary, a high-income, hyperconsuming sales professional employed in the high-tech field. Gary buys only new foreign motor vehicles. If Gary is like most UAWs, he firmly believes that the buyer of his old 5 series BMW is not as financially well off as he. This is one of the tell-tale symptoms of being a UAW. UAWSs usually think they have more wealth than their neighbors. Many UAWs also believe that people drive the best they can afford.
Think of this situation in another way. Gary, the under accumulator of wealth, is subsidizing Dr. Bill’s motor vehicle purchases. Gary takes the brunt of the three-year depreciation and then transfers title of a fine automobile to Dr. Bill, the frugal millionaire.
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Also, since Gary is an employee, he cannot write off depreciation against his income tax liability. In addition, Gary has no friends, relatives, or clients in the motor vehicle business. He gets no tax write-offs, no super discounts from an uncle or aunt who owns a dealership, and no reciprocity from a client/customer who is in the automobile business. He consumes motor vehicles purely for pleasure.
What should Gary, Mr. Norman, and others of the UAW variety know? That they spend more for motor vehicles than the typical American millionaire. Gary’s earned income is equal to that of many millionaires, yet Gary isn’t a millionaire. Perhaps he compensates for this through his heavy consumption of status products. Is he trying to emulate the driving and buying habits of the chairman of the company that employs him? But the chairman is a millionaire and owns equity in the corporation. Unlike Gary, he never purchased an expensive automobile until after he was wealthy. Instead, he put much of his income back into the company via stock purchases. In contrast, Gary makes his expensive purchases in anticipation of becoming wealthy. But that day is unlikely to ever arrive.
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~ We use the term motor vehicles to include sports utility vehicles, pickups, and so on as well as cars.
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