is luxury car a smarter purchase?

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pepperz
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is luxury car a smarter purchase?

Post by pepperz » Mon Jun 19, 2017 11:15 pm

Does it ever make *more* financial sense to buy a used luxury car over a regular new / used car?

For instance, I've heard BMW's hold their value and quality substantially better than normal American / Japanese cars.

An article I read stated how a used BMW 760Li that is 1-3 years old with 40K miles, purchased for $40K (they are $140K brand new), can last 20 years and retain much of its value even after that long.

As opposed to a "normal car" you're lucky to get 10 years out of that is worth far less by the time you are done with it.

I'm curious to hear Boglehead thoughts on this.

UPDATE (added later):

Here is the e-book which gave me this idea...

http://resources.palmbeachgroup.com/spe ... g-Rich.pdf

Please see pages 3-4, 8 ("cost of use"), and 43.
Last edited by pepperz on Tue Jun 20, 2017 10:50 am, edited 3 times in total.

happy77
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Re: is luxury car a smarter purchase?

Post by happy77 » Mon Jun 19, 2017 11:51 pm

Today, buying any car other than a self-driving car(Tesla?) is not a smart purchase.

There is a revolution coming in the automobile world. Few more years, and all current car ownerships and insurance models will be history.

We are living in the last years of manual driving.

So, just wait for fully automated mobility services with different levels of ETA and comfort; and pay a monthly fixed or variable service fees just like any other utility. And the best part is – you don’t have to drive.

And yes, if you love driving, just buy a performance car now without giving any thoughts to money. In few years, all manual driving would be banned and the only resort for car lovers would be to shell out money at specialized private tracks to manually drive a car .

sport
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Re: is luxury car a smarter purchase?

Post by sport » Tue Jun 20, 2017 12:24 am

My understanding is that BMWs are much less reliable than Hondas or Toyotas. They need more service and repairs. To make matters worse, this service and repairs can be much more expensive than other cars. Also, if you buy a used one, there will be more problems because the car is older. So, you may like the car, but there likely will be a substantial cost of ownership in addition to the depreciation.

IMO
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Re: is luxury car a smarter purchase?

Post by IMO » Tue Jun 20, 2017 12:27 am

Always seems there is this thought that German cars are felt superior to other cars. I've done the luxary German Porsche purchase (1988 928 S4 bought 1995 with 50,000 miles, $20K for a car costing over $50K in 1988 which was a lot for a car at that time). Drove it off the lot and literally the water pump went out. 60,000 miles and the camshaft broke (and never drove it hard). The argument then was you'll get 300,000 miles from that engine. Actually the value of that car has gone up significantly over the last few yrs, but more for it's collector type status. Kinda sounds like your current argument . . . But FWIW, was a fun car to drive.

So from my personal experience I don't buy it as I've never had even a Chrysler/Honda/Hyundai/Nissan economy car perform so poorly on engine quality prior to 100,000 miles.

Interesting article from Consumer Reports that has BMW's amongst others with high oil consumption issues.
http://www.consumerreports.org/cro/maga ... /index.htm

So to answer your question, no.

Spirit Rider
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Re: is luxury car a smarter purchase?

Post by Spirit Rider » Tue Jun 20, 2017 12:50 am

happy77 wrote:Today, buying any car other than a self-driving car(Tesla?) is not a smart purchase.

There is a revolution coming in the automobile world. Few more years, and all current car ownerships and insurance models will be history.
Balderdash. Maybe in a few decades, but in a few years they will still be in single digits percentages at most.

selters
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Re: is luxury car a smarter purchase?

Post by selters » Tue Jun 20, 2017 2:09 am

happy77 wrote:Today, buying any car other than a self-driving car(Tesla?) is not a smart purchase.

There is a revolution coming in the automobile world. Few more years, and all current car ownerships and insurance models will be history.

We are living in the last years of manual driving.
According to Volvo, no autonomous car technology is even remotely close to being able to operate a vehicle by itself in snowy and icy climates. Of course, with climate change, there won't be much snow and ice left anywhere, but even in rainy conditions on bad roads I have my doubts about how good this new technology is.

BruDude
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Re: is luxury car a smarter purchase?

Post by BruDude » Tue Jun 20, 2017 2:21 am

Most German cars depreciate like a rock. The best car "investments" are limited number sports cars or ones with hard-to-find desirable options. I bought a Porsche 991S for a year ago that I could probably sell today for $15k more than I paid. I bought a different 991S last year from Carmax that they had underpriced and sold it for a nice five-figure profit because it was a very rare build with all of the "performance"/"enthusiast" options that I knew would be highly valued from the right buyer. I bought an E92 M3 before that for $42k, drove it for 3 years and 20k miles, and sold it for $39k. Porsche GT cars still sell above MSRP used, sometimes well above MSRP even if they're several years old (check GT3RS , GT2/GT2RS, GT4 prices for example). E9x series BMW M3's have held their value incredibly well in the last few years. Meanwhile standard SUVs like Cayenne's, X3, X5, Q5, Q7, GL, etc, standard sedans like C class, Panamera, A5, etc will lose half of their MSRP value extremely fast and keep dropping you really need to know what you're looking for and which cars will hold their resale the best in the market.

Every-day run of the mill cars like a 7 series, SUVs, basic sedans, aren't going to hold their value and will generally get crushed on depreciation. If you think you're going to buy a $40k 760i and have it be worth $30k in 3 years you are probably mistaken, it will probably be $20k by then and you will have a lot of expenses for maintenance, repairs, and possibly property taxes depending on the state. I had my M3 under warranty when the air conditioning broke. The part was $400 but they had to tear the whole car apart to fix it, was a $3400 job all said and done. A 7 series is going to have some really expensive repairs if anything major breaks. Minor repairs can still be well over $1000.

There is obviously some value in enjoying the car too. I absolutely love the 991S and may well keep it forever, it is pretty much the perfect luxury sports car. Wasn't cheap but worth every penny. Maybe I'll regret it when I retire with less cash in my pocket, but probably not. Gotta enjoy life.

AlohaJoe
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Re: is luxury car a smarter purchase?

Post by AlohaJoe » Tue Jun 20, 2017 3:04 am

pepperz wrote:Does it ever make *more* financial sense to buy a used luxury car over a regular new / used car?
Ever? Sure, I'm sure there are some circumstances where you can buy a used car at a great price all the stars align. But, as the saying goes, that's confusing strategy with outcome. Just because you have a good outcome doesn't mean you had a good strategy. Maybe you just got awfully lucky.
For instance, I've heard BMW's hold their value and quality substantially better than normal American / Japanese cars.
This is basically an outright lie and one that is easily checked. There are numerous websites out there that provide data on cars.

10 best at holding value according to Car & Driver. No BMWs listed but plenty of Japanese cars.

Image

Best brands at holding value according to Edmunds. No BMW listed.

Image

"Top Depreciation Busters" according to CAP Automotive in the UK. No BMW.

Image
An article I read stated how a used BMW 760Li that is 1-3 years old with 40K miles, purchased for $40K (they are $140K brand new)
A 3-year old BMW 760Li cannot be purchased for $40,000. All you have to do is look at prices online. A 2014 760Li generally sells for $65,000 - $75,000. I mean sure, maybe you might get lucky and find someone who suddenly needs to sell their car for a firesale price of $40,000. I don't know that I'd call that something a person could build a plan around, though.
can last 20 years and retain much of its value even after that long.
Both of these are also easily proven wrong. A 1997 (20 year old) 7-series in great condition with low mileage is worth maybe $2,000. I don't think anyone would consider that "retaining much of its value".

(You also have to account for the terrible gas mileage of the 7-series compared to other cars. 20 years of 12mpg adds up.)
I'm curious to hear Boglehead thoughts on this.
I think there are plenty of good reasons to buy a luxury car; I've owned both a rear wheel drive convertible and Japanese import turbo so I understand the appeal for some people. But I don't think they are "cheaper" by any possible metric.

The Wizard
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Re: is luxury car a smarter purchase?

Post by The Wizard » Tue Jun 20, 2017 3:46 am

selters wrote:
happy77 wrote:Today, buying any car other than a self-driving car(Tesla?) is not a smart purchase.

There is a revolution coming in the automobile world. Few more years, and all current car ownerships and insurance models will be history.

We are living in the last years of manual driving.
According to Volvo, no autonomous car technology is even remotely close to being able to operate a vehicle by itself in snowy and icy climates. Of course, with climate change, there won't be much snow and ice left anywhere, but even in rainy conditions on bad roads I have my doubts about how good this new technology is.
Self driving probably doesn't do so well on rural gravel roads either.

And I can recall a short drive in or just after a blizzard a few years back. It was in one of the flyover states. No other recent traffic so the road was pure white including the ditches on both sides. Staying on the road was possible by staying equidistant between the fences of the fields on either side of the road...
Attempted new signature...

Thesaints
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Re: is luxury car a smarter purchase?

Post by Thesaints » Tue Jun 20, 2017 4:04 am

Unless one is interested in having a job in the sector of used cars sales, the residual value of a car is a non-issue.
My advice is to buy the car you like best and drive it until you find one you lime more. All within your financial means, it goes without saying.
A lot better than forcing oneself to buy a car one does not particularly like, only because after N years it will have maintained a certain value. Those would be N unhappy years.

jbranx
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Re: is luxury car a smarter purchase?

Post by jbranx » Tue Jun 20, 2017 4:09 am

I've always driven Boglehead vehicles in BH fashion, one lasting 17 years. However, for the reasons listed above by Aloha Joe, I now drive a 2016 Mercedes E-350. Strolled up the street two blocks in Sept. nearly two years ago to the Mercedes dealer with a Costco bid in my pocket, expecting nothing to happen. Internet sales guy said he'd beat the Costco deal by $4K. Then asked what trade-in I had: 2007 Honda Ridgeline pickup with all the trimmings. I was taken aback at his high offer for the truck; Joe's info was right. I asked for $1k more and got it. He sold it a week later for $600 above my offer.

MB is a great car. Much safer for me and my wife, both seventy-some, to drive vs. our other car, a 2004 Toyota Avalon. Took the MB to the dealer at one year for the oil change and checkup, $260. My local Firestone shop will do the next one for under a hundred with best synthetic oil. It's easy to figure out why the dealership was so anxious to make a deal: he expects I'm not willing to drive more than two blocks to save money. But the Firestone manager warned me that MB will give me warranty trouble probably if I don't have them do the maintenance. I'll let it rust in the garage first rather than be ripped off.

Truth be told, neither me or my wife, having read all the manuals and watched all the videos, have a clue how to operate half of all the gizmos on MB. Turns out the dealer doesn't either. Was told they have a young "geek" who will gladly train us. No thanks. Just stuck my trusty Garmin on the dash and figured out how to turn on the radio. Fine as it is, the E-350 doesn't steer any better than the Toyota. It requires premium gas.

My friends that own BMW's tell me their next luxury car will be an Audi. Apparently Audi has pulled ahead in a lot of rankings. My next car is very likely to be a Tesla self driver or the Honda or Toyota equivalent. I now take Uber to the airport for $13 and the Toyota to the grocery store. Lesson learned: luxury ain't never "in" if you've spent your whole life living below your means, clipping coupons, investing in the cheapest index funds, and generally being consumer smart. It's too much of a constant "culture clash." My city has those funny self drivers with all the hardware on top cruising all over the place. My guess is near autonomous cars are coming very fast.

grettman
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Re: is luxury car a smarter purchase?

Post by grettman » Tue Jun 20, 2017 4:30 am

Spirit Rider wrote:
happy77 wrote:Today, buying any car other than a self-driving car(Tesla?) is not a smart purchase.

There is a revolution coming in the automobile world. Few more years, and all current car ownerships and insurance models will be history.
Balderdash. Maybe in a few decades, but in a few years they will still be in single digits percentages at most.

When I was growing up, the promised us hovercrafts and flying cars. I will believe this when I see it.

Griffeycom
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Re: is luxury car a smarter purchase?

Post by Griffeycom » Tue Jun 20, 2017 4:43 am

pepperz wrote:Does it ever make *more* financial sense to buy a used luxury car over a regular new / used car?

For instance, I've heard BMW's hold their value and quality substantially better than normal American / Japanese cars.

An article I read stated how a used BMW 760Li that is 1-3 years old with 40K miles, purchased for $40K (they are $140K brand new), can last 20 years and retain much of its value even after that long.

As opposed to a "normal car" you're lucky to get 10 years out of that is worth far less by the time you are done with it.

I'm curious to hear Boglehead thoughts on this.
$100k loss is 1-3 years isn't quite "Holding value."

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bottlecap
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Re: is luxury car a smarter purchase?

Post by bottlecap » Tue Jun 20, 2017 5:58 am

No. Doesn't make sense. A Honda or Toyota will hold value as well as a BMW, maybe more. And they will cost you far less in maintenance.

And getting ten+ years out of a car is easy. It has been for several decades.

JT

emoore
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Re: is luxury car a smarter purchase?

Post by emoore » Tue Jun 20, 2017 8:00 am

grettman wrote:
Spirit Rider wrote:
happy77 wrote:Today, buying any car other than a self-driving car(Tesla?) is not a smart purchase.

There is a revolution coming in the automobile world. Few more years, and all current car ownerships and insurance models will be history.
Balderdash. Maybe in a few decades, but in a few years they will still be in single digits percentages at most.

When I was growing up, the promised us hovercrafts and flying cars. I will believe this when I see it.
True but at least the self driving technology is being developed and tested. Flying cars were just a pipe dream. I don't think it will happen in the next few years but self driving cars will be coming faster than the typical car changes.

Rick Rock
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Re: is luxury car a smarter purchase?

Post by Rick Rock » Tue Jun 20, 2017 8:23 am

happy77 wrote:Today, buying any car other than a self-driving car(Tesla?) is not a smart purchase.

There is a revolution coming in the automobile world. Few more years, and all current car ownerships and insurance models will be history.
Define "few" -- if "few" equals 20+, then OK.

https://futurism.com/elon-musk-makes-a- ... ext-decade

Simple math - you have 2 billion cars driving today, the industry can produce 100 million cars per year.

Tesla doesn't even ship 100k cars annually yet - and while they have Autopilot, they can all be driven by their human owners. And they're the furthest along.

Elon thinks 10 years before all new cars are self driving. Maybe - but it's going to take a long time to replace all of the vehicles in the world before that happens.

Shouldn't have any bearing on whether this guy should buy a used 7 series.

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sunny_socal
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Re: is luxury car a smarter purchase?

Post by sunny_socal » Tue Jun 20, 2017 8:48 am

pepperz wrote:Does it ever make *more* financial sense to buy a used luxury car over a regular new / used car?

For instance, I've heard BMW's hold their value and quality substantially better than normal American / Japanese cars.

An article I read stated how a used BMW 760Li that is 1-3 years old with 40K miles, purchased for $40K (they are $140K brand new), can last 20 years and retain much of its value even after that long.

As opposed to a "normal car" you're lucky to get 10 years out of that is worth far less by the time you are done with it.

I'm curious to hear Boglehead thoughts on this.
You must be new here. There's at least one car thread a week, I'll summarize the common themes:
- Buy a used car and drive it until it falls apart.
- If buying new, it's ok to get Honda or Toyota. Drive it until it falls apart.

Bogleheads will never bless your decision to get a luxury car because it never makes financial sense. It only makes sense from the "life is short" perspective. YOLO! :beer (Disclaimer: I've owned a BMW, but never again)

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Re: is luxury car a smarter purchase?

Post by lazydavid » Tue Jun 20, 2017 8:49 am

IMO wrote:Interesting article from Consumer Reports that has BMW's amongst others with high oil consumption issues.
http://www.consumerreports.org/cro/maga ... /index.htm
To clarify, there is ONE modern BMW engine that has oil consumption issues. It's the N63 Twin-turbo 4.4L v8 used in the 550i, 750i, and X5/X6 50i. This is a "hot vee" configuration, with the turbos nestled between the cylinder heads, under the intake manifold. It burns oil at an elevated rate as a result. Other manufacturers who have adopted this design have seen similar issues.

Substantial improvements to the design were made for the 2013/2014 model year (depending on model), and should be totally resolved as of 2016/2017.

NHRATA01
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Re: is luxury car a smarter purchase?

Post by NHRATA01 » Tue Jun 20, 2017 9:00 am

Luxury cars have the absolute worst depreciation, by far in the industry. And the higher in price, the more you lose.

You look at the 3 year resale on something like an S-class, 7-series, A8, Quattroporte, it's awful. I mean think about it, you can pick up a 3 year old car that sold for 100K new, for 40-50k. This is why such a high percentage are leased.

Note that we're speaking about luxury cars, not high end performance cars like Porsche and Ferrari or certain AMG coupes. They tend to sell in much lower numbers. But there's really nothing rare about an S500.

Now I see where the boglehead might be going - hey let me spoil myself and pick up a 100K car on the cheap! Just remember that 100K car takes maintenance and repair costs of a 100K car, not a 40k one! I honestly think it may be more financially conscious if you're going to splurge, to just take out a lease for such a vehicle and write it off as gift to yourself. Just don't start thinking about what that $899/mo lease payment would do if put into an S&P 500 fund for 36 months. :)

DomDangelina
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Re: is luxury car a smarter purchase?

Post by DomDangelina » Tue Jun 20, 2017 9:03 am

OP, in the valley of tears in which we live, you've got to ask yourself one question: Will buying a BMW bring me a modicum of happiness? If the answer is yes, and if you can afford it, then buy it.
"Often the remedy causes the disease. It is by no means the least of life's rules: to let things alone." | Baltasar Gracián, S.J., The Art of Worldly Wisdom, Maxim 121

Dottie57
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Re: is luxury car a smarter purchase?

Post by Dottie57 » Tue Jun 20, 2017 9:04 am

Spirit Rider wrote:
happy77 wrote:Today, buying any car other than a self-driving car(Tesla?) is not a smart purchase.

There is a revolution coming in the automobile world. Few more years, and all current car ownerships and insurance models will be history.
Balderdash. Maybe in a few decades, but in a few years they will still be in single digits percentages at most.
+1

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AAA
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Re: is luxury car a smarter purchase?

Post by AAA » Tue Jun 20, 2017 9:25 am

happy77 wrote:Today, buying any car other than a self-driving car(Tesla?) is not a smart purchase.

There is a revolution coming in the automobile world. Few more years, and all current car ownerships and insurance models will be history.

We are living in the last years of manual driving.
I've seen predictions such as this for a long time and I don't think we're anywhere near the point of self-driving cars. The software is very complex and the consequence of inevitable bugs could be disastrous. Right now, it would be like having Siri drive your car for you. How would that work out?

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lthenderson
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Re: is luxury car a smarter purchase?

Post by lthenderson » Tue Jun 20, 2017 9:27 am

pepperz wrote:As opposed to a "normal car" you're lucky to get 10 years out of that is worth far less by the time you are done with it.
I've bought many "normal" cars that are already 10 years old after the original owner tired of them and ate most of the depreciation costs. I then drive them until the wheels fall off. Right now I have two "normal" vehicles that are greater than 10 years old, one just turned 20 years old and neither are in danger of falling apart. The 20 year old vehicle has only depreciated $12,000 since I bought the thing brand new when I paid $12,500 for it. It is just a "normal" Honda.

takeshi
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Re: is luxury car a smarter purchase?

Post by takeshi » Tue Jun 20, 2017 9:31 am

pepperz wrote:Does it ever make *more* financial sense to buy a used luxury car over a regular new / used car?
Can you find outlier data points that are far off a given trend? Yes. Are you likely to end up as one of those data points? Probably not.
pepperz wrote:As opposed to a "normal car" you're lucky to get 10 years out of that is worth far less by the time you are done with it.
Already pointed out above but 10 years from a "normal car" has been easy for a long time now and luxury cars are also going to be worth far less.
pepperz wrote:I'm curious to hear Boglehead thoughts on this.
Sunny_socal provides the tl;dr version but there are many existing car purchase threads if you want to read more. That said, buy a car for your reasons and needs within your means instead of relying on polling others.
Last edited by takeshi on Tue Jun 20, 2017 9:34 am, edited 2 times in total.

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TomatoTomahto
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Re: is luxury car a smarter purchase?

Post by TomatoTomahto » Tue Jun 20, 2017 9:32 am

Regardless of the self-driving issue, a Tesla will make you smile every time you drive it. Get a used Tesla. :D

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DaftInvestor
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Re: is luxury car a smarter purchase?

Post by DaftInvestor » Tue Jun 20, 2017 9:32 am

Do you have a link to the article you read?
Funny - a friend of mine tried to make this argument to me with his used-BMW purchase - now he complains that every time he gets service there is something he needs to pay for which costs him at least $1000. I can't imagine how much money you would have to sink into a used 760 over 20 years. Also - I thought 2-year used 560's went for more than $40K - so find it hard to believe you can get a 1-3 year old 760 for $40K (I could be wrong though - never been in the market).
If you want a BMW then buy it but realize it will cost you far more financially than a new or used Japanese car would.

rai
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Re: is luxury car a smarter purchase?

Post by rai » Tue Jun 20, 2017 9:46 am

Most German luxury cars will cost a lot to fix. I can't say if your car will need to be repaired or not. Even a brand new car can need to be repaired.

But I owned one car Honda S2000 literally nothing needed to be repaired or fixed for 6 years.

I owned a BMW M3 also 6 years and it cost me $3000 out of pocket even though 4 years were under warranty so just the 2 years cost me $3000 for maintenance and repairs (not counting tires and brakes which all cars will need so that's a wash). I sold it before anything else went bad and before brakes were needed because I read they always replace pads and rotors on the M3 so brakes cost 4x more than a typical car.

My friend had a M3 and his engine went out, it would have cost him $20K or something but it was still under warranty so he was safe.

Many German cars are leased because people don't want to own them out of warranty. Contrary a car like Honda/Acura is still very valuable out of warranty. Not saying Honda/Toyota etc. are always trouble free but more so than typical German cars. Often times I'll look at buying a used Honda new one will just be a small bit more because the used holds resale so well.

I sold a Acura MDX with 120K miles and got something like $13K from a dealer so presumably someone bought it from them for $15K and will probably get another 100k miles.
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair

rai
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Re: is luxury car a smarter purchase?

Post by rai » Tue Jun 20, 2017 9:53 am

It's all a crap shoot. I sold my neighbor our old Ford Escort because we had little baby and we wanted a safer (bigger car too) anyway that car had like 120K miles when she sold it at 10 years sold for less than $1000. The neighbor drove the car for another 10 years with minor repairs. Literally it was 20 years with minimal repairs.

But the point was if the engine or transmission went on the Escort they could just junk the car since it was only worth $800 or so. But if an engine goes on a 10 year old 740i you probably wound not just throw the car away you might spend several thousand on repairs.
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair

jebmke
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Re: is luxury car a smarter purchase?

Post by jebmke » Tue Jun 20, 2017 9:59 am

grettman wrote:When I was growing up, the promised us hovercrafts and flying cars. I will believe this when I see it.
and paperless society.
When you discover that you are riding a dead horse, the best strategy is to dismount.

afan
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Re: is luxury car a smarter purchase?

Post by afan » Tue Jun 20, 2017 10:02 am

The smart purchase is always a used, high reliability, non-luxury car. By buying something several years old you avoid most of the depreciation. Lots of cars come off lease after 3-5 years. They may be in very good condition with relatively low mileage. You are not paying for the dealer markup, manufacturer's marketing and so forth.

Something like a Toyota Avalon would get you a size similar to a million dollar big BMW, at a fraction of the purchase price, a fraction of the maintenance cost, more reliability and many more places to get maintenance.

Of course, if you want/need a car to demonstrate status then you have to pay for that. IF this is not the motivation, then a regular car, not a luxury model, is far better.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

Lindrobe
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Re: is luxury car a smarter purchase?

Post by Lindrobe » Tue Jun 20, 2017 10:06 am

If you must buy a German car, buy a used one. I did the German car experiment and have learned my lesson. I have owned a German luxury car (Audi) and Japanese luxury car (Infiniti) and have never seen a car plummet in value like my Audi did.

In 2004, I bought a brand new G35 coupe for around $35,000. I sold it 8 years later with around 25,000 miles for $18,000, so a little over 50% of new car cost after 8 years. Not too bad. In 2013, I bought a brand new A5 for $40,000 and sold it 3.5 years later with 17,000 miles for $22,000, so 55% of new car cost after only 3.5 years. My Infiniti was a rear rear drive, mid-line model. The Audi was an all-wheel drive, mid-line model.

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Re: is luxury car a smarter purchase?

Post by dm200 » Tue Jun 20, 2017 10:08 am

Other might comment, but maintenance/repair costs for many "luxury" vehicles are higher.

ArmchairArchitect
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Re: is luxury car a smarter purchase?

Post by ArmchairArchitect » Tue Jun 20, 2017 10:27 am

The depreciation on European luxury cars (ie. BMW, Mercedes, Audi) is horrid, even if you buy used. Reason being, they are overengineered, unnecessarily complicated and have high maintenance/parts costs. So essentially, you're buying a liability.

Thesaints
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Re: is luxury car a smarter purchase?

Post by Thesaints » Tue Jun 20, 2017 10:31 am

ArmchairArchitect wrote:The depreciation on European luxury cars (ie. BMW, Mercedes, Audi) is horrid, even if you buy used. Reason being, they are overengineered, unnecessarily complicated and have high maintenance/parts costs. So essentially, you're buying a liability.
A stylish liability, to be sure.

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Re: is luxury car a smarter purchase?

Post by wfrobinette » Tue Jun 20, 2017 10:36 am

happy77 wrote:Today, buying any car other than a self-driving car(Tesla?) is not a smart purchase.

There is a revolution coming in the automobile world. Few more years, and all current car ownerships and insurance models will be history.

We are living in the last years of manual driving.

So, just wait for fully automated mobility services with different levels of ETA and comfort; and pay a monthly fixed or variable service fees just like any other utility. And the best part is – you don’t have to drive.

And yes, if you love driving, just buy a performance car now without giving any thoughts to money. In few years, all manual driving would be banned and the only resort for car lovers would be to shell out money at specialized private tracks to manually drive a car .
It'll be 10 -20 years or more before manual driving will be banned entirely. The auto fleet will need to cycle out completely or someone is going to have shell out a bunch of tax rebates to buy of these perfectly working cars.

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HomerJ
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Re: is luxury car a smarter purchase?

Post by HomerJ » Tue Jun 20, 2017 10:38 am

pepperz wrote:Does it ever make *more* financial sense to buy a used luxury car over a regular new / used car?

For instance, I've heard BMW's hold their value and quality substantially better than normal American / Japanese cars.

An article I read stated how a used BMW 760Li that is 1-3 years old with 40K miles, purchased for $40K (they are $140K brand new), can last 20 years and retain much of its value even after that long.

As opposed to a "normal car" you're lucky to get 10 years out of that is worth far less by the time you are done with it.

I'm curious to hear Boglehead thoughts on this.
I've heard the exact opposite. Hondas and Toyotas hold their value very well, and last a long time (certainly longer than 10 years).

No BMW is going to last 20 years without extensive expensive repairs.

I can only guess you read that article in "BMW Monthly".

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Re: is luxury car a smarter purchase?

Post by wfrobinette » Tue Jun 20, 2017 10:41 am

NHRATA01 wrote:Luxury cars have the absolute worst depreciation, by far in the industry. And the higher in price, the more you lose.

You look at the 3 year resale on something like an S-class, 7-series, A8, Quattroporte, it's awful. I mean think about it, you can pick up a 3 year old car that sold for 100K new, for 40-50k. This is why such a high percentage are leased.
You do realize that people are paying that depreciation in the lease right? They are leased because people can't afford the payment to pay it off in 5 years. Leasing is less cash out of pocket in a lot of cases but you get nothing in the end except the opportunity to buy the car or over mileage fees..

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Re: is luxury car a smarter purchase?

Post by rgs92 » Tue Jun 20, 2017 10:48 am

Read the Lexus forums and read about the money-pit stories with BMWs, Audis, and Mercedes. There are tons of refugees from these brands.

And actually, you can pick up a used high-end Euro car for a low price because everyone knows about the high cost of maintaining these, along with their fragile mechanical character.

Don't believe me, spend some time on the car forums and you'll get the idea.
Basically, the reverse of what you are asking is true. If you want a luxury car, try Lexus or maybe Genesis or Infiniti.

Lexus offers about an 8 year bumper-to-bumper warranty that you can buy on their CPO cars. Mercedes offers 3 years on theirs. That's not a good sign and reflects on the company's faith in its own cars.
Last edited by rgs92 on Tue Jun 20, 2017 10:51 am, edited 1 time in total.

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Re: is luxury car a smarter purchase?

Post by pepperz » Tue Jun 20, 2017 10:49 am

FYI: Here is the e-book which gave me this idea...

http://resources.palmbeachgroup.com/spe ... g-Rich.pdf

Please see pages 3-4, 8 ("cost of use"), and 43.

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Re: is luxury car a smarter purchase?

Post by Thesaints » Tue Jun 20, 2017 10:51 am

rgs92 wrote:Read the Lexus forums and read about the money-pit stories with BMWs, Audis, and Mercedes. There are tons of refugees from these brands.

To be fair, in the BMW forum they pity those driving a Lexus.

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Re: is luxury car a smarter purchase?

Post by sunny_socal » Tue Jun 20, 2017 11:22 am

Thesaints wrote:
rgs92 wrote:Read the Lexus forums and read about the money-pit stories with BMWs, Audis, and Mercedes. There are tons of refugees from these brands.

To be fair, in the BMW forum they pity those driving a Lexus.
Perhaps I can see why - Lexus has a face only a mother can love :|
(I wouldn't be caught dead driving a lexus, I don't care if it's the most reliable car in the world)

I'm hoping that a Volvo will be the perfect compromise between luxury and reliability, their new models look great :beer

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Re: is luxury car a smarter purchase?

Post by BruDude » Tue Jun 20, 2017 11:23 am

rgs92 wrote:Read the Lexus forums and read about the money-pit stories with BMWs, Audis, and Mercedes. There are tons of refugees from these brands.

And actually, you can pick up a used high-end Euro car for a low price because everyone knows about the high cost of maintaining these, along with their fragile mechanical character.

Don't believe me, spend some time on the car forums and you'll get the idea.
Basically, the reverse of what you are asking is true. If you want a luxury car, try Lexus or maybe Genesis or Infiniti.

Lexus offers about an 8 year bumper-to-bumper warranty that you can buy on their CPO cars. Mercedes offers 3 years on theirs. That's not a good sign and reflects on the company's faith in its own cars.
The feel of a Lexus and the feel of a BMW/Audi/Merc/Porsche are apples and oranges. To me, a Lexus feels like an overpriced Toyota, which is basically what it is. I wouldn't be caught dead in a Lexus personally...

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Re: is luxury car a smarter purchase?

Post by WhiteMaxima » Tue Jun 20, 2017 11:38 am

I would buy a used luxury car with extended warranty. Or just buy a new yota or honda.

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Re: is luxury car a smarter purchase?

Post by lazydavid » Tue Jun 20, 2017 11:59 am

sunny_socal wrote:I'm hoping that a Volvo will be the perfect compromise between luxury and reliability, their new models look great :beer
The XC90 in particular is amazing, and super comfortable. Unfortunately from what I've seen, reliability is absolutely deplorable.

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Re: is luxury car a smarter purchase?

Post by jharkin » Tue Jun 20, 2017 12:05 pm

Spirit Rider wrote:
happy77 wrote:Today, buying any car other than a self-driving car(Tesla?) is not a smart purchase.

There is a revolution coming in the automobile world. Few more years, and all current car ownerships and insurance models will be history.
Balderdash. Maybe in a few decades, but in a few years they will still be in single digits percentages at most.

Agreed. Ive heard these prognostications myself, usually made by somebody sitting in a silicon valley office.

Drive through Iowa farm country, and try to tell me this will happen in less than a couple decades. :oops:

I dont want to have to call a self driving uber to take me on a camping trip to the mountains... or to haul my yard waste to the town dump... or any one of a hundred other tasks that are not so easy to automate/centralize in the USA which is far to spread out to make these centralized public transit options work as well as they do in densely populated continental Europe.

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Re: is luxury car a smarter purchase?

Post by jharkin » Tue Jun 20, 2017 12:11 pm

sunny_socal wrote:
You must be new here. There's at least one car thread a week, I'll summarize the common themes:
- Buy a used car and drive it until it falls apart.
- If buying new, it's ok to get Honda or Toyota. Drive it until it falls apart.

Bogleheads will never bless your decision to get a luxury car because it never makes financial sense. It only makes sense from the "life is short" perspective. YOLO! :beer (Disclaimer: I've owned a BMW, but never again)

Bingo. the boglehead rules say that when you buy a car it:

* Must be at least 20 years old so that its financial cost is minimal
* Must be brand new because anything more than 6 months old is a death trap lacking modern safety features
* Must be a Prius because anything larger wastes gas
* Must be a full size 3 ton SUV because anything smaller is too dangerous to drive

I'll let you wade though detangling all the contradictions .....

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Re: is luxury car a smarter purchase?

Post by pepperz » Tue Jun 20, 2017 12:19 pm

DaftInvestor wrote:Do you have a link to the article you read?
Here is the e-book which gave me this idea:

http://resources.palmbeachgroup.com/spe ... g-Rich.pdf

Please see pages 3-4, 8 ("cost of use"), and 43.

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Re: is luxury car a smarter purchase?

Post by nisiprius » Tue Jun 20, 2017 12:25 pm

If you want a luxury car and you can afford one, get one. Of course, do the tradeoff on how much you think you will enjoy it versus spending the same money in some different way.

Don't kid yourself for an instant that it's going to be cheaper. Of course it isn't. Don't be silly. Use your common sense.

There's nothing wrong with paying more in order to drive a nicer car. Just say it: "I'm spending more money because I want a nicer car." There's nothing wrong with that, but there's something wrong with kidding yourself.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: is luxury car a smarter purchase?

Post by GuyFromGeorgia » Tue Jun 20, 2017 12:28 pm

BruDude wrote:
The feel of a Lexus and the feel of a BMW/Audi/Merc/Porsche are apples and oranges. To me, a Lexus feels like an overpriced Toyota, which is basically what it is. I wouldn't be caught dead in a Lexus personally...
People are very opinionated about Lexus. I agree with your first statement about the feel of the multiple cars, but disagree on the second. BMW/Merc/Porsche don't have a non-luxury version of their brand. They are high-end performance luxury cars, no doubt. Lexus doesn't want to play in that field and aligns better with Infiniti which both push luxury and reliability, with just enough performance to be reasonable. They are also extremely reasonable to repair, unlike BMW/Merc/Porsche. As for Audi, if you claim Lexus is an overpriced Toyota, then I claim Audi is an overpriced VW. Neither claim is actually 100% valid, but the comparison for argument's sake is solid. Suspension, interior noise, quality of seats/speakers/features, and many more are dramatically improved.

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Re: is luxury car a smarter purchase?

Post by astondb4gtz » Tue Jun 20, 2017 12:45 pm

WhiteMaxima wrote:I would buy a used luxury car with extended warranty.
Buy from CarMax and get their extended warranty - that's the way to go. Or Certified pre-owned - Jaguar has a very nice program if you like them. Still gonna be cheaper overall to buy a ten year old civic and drive it until the wheels fall off, though - no argument.

Depends on your situation and priorities.

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