luxury vehicle: what income/asset range

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seligsoj
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luxury vehicle: what income/asset range

Post by seligsoj » Thu Aug 01, 2019 10:43 pm

I'm curious as to what income/asset range you would consider purchasing a luxury vehicle...say in the $40,000 range and up? My husband is in the market for a new car......I want to stick with a toyota.......he wants to maybe consider a used lexus....our families have never been luxury vehicle owners so it would feel weird to me to ride around in one.

HornedToad
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Re: luxury vehicle: what income/asset range

Post by HornedToad » Thu Aug 01, 2019 10:51 pm

~$200-250k+ income or $750k+ net worth where the cost of the luxury will have small-ish impact on savings goals.

Ideally the cash cost of the vehicle is <1yr annual savings

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Re: luxury vehicle: what income/asset range

Post by 9-5 Suited » Thu Aug 01, 2019 10:55 pm

I have a slightly different way of thinking about this than % of income or % of net worth. Every year we have an annual spending budget. We can spend that total on whatever we want, but can't spend more than that.

So with a car, we take the purchase price (e.g. $40,000) and the expected residual value after 8 years (e.g. $8,000) and that tells us the car costs us $32,000. We choose 8 years because that's how long we plan to keep the vehicle. For simplicity, we divide the total expense by 8 and get $4,000 per year of cost. Regardless of income or net worth, that $4,000 is just part of our annual spending budget. If that fits along with all our other spending goals, then that's the definition of being able to afford it.

As for not being a luxury car type person, I would strongly recommend getting over that as quickly as possible. It's all relative. Driving a Toyota is a luxury car compared to people who buy junker Pontiacs. As long as you are buying the car because you guys like it and not to show off wealth, then it's totally fine. Anyone who hates on you for that can't be much of a good friend anyway, right?

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Re: luxury vehicle: what income/asset range

Post by DesertDiva » Thu Aug 01, 2019 11:04 pm

Get a copy of "Stop Acting Rich and Act Like a Real Millionaire" by Thomas Stanley and read Chapter 7.

Spoiler alert: "The Toyota make was found to be number one in market share among both engineers and millionaires in general... engineers are more than twice as likely to drive Toyotas as others in their wealth category."

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Re: luxury vehicle: what income/asset range

Post by 9-5 Suited » Thu Aug 01, 2019 11:11 pm

DesertDiva wrote:
Thu Aug 01, 2019 11:04 pm
Get a copy of "Stop Acting Rich and Act Like a Real Millionaire" by Thomas Stanley and read Chapter 7.

Spoiler alert: "The Toyota make was found to be number one in market share among both engineers and millionaires in general... engineers are more than twice as likely to drive Toyotas as others in their wealth category."
This is very overrated. People who buy cars they can afford while maintaining high savings rates are going to be wealthy, even if those cars are BMWs or Volvos or whatever. I have a 40% gross savings rate and am going to buy a luxury car soon.

Correlation doesn't demonstrate causation. Just because the most common car brand among millionaires is a Toyota doesn't say anything predictive about an individual's situation. If the OP can afford the luxury car and collectively wants to buy it with his/her spouse for enjoyment, then DO IT!

I wonder what the most common lunch millionaires eat is ... maybe I shouldn't have had a kale salad today because that probably isn't it. I bet it's a homemade turkey sandwich on wheat. I'm going to be in trouble :)

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Re: luxury vehicle: what income/asset range

Post by randomguy » Thu Aug 01, 2019 11:18 pm

9-5 Suited wrote:
Thu Aug 01, 2019 11:11 pm
DesertDiva wrote:
Thu Aug 01, 2019 11:04 pm
Get a copy of "Stop Acting Rich and Act Like a Real Millionaire" by Thomas Stanley and read Chapter 7.

Spoiler alert: "The Toyota make was found to be number one in market share among both engineers and millionaires in general... engineers are more than twice as likely to drive Toyotas as others in their wealth category."
This is very overrated. People who buy cars they can afford while maintaining high savings rates are going to be wealthy, even if those cars are BMWs or Volvos or whatever. I have a 40% gross savings rate and am going to buy a luxury car soon.

Correlation doesn't demonstrate causation. Just because the most common car brand among millionaires is a Toyota doesn't say anything predictive about an individual's situation. If the OP can afford the luxury car and collectively wants to buy it with his/her spouse for enjoyment, then DO IT!

I wonder what the most common lunch millionaires eat is ... maybe I shouldn't have had a kale salad today because that probably isn't it. I bet it's a homemade turkey sandwich on wheat. I'm going to be in trouble :)
It is a stupid stat. What if the numbers said that millionaire owners are 4x as likely to own a BMW as people making less than 50k (could be true. Have never looked into it). Would anyone suggest buying a BMW ?

Toyotas are popular cars. Not surprising they are popular among millionaires. And it isn't like a 45k+ highlander is a cheap car.

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Re: luxury vehicle: what income/asset range

Post by DesertDiva » Thu Aug 01, 2019 11:19 pm

9-5 Suited wrote:
Thu Aug 01, 2019 11:11 pm
DesertDiva wrote:
Thu Aug 01, 2019 11:04 pm
Get a copy of "Stop Acting Rich and Act Like a Real Millionaire" by Thomas Stanley and read Chapter 7.

Spoiler alert: "The Toyota make was found to be number one in market share among both engineers and millionaires in general... engineers are more than twice as likely to drive Toyotas as others in their wealth category."
This is very overrated. People who buy cars they can afford while maintaining high savings rates are going to be wealthy, even if those cars are BMWs or Volvos or whatever. I have a 40% gross savings rate and am going to buy a luxury car soon.

Correlation doesn't demonstrate causation. Just because the most common car brand among millionaires is a Toyota doesn't say anything predictive about an individual's situation. If the OP can afford the luxury car and collectively wants to buy it with his/her spouse for enjoyment, then DO IT!

I wonder what the most common lunch millionaires eat is ... maybe I shouldn't have had a kale salad today because that probably isn't it. I bet it's a homemade turkey sandwich on wheat. I'm going to be in trouble :)
Did I say that there is anything predictive about an individual's situation? No. My point is merely that Toyota is a solid choice. There is no reason to feel socially inferior if one chooses a Toyota over a Lexus.

I can afford a luxury car (and have owned them in the past), but there is no one on this planet I care to impress. I drive a Toyota.
randomguy wrote:
Thu Aug 01, 2019 11:18 pm
And it isn't like a 45k+ highlander is a cheap car.
You're spot on with that observation :happy

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msi
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Re: luxury vehicle: what income/asset range

Post by msi » Thu Aug 01, 2019 11:26 pm

You don't have to pay $40,000 and up for a used Lexus. A 2016 ES or NX 200t, for example, can be under $30k easily, depending on mileage.

https://www.carvana.com/cars/lexus for some examples. Could work out cheaper than buying a similar new Toyota.

I think the question about income/asset range really applies more to new luxury cars. If he were considering that, then this would be a different story.

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Re: luxury vehicle: what income/asset range

Post by msk » Thu Aug 01, 2019 11:29 pm

Comfortable rule-of-thumb that also allows you to enjoy life, not just save for retirement. Car should not be worth more than 6 months income, regardless of whether you pay cash, finance it or lease. One million $ income? Get a Rolls Royce Phantom :mrgreen:

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Re: luxury vehicle: what income/asset range

Post by 9-5 Suited » Thu Aug 01, 2019 11:30 pm

DesertDiva wrote:
Thu Aug 01, 2019 11:19 pm
Did I say that there is anything predictive about an individual's situation? No. My point is merely that Toyota is a solid choice. There is no reason to feel socially inferior if one chooses a Toyota over a Lexus.

I can afford a luxury car (and have owned them in the past), but there is no one on this planet I care to impress. I drive a Toyota.
Fair enough, but I still don't think there's much of an actionable point there. Virtually everyone knows a Toyota is a solid car that doesn't make someone inferior for driving, but if you want and can afford a luxury one why should that influence your decision? You should buy the car that you desire within the budget you are willing to allocate. Hopefully the OP's husband has other reasons than impressing people for considering a higher-end vehicle. If that's the only reason then sure, that's a poor way of approaching life choices.

Most important thing of all is that they're both in agreement on the purchase.

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Re: luxury vehicle: what income/asset range

Post by DesertDiva » Thu Aug 01, 2019 11:35 pm

9-5 Suited wrote:
Thu Aug 01, 2019 11:30 pm
DesertDiva wrote:
Thu Aug 01, 2019 11:19 pm
Did I say that there is anything predictive about an individual's situation? No. My point is merely that Toyota is a solid choice. There is no reason to feel socially inferior if one chooses a Toyota over a Lexus.

I can afford a luxury car (and have owned them in the past), but there is no one on this planet I care to impress. I drive a Toyota.
Fair enough, but I still don't think there's much of an actionable point there. Virtually everyone knows a Toyota is a solid car that doesn't make someone inferior for driving, but if you want and can afford a luxury one why should that influence your decision? You should buy the car that you desire within the budget you are willing to allocate. Hopefully the OP's husband has other reasons than impressing people for considering a higher-end vehicle. If that's the only reason then sure, that's a poor way of approaching life choices.

Most important thing of all is that they're both in agreement on the purchase.
And I sincerely hope you enjoy your new purchase :sharebeer

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Re: luxury vehicle: what income/asset range

Post by 9-5 Suited » Thu Aug 01, 2019 11:43 pm

DesertDiva wrote:
Thu Aug 01, 2019 11:35 pm
And I sincerely hope you enjoy your new purchase :sharebeer
Ha, thanks. Probably a 25% chance I'll end up preaching about how over-rated it is when the 8 years are up ;)

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Re: luxury vehicle: what income/asset range

Post by stimulacra » Thu Aug 01, 2019 11:45 pm

Lexus was created by Toyota for a specific reason; to give their existing customer base a place to ladder up in with upscale and premium vehicles. This was back when Toyotas were considered reliable economical appliances (Corolla, Camry, etc…) and they felt they would have issues selling a premium full size RWD sedan for $40k if it had a Toyota badge on it in the 1980's.

I would argue in 2019, Lexus only makes 3 bona-fide luxury models; LS (sedan), LC (coupe), and LX (SUV). The rest of the lineup are upscale versions of various Toyota models from around the globe (Yes, I'm aware the LX is a rebadged version of the Toyota Land Cruiser).

If your husband wants to consider a Lexus, let him. The delta, in terms of total cost of ownership, between a Toyota and an equivalent Lexus is considerably less than if he were considering other luxury marques (BMW, Audi, Mercedes, Jaguar).

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Re: luxury vehicle: what income/asset range

Post by randomguy » Thu Aug 01, 2019 11:50 pm

msi wrote:
Thu Aug 01, 2019 11:26 pm
You don't have to pay $40,000 and up for a used Lexus. A 2016 ES or NX 200t, for example, can be under $30k easily, depending on mileage.

https://www.carvana.com/cars/lexus for some examples. Could work out cheaper than buying a similar new Toyota.

I think the question about income/asset range really applies more to new luxury cars. If he were considering that, then this would be a different story.
Even with new does it really matter much? Is a 35k Toyota Avalon really that much cheaper than a 40k Lexus ES over a 15 year lifespan of the car? Is it enough to change your financial picture much?

The money part is easy. You can sit down with a calculator and make an estimate of what a car will cost over its 10-15 year lifespan and what the difference between your choices is. The social status stuff is harder. I doubt anyone cares about what the OP drives other than the OP but maybe they live where a 40k lexus is a status symbol. What they are is pretty comfortable ways to commute around.

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Re: luxury vehicle: what income/asset range

Post by ohai » Fri Aug 02, 2019 12:11 am

OP is basically asking how rich you have to be to not care if buying a BMW is a good financial decision, because it is obviously not a good financial decision. No one needs a "luxury car", but if you have enough money, you can spend it on whatever you want.

What matters is how your overall budget looks with the addition of this purchase. You should have some kind of principle on your total spending, given your assets, income, and financial goals. If your luxury is an expensive car, that's fine, just as long as it does not compromise your finances after added to housing, kids school, etc.

Some possible guidelines:
1) If household loses all wage income, you can continue your spending pattern for X years.
2) If a two income household loses one income, you can continue your spending pattern, while saving money, on one income.
3) Your spending is capped at some percentage of income, or provided that you save a fixed dollar amount per year.
4) Ultimately, your target might be to continue your current budget in perpetuity, even with total loss of wage income: i.e. "financial independence".

Unfortunately, the goal of most US people is to exhaust their cash flow on unnecessary things.

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Re: luxury vehicle: what income/asset range

Post by Starfish » Fri Aug 02, 2019 12:18 am

I do not intend to ever go over 30-35k for a car unless is for a good reason (an electric car that saves gas). There are plenty of cars I like under this price.
We have half million income and (low) 7 digits NW, so that is not a factor. Although I am not obsessed I like cars.

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Re: luxury vehicle: what income/asset range

Post by dustinst22 » Fri Aug 02, 2019 12:37 am

My guideline is 10% of income or 5% of networth.

anoop
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Re: luxury vehicle: what income/asset range

Post by anoop » Fri Aug 02, 2019 12:56 am

This is a tough one because it depends also on how much you like cars and if you regard it as a hobby. I do, so I bought an expensive car $30+K when I had a < $200K net worth, but I was young back then (early 30's) and knew my best earning years were ahead of me, not behind me.

Anyway, for someone more authoritative on this subject, Financial Samurai has the following guidelines:
https://www.financialsamurai.com/net-wo ... guideline/

And another one:
https://www.bankrate.com/loans/auto-loa ... -i-afford/

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Re: luxury vehicle: what income/asset range

Post by msi » Fri Aug 02, 2019 2:01 am

randomguy wrote:
Thu Aug 01, 2019 11:50 pm
msi wrote:
Thu Aug 01, 2019 11:26 pm
You don't have to pay $40,000 and up for a used Lexus. A 2016 ES or NX 200t, for example, can be under $30k easily, depending on mileage.

https://www.carvana.com/cars/lexus for some examples. Could work out cheaper than buying a similar new Toyota.

I think the question about income/asset range really applies more to new luxury cars. If he were considering that, then this would be a different story.
Even with new does it really matter much? Is a 35k Toyota Avalon really that much cheaper than a 40k Lexus ES over a 15 year lifespan of the car? Is it enough to change your financial picture much?

The money part is easy. You can sit down with a calculator and make an estimate of what a car will cost over its 10-15 year lifespan and what the difference between your choices is. The social status stuff is harder. I doubt anyone cares about what the OP drives other than the OP but maybe they live where a 40k lexus is a status symbol. What they are is pretty comfortable ways to commute around.
For a younger buyer, $5k saved today could be worth $40k after 30 years of growth at 7%.

Of course, it depends on that buyer's income, net worth, and saving habits if even 30 years worth of growth on that amount of money would matter. It won't make or break anyone's retirement, but it could be enough to wonder if the extra money is really justified.

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Re: luxury vehicle: what income/asset range

Post by MathIsMyWayr » Fri Aug 02, 2019 2:25 am

dustinst22 wrote:
Fri Aug 02, 2019 12:37 am
My guideline is 10% of income or 5% of networth.
Mine is 20% of an annual income or 2% of an investable asset.

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Re: luxury vehicle: what income/asset range

Post by Sconie » Fri Aug 02, 2019 5:03 am

Hmm.....just a few thoughts:
-I'd rather have many of the Toyotas that are priced at $40K+ than most of the Lexus models in the same or similar price range----much less expensive maintenance and wider-availability of dealerships is something that goes hand-in-hand with that decision, too.
-I don't think of the $40K range as being truly "luxury"----$50K-$70K and up-----yes, but it will take $40K+ to purchase something like a Toyota Highlander or an upper end 4Runner, etc.
Of course, everyone had different desires and objectives----YMMV! Good luck with your purchase decision!
I know you think you understand what you thought I said but I'm not sure you realize that what you heard is not what I meant. - Alan Greenspan

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Re: luxury vehicle: what income/asset range

Post by theplayer11 » Fri Aug 02, 2019 5:16 am

car buying is a hot topic. Some people don't see a vehicle as all that important as long as it gets you from point A to point B.
Others actually like driving and prefer a vehicle that is higher in performance. The problem is that many by the higher priced vehicles for the status and drive around like a granny. That is a waste IMO and maybe they should try to figure why they feel the need to try to impress others...or care so much what others think.
The point A to point B people think buying higher priced(or even buying new) is a waste of money, yet they might spend on luxury vacations that others would consider a total waste. Everyone is different.

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Re: luxury vehicle: what income/asset range

Post by student » Fri Aug 02, 2019 5:31 am

9-5 Suited wrote:
Thu Aug 01, 2019 10:55 pm
I have a slightly different way of thinking about this than % of income or % of net worth. Every year we have an annual spending budget. We can spend that total on whatever we want, but can't spend more than that.

So with a car, we take the purchase price (e.g. $40,000) and the expected residual value after 8 years (e.g. $8,000) and that tells us the car costs us $32,000. We choose 8 years because that's how long we plan to keep the vehicle. For simplicity, we divide the total expense by 8 and get $4,000 per year of cost. Regardless of income or net worth, that $4,000 is just part of our annual spending budget. If that fits along with all our other spending goals, then that's the definition of being able to afford it.

As for not being a luxury car type person, I would strongly recommend getting over that as quickly as possible. It's all relative. Driving a Toyota is a luxury car compared to people who buy junker Pontiacs. As long as you are buying the car because you guys like it and not to show off wealth, then it's totally fine. Anyone who hates on you for that can't be much of a good friend anyway, right?
Smart way of looking at it.

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Re: luxury vehicle: what income/asset range

Post by CppCoder » Fri Aug 02, 2019 7:03 am

theplayer11 wrote:
Fri Aug 02, 2019 5:16 am
car buying is a hot topic. Some people don't see a vehicle as all that important as long as it gets you from point A to point B.
Others actually like driving and prefer a vehicle that is higher in performance. The problem is that many by the higher priced vehicles for the status and drive around like a granny. That is a waste IMO and maybe they should try to figure why they feel the need to try to impress others...or care so much what others think.
The point A to point B people think buying higher priced(or even buying new) is a waste of money, yet they might spend on luxury vacations that others would consider a total waste. Everyone is different.
It drives me crazy accelerating out of a red light behind a Porsche that just won't move. Why buy a performance car to drive it like a Nissan Versa? I don't care what people do with their money. I'm just offended by the assault on rationality :).

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Re: luxury vehicle: what income/asset range

Post by Nissanzx1 » Fri Aug 02, 2019 7:10 am

No real hard and fast rule. We probably wouldn’t spend over $25,000 on a vehicle unless we had about a $1M NW.

Our next car will be bought in 1-2 years for $15,000ish. It will be a used Lexus from a private owner. We will pay cash. NW will be somewhere around $750K then. I think the idea is not to have too many assets loosing value to depreciation...

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Re: luxury vehicle: what income/asset range

Post by livesoft » Fri Aug 02, 2019 7:26 am

Previous thread on exact same subject:
viewtopic.php?t=233021
wherein I commented:
livesoft wrote:
Sat Nov 25, 2017 9:25 am
I don't think it has anything to do with income level per se. My rule-of-thumb is that the most you can spend on a car every 10 to 15 years is the amount that your portfolio has gone up or down in one single day from market activity.

So you can buy a luxury vehicle any time you want to as long as you don't pay very much for it. Many luxury vehicles cost less than a new Camry, Accord, or F150.
Wiki This signature message sponsored by sscritic: Learn to fish.

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Re: luxury vehicle: what income/asset range

Post by Jags4186 » Fri Aug 02, 2019 7:27 am

randomguy wrote:
Thu Aug 01, 2019 11:18 pm
Toyotas are popular cars. Not surprising they are popular among millionaires. And it isn't like a 45k+ highlander is a cheap car.
Or an $90k Land Cruiser :-)

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Re: luxury vehicle: what income/asset range

Post by Jags4186 » Fri Aug 02, 2019 7:29 am

livesoft wrote:
Fri Aug 02, 2019 7:26 am
Previous thread on exact same subject:
viewtopic.php?t=233021
wherein I commented:
livesoft wrote:
Sat Nov 25, 2017 9:25 am
I don't think it has anything to do with income level per se. My rule-of-thumb is that the most you can spend on a car every 10 to 15 years is the amount that your portfolio has gone up or down in one single day from market activity.

So you can buy a luxury vehicle any time you want to as long as you don't pay very much for it. Many luxury vehicles cost less than a new Camry, Accord, or F150.
So if you were "lucky" enough to have had a decent sized portfolio in 1987 I guess you've been driving well. If we have another Black Monday type day I could be driving around in a Porsche. Don't worry, honey, livesoft said it was okay. :twisted:

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Re: luxury vehicle: what income/asset range

Post by stan1 » Fri Aug 02, 2019 8:00 am

Without knowing what type of car he wants I'd just point out that the current Accord in higher trim levels with 2L engine is very nice and you'll be able to get a good discount off MSRP that will get out the door for maybe $33K depending upon your market. If he is OK with slow(er) acceleration the smaller engine Accord should be around $30K or less with all the nice interior features. It's not a BMW or Lexus but close enough while saving a lot of money.

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Re: luxury vehicle: what income/asset range

Post by smalliebigs » Fri Aug 02, 2019 8:26 am

msi wrote:
Fri Aug 02, 2019 2:01 am
For a younger buyer, $5k saved today could be worth $40k after 30 years of growth at 7%.

Of course, it depends on that buyer's income, net worth, and saving habits if even 30 years worth of growth on that amount of money would matter. It won't make or break anyone's retirement, but it could be enough to wonder if the extra money is really justified.
This is a sensible argument, but I really hate it. Any money saved if invested will likely grow and be worth more. If you take this logic and extend it ad infinitum, then you could just argue that no one should buy anything or eat.

We should be concerned about our retirement and investments, but we should also be mindful to live in the present. What is the point of having millions and millions in your old age if you don't have the energy, or god forbid, the companions to enjoy it with?

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Re: luxury vehicle: what income/asset range

Post by hand » Fri Aug 02, 2019 8:52 am

The whole concept of income/asset ratios defining car purchases is flawed.

As always, consumer purchases require balancing needs and the incremental cost of wants.

First Identify your transportation requirements (capacity, efficiency, safety, features, number of years/miles of ownership) this is what you *need* to pay.

Next Identify incremental cost of your wants (luxury, power, prestige, fawning salespeople etc.) and decide whether your discretionary budget (whatever it is) is best used to fulfill some or all of your wants.

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Re: luxury vehicle: what income/asset range

Post by JackoC » Fri Aug 02, 2019 9:12 am

smalliebigs wrote:
Fri Aug 02, 2019 8:26 am
msi wrote:
Fri Aug 02, 2019 2:01 am
For a younger buyer, $5k saved today could be worth $40k after 30 years of growth at 7%.

Of course, it depends on that buyer's income, net worth, and saving habits if even 30 years worth of growth on that amount of money would matter. It won't make or break anyone's retirement, but it could be enough to wonder if the extra money is really justified.
This is a sensible argument, but I really hate it. Any money saved if invested will likely grow and be worth more. If you take this logic and extend it ad infinitum, then you could just argue that no one should buy anything or eat.

We should be concerned about our retirement and investments, but we should also be mindful to live in the present. What is the point of having millions and millions in your old age if you don't have the energy, or god forbid, the companions to enjoy it with?
The other problem with it is 7% (real return if would have to be to be meaningful, nominal dollar comparisons over 30 yrs are meaningless) is too high. The expected return of a balanced portfolio is much lower than that at today's bond yields and stock valuations.

Which isn't to say, 'so go out and blow it all now!' :happy That appeal, 'think what it would be worth in the future' isn't wholly logical as you point out, and I think this is only underlined by the distinct tendency, almost every time it's invoked on this forum, to use unrealistic numbers for expected returns. Why is it necessary to use inflated returns expectations when invoking this trope if it's really a solid general principal? The tendency to pair it with inflated return expectations tells you it isn't.

There is no simple way to determine if you should consume now or later. Although we know, or should know, that the idea of saving continuously and never consuming is illogical. You save now to consume later, or to give the money to someone else to consumer later, as in heirs.

Back to cars, or their affordability, the average (not median, but *average*) household net worth in the US isn't a lot less than $1mil. (~$104tril in US household NW, around 120mil households). And if you slice/dice the population down there are a significant segments where the *median* isn't far from that, balanced out by a huge number with ~zero NW. But just to say, $1mil net worth really isn't *that* much, and I bet a notable proportion of say (new bought) BMW owners meet it, though the stereotype of BMW owner with nothing in the bank, barely meeting lease payments on a basic 3-series, and a neighbor down the street driving a beater but saving avidly, has some truth to it also. Just don't get carried away and keep things in perspective is my point. $1mil in retirement is only $30-$40k/yr to be pretty sure of not exhausting it, maybe $15-20k to give the whole original inflation adjusted $mil to heirs. So never buy an expensive car? Or, don't kid yourself that never buying one is the road to fantastic riches in the future? I guess you could read it either way or again, quoting some return doesn't logically tell you how much to spend on stuff now.

Clearly if you have million*s* there's no reason besides personal taste (or affectation) to buy cheap cars. Nobody should buy a car they don't want, there's just no *financial* reason at a certain point to buy cheap cars. If 'surveys' say (actually) rich (not $30k sustainable income off their savings which is comfortable) people are buying cheap cars (which I doubt anyway), so what?
Last edited by JackoC on Fri Aug 02, 2019 9:19 am, edited 1 time in total.

bluebolt
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Re: luxury vehicle: what income/asset range

Post by bluebolt » Fri Aug 02, 2019 9:17 am

Our approach is that we need to be able to pay for a car with cash without any impact to our annual savings goals (even if we end up financing all or part). Practically, that means that we are setting aside money over and above our annual savings in order to have that lump sum available if and when we need to purchase a car. Since we generally keep our cars 8-10+ years and prefer buying used, this strategy is easy to follow.

BTW - we own two luxury cars that we bought new. First ever new car purchases for us and we followed the approach above.

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lthenderson
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Re: luxury vehicle: what income/asset range

Post by lthenderson » Fri Aug 02, 2019 9:20 am

seligsoj wrote:
Thu Aug 01, 2019 10:43 pm
I'm curious as to what income/asset range you would consider purchasing a luxury vehicle...say in the $40,000 range and up?
Even if a $XX,XXXX luxury vehicle were less than 1% of our assets and a small fraction of our income, I still wouldn't buy one. Owning a luxury vehicle was not my thing. Quitting work at age 39 and not working 9 to 5 again was my thing.

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Re: luxury vehicle: what income/asset range

Post by Jags4186 » Fri Aug 02, 2019 9:22 am

Buying a car is no different than buying a stereo, TV, or anything else, really. You have limited money and infinite things to spend that money on.

If you pay yourself first, and live on the rest, then simply model out your annual budget and see what you can afford on a yearly basis on transportation. You can then extrapolate out what you can buy.

Let's say you determine you have $10,000 to spend on transportation a year for a two car household.

Assume $2000 to insurance, $2000 to gas, $1000 to maintenance, you have $5000 left for two cars. That's $2500/person/yr. If you keep your cars on average for 10 years then you each have $25k to spend on a car every 10 years. You can decide at that point if you want to finance it or pay cash.

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Re: luxury vehicle: what income/asset range

Post by stoptothink » Fri Aug 02, 2019 9:26 am

Starfish wrote:
Fri Aug 02, 2019 12:18 am
I do not intend to ever go over 30-35k for a car unless is for a good reason (an electric car that saves gas). There are plenty of cars I like under this price.
We have half million income and (low) 7 digits NW, so that is not a factor. Although I am not obsessed I like cars.
$250k HHI, closing in on 7-figures in NW at 38 and 33 and we share a single car we bought new for <$14k (which IMO, is really nice). Even economy cars are pretty nice these days. I am a huge gearhead, I love anything with an engine, but one of the greatest factors in my quality of life is how little I drive. Buying a home close enough to walk to work and ride my bike almost everywhere else was a life-changer. For that reason alone, I could never justify buying anything more than an appliance, regardless of how wealthy we became. If I get the itch, my brother will let me take my wife on a date night in his AMG E63s or I can go drive my RC truck with my son.

When you're in that bracket where you can buy anything, but not everything, you have to make choices. Saving $10k+ per year by driving an economy vehicle compared to "what we can afford" is a lot of family vacations. If a luxury vehicle improves your quality of life more than alternatives, than have at it.

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Re: luxury vehicle: what income/asset range

Post by bluebolt » Fri Aug 02, 2019 9:30 am

Also remember that new luxury vehicles can add thousands of dollars in taxes & insurance especially in the first few years depending on where you are located.

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Re: luxury vehicle: what income/asset range

Post by desihorn » Fri Aug 02, 2019 9:34 am

I read this stunning related fact in the WSJ yesterday..

The average new-car price in the U.S. was $37,285 in June, according to Kelley Blue Book. It didn’t deter buyers. The industry sold or leased at least 17 million cars each year from 2015 to 2018, its best four-year stretch ever.

How households earning $61,000 can acquire cars costing half their gross income is a story of the financialization of the economy. Some 85% of new cars in the first quarter of this year were financed, including leases

32% of new-car loans were for six to seven years. A decade ago, only 12% were that long.

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Re: luxury vehicle: what income/asset range

Post by Cycle » Fri Aug 02, 2019 9:37 am

If i wanted luxury, i'd start by ordering the most expensive things on the menu and the finest foods at the grocery store. I'd never cut another coupon again. I'd never bother trying to get a beer order in just before happy hour ends. I'd never spend time trying to find the cheapest flight. I'd pay for extra legroom on flights.

One of the ultimate luxuries is having a cleaning maids and chauffeur. Depending on where you've chosen to live and what kind of activities you do, it may be cheaper to have lyfts chauffeur you everywhere than own a luxury car.

Only after I've made upgraded to these functionally impactful luxuries would i start looking at the superficial status-flagging luxuries to impress the Jonses.
Last edited by Cycle on Fri Aug 02, 2019 9:39 am, edited 1 time in total.
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Re: luxury vehicle: what income/asset range

Post by smitcat » Fri Aug 02, 2019 9:38 am

lthenderson wrote:
Fri Aug 02, 2019 9:20 am
seligsoj wrote:
Thu Aug 01, 2019 10:43 pm
I'm curious as to what income/asset range you would consider purchasing a luxury vehicle...say in the $40,000 range and up?
Even if a $XX,XXXX luxury vehicle were less than 1% of our assets and a small fraction of our income, I still wouldn't buy one. Owning a luxury vehicle was not my thing. Quitting work at age 39 and not working 9 to 5 again was my thing.
Glad to see you achieved your goal.

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Re: luxury vehicle: what income/asset range

Post by zlandar » Fri Aug 02, 2019 9:41 am

Used Lexus is a fine choice IMO. You can find 3+ year Lexus that are equal or less in price than a new Toyota equivalent. It's far more reliable and maintenance is significant less than BMW/Mercedes. Just make sure to get the car inspected by a mechanic as precertified warranties are a gimmick IMO. There are a lot of items not covered by those warranties.

Figure out how much you want to pay for a car (total price, not monthly payments). You can look up used Lexus and other vehicles on Carmax as a starting point.

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Re: luxury vehicle: what income/asset range

Post by smitcat » Fri Aug 02, 2019 9:42 am

Jags4186 wrote:
Fri Aug 02, 2019 9:22 am
Buying a car is no different than buying a stereo, TV, or anything else, really. You have limited money and infinite things to spend that money on.

If you pay yourself first, and live on the rest, then simply model out your annual budget and see what you can afford on a yearly basis on transportation. You can then extrapolate out what you can buy.

Let's say you determine you have $10,000 to spend on transportation a year for a two car household.

Assume $2000 to insurance, $2000 to gas, $1000 to maintenance, you have $5000 left for two cars. That's $2500/person/yr. If you keep your cars on average for 10 years then you each have $25k to spend on a car every 10 years. You can decide at that point if you want to finance it or pay cash.
But some folks are able to buy used more expensive cars/trucks/boats and either not lose much in deprecation or actually make up some of the price at resale. For them the costs associated with these items are nothing like stereos, furniture etc.

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TierArtz
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Re: luxury vehicle: what income/asset range

Post by TierArtz » Fri Aug 02, 2019 9:43 am

Buy what you want and can afford in harmony with other goals. In 2005, DW and I (teacher/military) went from an Accord and a Saab 900 to a Lexus SUV and a Prius. We paid cash for the Lexus (55k) and got a loan on the Prius. Vehicle choice factors were first baby on the way (SUV vs.minivan) and sick of repairing the Saab. The two vehicles represented about a year’s salary and probably about 1/3 net worth at the time. The Lexus is still going strong and the Prius was traded for a Sienna when the third baby was on the way. Good luck shopping.

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Re: luxury vehicle: what income/asset range

Post by snackdog » Fri Aug 02, 2019 9:55 am

We have had a lot of different luxury cars, mostly because I am a bit of a car nut. My current favorite is a 100,000-mile 2008 GS350 we bought last year for $10K. 300HP, RWD, and all the goodies. Runs like a scalded dog. I have had brand new 2019 rental cars recently which were POS compared to the Lexus.

My guidance for purchase is to aim for 3-5% of net income for total vehicle costs (depreciation + insurance + gas + maintenance etc).

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snackdog
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Re: luxury vehicle: what income/asset range

Post by snackdog » Fri Aug 02, 2019 9:58 am

stimulacra wrote:
Thu Aug 01, 2019 11:45 pm

I would argue in 2019, Lexus only makes 3 bona-fide luxury models; LS (sedan), LC (coupe), and LX (SUV). The rest of the lineup are upscale versions of various Toyota models from around the globe (Yes, I'm aware the LX is a rebadged version of the Toyota Land Cruiser).
What Toyota model is the GS?

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Re: luxury vehicle: what income/asset range

Post by Jags4186 » Fri Aug 02, 2019 10:00 am

smitcat wrote:
Fri Aug 02, 2019 9:42 am
Jags4186 wrote:
Fri Aug 02, 2019 9:22 am
Buying a car is no different than buying a stereo, TV, or anything else, really. You have limited money and infinite things to spend that money on.

If you pay yourself first, and live on the rest, then simply model out your annual budget and see what you can afford on a yearly basis on transportation. You can then extrapolate out what you can buy.

Let's say you determine you have $10,000 to spend on transportation a year for a two car household.

Assume $2000 to insurance, $2000 to gas, $1000 to maintenance, you have $5000 left for two cars. That's $2500/person/yr. If you keep your cars on average for 10 years then you each have $25k to spend on a car every 10 years. You can decide at that point if you want to finance it or pay cash.
But some folks are able to buy used more expensive cars/trucks/boats and either not lose much in deprecation or actually make up some of the price at resale. For them the costs associated with these items are nothing like stereos, furniture etc.
So? You have $X to spend. Doesn’t matter how you do it. When you start trying to find excuses to spend more than you should you probably will. You can buy and sell as many vehicles as you want just keep your cash outlay within your predetermined budget.

123
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Re: luxury vehicle: what income/asset range

Post by 123 » Fri Aug 02, 2019 10:03 am

A luxury vehicle for personal use is fine when it is paid for with cash (no financing) and it does not diminish the emergency fund and does not impact taxable or tax-deferred investments and does not impact the payment of regular recurring expenses.
Last edited by 123 on Fri Aug 02, 2019 10:05 am, edited 2 times in total.
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runner3081
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Re: luxury vehicle: what income/asset range

Post by runner3081 » Fri Aug 02, 2019 10:04 am

Never. I love cars, but understand they are a waste of money.

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Re: luxury vehicle: what income/asset range

Post by stimulacra » Fri Aug 02, 2019 10:05 am

snackdog wrote:
Fri Aug 02, 2019 9:58 am
stimulacra wrote:
Thu Aug 01, 2019 11:45 pm

I would argue in 2019, Lexus only makes 3 bona-fide luxury models; LS (sedan), LC (coupe), and LX (SUV). The rest of the lineup are upscale versions of various Toyota models from around the globe (Yes, I'm aware the LX is a rebadged version of the Toyota Land Cruiser).
What Toyota model is the GS?
Toyota Aristo / Toyota Crown Majesta
Last edited by stimulacra on Fri Aug 02, 2019 10:12 am, edited 1 time in total.

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Re: luxury vehicle: what income/asset range

Post by EddyB » Fri Aug 02, 2019 10:08 am

runner3081 wrote:
Fri Aug 02, 2019 10:04 am
Never. I love cars, but understand they are a waste of money.
I feel the same way, but it makes me a little sad.

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