how bad would it hurt to spend an extra 10k on a car (24 yo)

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Paul78
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how bad would it hurt to spend an extra 10k on a car (24 yo)

Post by Paul78 » Fri Jul 12, 2013 6:53 pm

I know investment wise I should buy the cheapest more reliable car out their but

lets just say I buy a car that cost 30-35k instead of buying a car that cost 20k.

I am a 24 year old so yes that 10-15k (plus adding up extra registration and insurance fees over an 8-12 year period) will add up over a 30-40-50 maybe even 60 year investment period.

I understand the "coolness" factor of having a nice car (nice at least in terms of what I am use to) will wear off is 6 months or so. BUT the more expensive car will still drive a little better and be a little more comfortable (that is worth something right? :happy ).

but in my defense

-I really do not splurge too often. Currently in my short working career I have saved 43.1% of my total gross income towards retirement. My goal is to keep this number at least at 30% of gross my entire working career. I will also have a modest federal pension and hopefully some SS to fall back on when I retire.

-I will keep this car for a long time. My current car is 12 years old and has about 250k miles (I have driven it for 4 of those year and 60k of the miles). My goal would be to keep my next car at least 8 year preferable in the range of 10-12.

- Just a guess but I am assuming I would prefer to have a "cooler" car from the ages of 24-33 instead of 33-42 or 42-51. I am hoping my next car after this one with be a "family" car not a "cool"/"fun" car.

-I know this one is a lame reason but I see plenty of friends who make the same or less then me driving around in 40k+ cars. If they can have a 40k car why can't I have a 30k one?

Basically the question is how much can I reasonable expect to lose by having 10-15k less to invest when I am 25 year old (age I will be when I buy the new car). Over a 30+ years I am sure that 10-15k would earn some cash but you have to live for both the present and the future, right?

2stepsbehind
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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by 2stepsbehind » Fri Jul 12, 2013 7:04 pm

if they jumped off a bridge, would you jump too?

Think for yourself.

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PaddyMac
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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by PaddyMac » Fri Jul 12, 2013 7:08 pm

It sounds like you can afford it, but you don't say what your annual income is?
Saving 40% of a low income isn't as good as saving 40% of a good income.
What kind of debts do you have? What is your net worth? Could that extra $10K be better used going toward student debt, or saving for a house? Or building a 6-8 month emergency fund? Are you buying the car with cash?

I can only speak for ourselves, but our last two cars were bought for cash for $32K or so. The last one from Costco's program (highly recommend it). We expect to keep them for 10 years each. I don't think that's an outrageous amount to spend, but then, we have a good emergency fund, good net worth, and no debt apart from a mortgage.

Just be sure that it's not to impress your friends, but to really drive a better and more comfortable car. Friends that you need to impress are not worth wasting money on!

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by Ged » Fri Jul 12, 2013 7:14 pm

Paul78 wrote: I know this one is a lame reason but I see plenty of friends who make the same or less then me driving around in 40k+ cars.
Maybe you should get smarter friends?

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by Pacman » Fri Jul 12, 2013 7:15 pm

Half the battle in making these decisions is picking an appropriate framework to weight the costs and benefits. 15K at 5% interest over 30 years is 65K. When I look at the number, I say to myself, 65K is 2-3 years of living expenses at my current burn rate. Is it worth it to me to work a few thousand more hours to drive a cool car?

"Whenever you find yourself on the side of the majority, it is time to pause and reflect."

Paul78
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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by Paul78 » Fri Jul 12, 2013 7:16 pm

PaddyMac wrote:It sounds like you can afford it, but you don't say what your annual income is?
Saving 40% of a low income isn't as good as saving 40% of a good income.
What kind of debts do you have? What is your net worth? Could that extra $10K be better used going toward student debt, or saving for a house? Or building a 6-8 month emergency fund? Are you buying the car with cash?

I can only speak for ourselves, but our last two cars were bought for cash for $32K or so. The last one from Costco's program (highly recommend it). We expect to keep them for 10 years each. I don't think that's an outrageous amount to spend, but then, we have a good emergency fund, good net worth, and no debt apart from a mortgage.

Just be sure that it's not to impress your friends, but to really drive a better and more comfortable car. Friends that you need to impress are not worth wasting money on!
no debt

-60k so far in various retirement sources (roth/taxable/tsp)
-20k in a savings account
-will get an additional 7-8k in early November (short term investment)
-expenses of 2k a month

100k a year job in Cali.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by mike143 » Fri Jul 12, 2013 7:17 pm

30yr old, driving my 04 Accord 168k into the ground. I may buy a 09 Miata for 10k in 2-3 years, but who knows.
Nothing is free, someone pays...You can't spend your way to financial freedom.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by Paul78 » Fri Jul 12, 2013 7:18 pm

Ged wrote:
Paul78 wrote: I know this one is a lame reason but I see plenty of friends who make the same or less then me driving around in 40k+ cars.
Maybe you should get smarter friends?
I knew posting that would backfire BUT I would be lying to myself if I said it did not make at least a little difference. Sure it might only be 5% (at the most) of the reason why I want a 30-35k car but it is still part of the reason.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by gkaplan » Fri Jul 12, 2013 7:22 pm

OP, have you ever heard of buyer's remorse?
Gordon

Paul78
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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by Paul78 » Fri Jul 12, 2013 7:25 pm

2stepsbehind wrote:if they jumped off a bridge, would you jump too?

Think for yourself.

I would say investing 40%+ towards retirement compared to my friends investing 20% (at most) falls under the category of "think for yourself".

Kinda pointless to save all this cash for retirement if you do not even know if you will make it. I could die in a car accident tonight or of a MI at that age of 45. Yes it is smart to save for retirement but eventually there is a point when you should spend some cash.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by Elbowman » Fri Jul 12, 2013 7:34 pm

Regardless of how much you decide to spend, hopefully you know that it makes the most financial sense to buy a used car (most sources I've heard say around three years old). I've driven a $9k used car for about 6 years now, and it will go for many more. For my next car I will probably reward myself with something nicer, but I will still be buying used, so I am only paying for the car, and not the social status of owning a new car.
Last edited by Elbowman on Fri Jul 12, 2013 7:38 pm, edited 2 times in total.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by thewizzer » Fri Jul 12, 2013 7:35 pm

Paul78 wrote:
Ged wrote:
Paul78 wrote: I know this one is a lame reason but I see plenty of friends who make the same or less then me driving around in 40k+ cars.
Maybe you should get smarter friends?
I knew posting that would backfire BUT I would be lying to myself if I said it did not make at least a little difference. Sure it might only be 5% (at the most) of the reason why I want a 30-35k car but it is still part of the reason.
Thanks for the honesty, anyway.

Here's my 2 cents. I'm 33 and I did something similar at around the age you are talking about. I bought a truck with a $500 a month payment. It was a nice truck and I could afford it, and I watched all my co-workers and friends buying big trucks and fancy houses. Then I came to my senses.

It wasn't worth the money. If you're prudent enough to have that much in savings already at your age, you'll probably end up regretting the purchase. I wouldn't say that I regretted owning that truck, but I certainly think I could have spent the money on something else and been just as happy (like a vacation fund, for example). Cars are simply tools that depreciate in value. Please don't get caught trying to keep up with the Joneses. You'll only make yourself miserable.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by Dave76 » Fri Jul 12, 2013 7:35 pm

Paul78 wrote:
-I know this one is a lame reason but I see plenty of friends who make the same or less then me driving around in 40k+ cars. If they can have a 40k car why can't I have a 30k one?
I see people in the ghetto driving expensive cars.

There's nothing special out there for 30-35k. I think you should keep your car and buy a second car to enjoy on weekends and special occasions. How about a nice, clean early-mid 80s Jaguar XJ6 to use on the weekends? Buy a nice, reasonably priced tweed jacket to go with it.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by jbourne99 » Fri Jul 12, 2013 7:38 pm

Be cool and get the ///M or be the boglehead and get a ///Metro.

Other expenses you haven't considered include the kind of girl you will get with either car.

With the ///M you will draw in model types with curves in all the right places but with an appetite for expensive things, $$$$

With the ///Metro you will draw in frumpy mid-western dairy cows with curves in all the wrong places but financially they may even spend more on you than you on them.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by LadyGeek » Fri Jul 12, 2013 7:39 pm

As others have stated, how about a cool used car? Whatever you're looking at, what's the value for the same model a few years old? I'll bet you'll be down under your 20k price range. Unless your friends are car nuts, I don't think they'll be able to tell.

The trick is to make it look good. Nothing is more impressive than a flashy car. How do you make it flashy? Detailing. Elbow grease is free. You'll be proud knowing that you saved a ton of money and have something to show for your hard work.

To follow gkaplan, buyer's remorse can last a long time. Getting a model that's "broken in" will avoid that feeling. If you take care of the car, it will last until it's time for the family vehicle.
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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by hicabob » Fri Jul 12, 2013 7:42 pm

Dave76 wrote:
Paul78 wrote:
-I know this one is a lame reason but I see plenty of friends who make the same or less then me driving around in 40k+ cars. If they can have a 40k car why can't I have a 30k one?
I see people in the ghetto driving expensive cars.

There's nothing special out there for 30-35k. I think you should keep your car and buy a second car to enjoy on weekends and special occasions. How about a nice, clean early-mid 80s Jaguar XJ6 to use on the weekends? Buy a nice, reasonably priced tweed jacket to go with it.
I would think that a civic + an old xj6 would cost more overall than just getting a single 3-series, g37 or whatever but it might be quite close

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by Ged » Fri Jul 12, 2013 7:43 pm

Paul78 wrote:Kinda pointless to save all this cash for retirement if you do not even know if you will make it. I could die in a car accident tonight or of a MI at that age of 45. Yes it is smart to save for retirement but eventually there is a point when you should spend some cash.
I think that's a pretty remote possibility. The average male of your age lives to 76.

That $10,000 invested at a 7% rate would be worth about $160,000 at age 64. That might translate to your being able to retire one or two years earlier.

It's a bit far off in the future, but it's also a pretty big carrot.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by mac808 » Fri Jul 12, 2013 7:44 pm

If you're a true boglehead, you'll regret the purchase shortly after making it. It sounds to me like you want a status symbol more than a car. And as other posters have alluded to, sometimes a car is not just a car, but the cornerstone of the type of lifestyle you end up getting sucked into.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by momar » Fri Jul 12, 2013 7:46 pm

2stepsbehind wrote:if they jumped off a bridge, would you jump too?

Think for yourself.
Yes. I don't know about your friends, but mine aren't crazy so I would assume they have an excellent reason for jumping.

If I were you, I would just lease this car for 3 years. Yeah, you probably don't want to lease your entire life, but at least this way you aren't making a huge commitment and you can change your mind in 3 years but you stil get the car you want when you are young. I live in Cali too, and you're crazy if you think most of the people driving 40k+ cars out here are buying them. 90%+ of them are late model, ie leases. Maybe your friends are different.
Last edited by momar on Fri Jul 12, 2013 7:49 pm, edited 2 times in total.
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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by SKILV » Fri Jul 12, 2013 7:48 pm

Most of us at the age of 24 were not Bogleheads so congrats on thinking about the finances of this purchase and saving 43% of your gross. Some of your friends with the $40K+ cars probably are in debt big time with little or no savings. One possible option - how about buying a good used car right now for $10- 15K then in 3 years if you still want the "cool" & more expensive car go for it? You will only be 27 and your desired model will probably change in the future.
Money saved in your retirement account now compounds a lot more than money saved later.
Keep up the good work!

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by Dave76 » Fri Jul 12, 2013 7:49 pm

hicabob wrote:
Dave76 wrote:
Paul78 wrote:
-I know this one is a lame reason but I see plenty of friends who make the same or less then me driving around in 40k+ cars. If they can have a 40k car why can't I have a 30k one?
I see people in the ghetto driving expensive cars.

There's nothing special out there for 30-35k. I think you should keep your car and buy a second car to enjoy on weekends and special occasions. How about a nice, clean early-mid 80s Jaguar XJ6 to use on the weekends? Buy a nice, reasonably priced tweed jacket to go with it.
I would think that a civic + an old xj6 would cost more overall than just getting a single 3-series, g37 or whatever but it might be quite close
Not if used sparingly. Very very very sparingly.... :wink:

Expensive cars (the luxury marques) don't seem to be the status symbols they once were. And young people today prefer to flaunt the latest pocket gadget.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by Watty » Fri Jul 12, 2013 8:01 pm

There is nothing wrong with spending some of your extra money on yourself on whatever you think is worthwhile as long as......drum roll .... you pay cash for it!

If you can't afford to pay cash for an expensive car without depleting your funds then you can't afford it. There are times when you may need to buy a modest car for transportation with a car loan, but that is totally different. This is not even a grey area, people who buy luxuries with loans are asking for trouble.
Basically the question is how much can I reasonable expect to lose by having 10-15k less to invest when I am 25 year old (age I will be when I buy the new car).
What would it cost?

Retirement is only one possible cost, how about;

1) Three or more fantastic vacations.

2) Being able to quit your job to be able to take a lower paying but more risky job.

3) Having to delay buying a house when you are ready to someday.

Etc , etc, etc,

With all the extra costs you are really looking at spending a lot more and I would really suspect that there are better ways to spend that money if you are looking to splurge.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by Paul78 » Fri Jul 12, 2013 8:06 pm

SKILV wrote:Most of us at the age of 24 were not Bogleheads so congrats on thinking about the finances of this purchase and saving 43% of your gross. Some of your friends with the $40K+ cars probably are in debt big time with little or no savings. One possible option - how about buying a good used car right now for $10- 15K then in 3 years if you still want the "cool" & more expensive car go for it? You will only be 27 and your desired model will probably change in the future.
Money saved in your retirement account now compounds a lot more than money saved later.
Keep up the good work!

"As others have stated, how about a cool used car? Whatever you're looking at, what's the value for the same model a few years old? I'll bet you'll be down under your 20k price range."
In the end that is probably what I will do. Either buy a cool used car or a reliable cheap car. The "cool" 2-3 year old used car will still probably cost about 5k more then the new "cheap" car but that 5k (compared to the 10-15k of buying a cool new car) might be a number I can live with. Also keep in my I am not talking about anything crazy here. As someone pointed out you are not getting an amazing new car with a price tag of 30-35k . BUT my reference is a 12 year old minivan that cost 15k new so it is does not take much to beat that, lol.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by Calm Man » Fri Jul 12, 2013 8:11 pm

I am not a car person and I do not normally recommend splurging. However I believe that as a one time purchase, this will have no material effect on your life so I would say that as long as you can pay in cash, it would not be a problem. If you have to borrow even a penny I would not do it.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by Paul78 » Fri Jul 12, 2013 8:13 pm

Watty wrote:
What would it cost?

Retirement is only one possible cost, how about;

1) Three or more fantastic vacations.

I might be pathetic but I would prefer a better car for 8-12 year over a couple of vacations.

2) Being able to quit your job to be able to take a lower paying but more risky job.

If I stay federal and if the rules do not change I will have to work until I am least 55.5 year old before I can retire. Not buying this car will not allow me to retire earlier. YES NOT buying this car will give me a little bit of extra cash to spend during retirement but by retirement age will still be 55.5

3) Having to delay buying a house when you are ready to someday.

That is very important but in my current situation (very high COL area) I really will never be able to afford a house until I retire. The only way this changes it if I am willing to commute 1-1.5 hours (each way) to work OR I marry someone who makes at least 1.5X as much as me. I doubt I will marry someone who makes more then me and I HATE to commute to work. Plus if I move out of the area my salary will decrease significantly. In other words I might be stuck renting until I retire and move to a lower COL area.

Etc , etc, etc,

With all the extra costs you are really looking at spending a lot more and I would really suspect that there are better ways to spend that money if you are looking to splurge.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by Grt2bOutdoors » Fri Jul 12, 2013 8:37 pm

The more it costs to purchase, the more it will cost to repair it, especially when we are talking about automobiles that cost $30-$40K+. Around your age, I bought a low-end Honda (spent $15K and change), 2 years later, a friend of mine who made significantly less money went out and bought an Acura Legend (spent over $30K) and told me that my car purchase pressured him to upgrade his perfectly fine and mechanically sound car. :shock: My car runs on regular gas, his car requires (mfg. stated) the use of premium gas, my car gets better mileage, his gets less mileage and has a much larger tank size, his auto parts are more costly - they come from Acura luxury car division, not ordinary Honda, though they all belong to the same automotive parent company.

Spend that extra 10K today - assume your car last 20 years, which it can if you take care of it. Now assume you take the same 10K and invest it in VTSAX (total stk market index- admiral) - at the end of 20 years, your what's an extra 10K expenditure going to cost me? Well, it will cost you $32,071.61 - just about the same price of the car you are contemplating purchasing today.
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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by 2stepsbehind » Fri Jul 12, 2013 8:40 pm

Paul78 wrote:
2stepsbehind wrote:if they jumped off a bridge, would you jump too?

Think for yourself.

I would say investing 40%+ towards retirement compared to my friends investing 20% (at most) falls under the category of "think for yourself".

Kinda pointless to save all this cash for retirement if you do not even know if you will make it. I could die in a car accident tonight or of a MI at that age of 45. Yes it is smart to save for retirement but eventually there is a point when you should spend some cash.
If you wanted a nicer car because you are a car buff that's one thing. To buy an expensive car just because everyone else is doing it is foolish. How long do you think your saving advantage will hold up with the new car + associated expenses (insurance, better parking--because you are worried they may scuff up the car, detailing etc)?
If you died in a car accident, would you be thinking man I'm glad I got the car that my friends envied or man I'm glad I ... [fill in the blank with your bucket list items of choice]. I have no problem with intentional spending.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by pennstater2005 » Fri Jul 12, 2013 8:47 pm

Your friends might ooh and ahh over your car for a short period of time. And then that will be it. Nobody will really care that much and you'll watch the value of your car depreciate. But if you got the cash, what the hell!
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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by iPatch » Fri Jul 12, 2013 9:02 pm

Truth is, you need to consider this as an entertainment expense and judge it accordingly. I recently bought my first new car ever: 2012 SRT Challenger. More fun than I can put into words. But I am on the back end of investing since I have reaped the benefits of the Boglehead way. I'll just say it is the best extra $10K I have ever spent.

--Cheapskate

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by gvsucavie03 » Fri Jul 12, 2013 9:05 pm

Save up and pay cash. It shouldn't take you too long making $100K. You're young, and this is not unreasonable for your income and you do have a long time to invest. I fully agree with the other posts that say get a steal of a deal on a GREAT 2-3 year old car, maybe even move up in model, for less than $30K.

If it was me, I wouldn't do it, but I don't make what you do, either. You're motivated in a much different way than what myself and someone older and more conservative feels on the subject... "who cares what I drive, I have so many other things to build my self-worth from than material things." Plus buying a $10-$15K car and continuing your aggressive savings plan will make you RICH someday... better than "acting" rich now and regretting it later.

Read Tom Stanley's book The Millionaire Next Door then turn around and read his book The Millionaire Mind. The average millionaire drives a used car, lives in a conservative home, still shops the consignment stores, and lives WELL below their means. It is a pattern of frugality, saving, and not caring about keeping up with the Joneses that will take you there. :moneybag

Biggest key - check your motivations on big purchases...this is more of a YOU issue than a financial issue because, again, you can afford it once you have the cash based on your income and age.

Good luck!

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by bottlecap » Fri Jul 12, 2013 9:10 pm

About $240k by age 65.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by gvsucavie03 » Fri Jul 12, 2013 9:11 pm

bottlecap wrote:About $240k by age 65.
I've got a High Life in my hands right now... :beer

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by RobInCT » Fri Jul 12, 2013 9:46 pm

Lease a nicer car for a year in the range you are looking to buy, see if the novelty wears off. If it doesn't, then go for it.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by honghong322 » Fri Jul 12, 2013 9:52 pm

Hi Paul

I was in the same boat as you last year. I've been frugal and cheap my entire life, probably saving more than 75% of my paycheck a month. I saved enough for a rental property and then last year I decided to buy my "mid life crisis" car at the age of 27(I'm 28 now). I was at the point where my finances were in great shape, IRA's have been maxed since age 16 and maxed 401k every year since I started to work as well as dump anything else extra in to taxable.

There came a point in my (young) life that I wasn't really enjoying it as I was probably saving too much. I never spent money on anything. Last year I bought myself a Porsche Cayman (very lightly used). Prior to purchasing I was mulling over it as it was a good chunk of money, but I could afford it. The boglehead in me said it was dumb, but I've never splurged on anything. My gut told me to go and buy it. The grin and smile on my face everytime I can in and start the car up is PRICELESS. There is never a dull moment when I am driving.

My advice is to go ahead and get it assuming you are able to comfortably afford it and continue to dump money into your retirement/savings. I'm probably going to keep both of my cars until they don't run. Happy motoring :D

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by madbrain » Fri Jul 12, 2013 10:10 pm

Keeping up with the Joneses is not a good reason to buy an expensive car.

I was still taking my bicycle and the bus when my salary first hit 6 figures.
I didn't even learn to drive and get my first car until later, when I turned 25. And I paid cash for it.
I became a homeowner at 21 because I did not have any driving expenses then.

Ask yourself what are actual needs versus wants.

First, do you actually need a car, or can you actually get by without one ?
If so, how large does it actually have to be ?
How many miles a year ? If a lot, choose an efficient car.
The rest is all wants.
How many years do you plan to keep the car ? It doesn't make sense to buy an expensive car for the short term.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by madbrain » Fri Jul 12, 2013 10:22 pm

Paul78 wrote: I would say investing 40%+ towards retirement compared to my friends investing 20% (at most) falls under the category of "think for yourself".

Kinda pointless to save all this cash for retirement if you do not even know if you will make it. I could die in a car accident tonight or of a MI at that age of 45. Yes it is smart to save for retirement but eventually there is a point when you should spend some cash.
It's great that you are able to save so much. Clearly you are depriving yourself in some ways. 2k a month of expenses in California is very low.
What are you currently driving ?

A Prius c starts at under $20k new and is a nice, efficient car. Add a few high-tech options to make it a cool car. Can't really go wrong with that.

Or if you want to really think outside the box, lease a Leaf EV, if you have the ability to charge at home and can live with the range. That is one very cool car. Cali has a $2500 rebate on it even if you are a lessee for at least 36 months. The lease cost is amazingly low because the $7500 federal tax credit goes towards downpayment. That means you could get one with 0 down and under $300 a month. Not counting that CA rebate. My bottom line is an average $220/month over 39 months for a 2012 SL including rebate and downpayment with taxes, license, registration. It's one of the few cases where leasing makes sense vs buying, IMO. Oh, and that 2012 Leaf SL is a $38k car...
Last edited by madbrain on Fri Jul 12, 2013 10:28 pm, edited 2 times in total.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by scubadiver » Fri Jul 12, 2013 10:26 pm

You're not a teenager. Don't make decisions justified by "my friends are doing it" as if you were a teenager.

Saving 40% of your income is pretty good. While you probably have some room to splurge a bit and reward yourself, for Pete's sake, be original in what you choose to splurge on. You'll enjoy it more and regret it less.

EDIT: My splurge was skydiving. Probably spent 10-12K in total. Met my wife. Best money I ever spent.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by NightOwl » Fri Jul 12, 2013 10:52 pm

Hi Paul78,
I am going to respond to the following points:
Paul78 wrote: -I really do not splurge too often. Currently in my short working career I have saved 43.1% of my total gross income towards retirement. My goal is to keep this number at least at 30% of gross my entire working career. I will also have a modest federal pension and hopefully some SS to fall back on when I retire.

- Just a guess but I am assuming I would prefer to have a "cooler" car from the ages of 24-33 instead of 33-42 or 42-51. I am hoping my next car after this one with be a "family" car not a "cool"/"fun" car.

-I know this one is a lame reason but I see plenty of friends who make the same or less then me driving around in 40k+ cars. If they can have a 40k car why can't I have a 30k one?
Great job starting early and saving 40+% of gross so far. That's awesome. You're doing awesome so far.

Now, about the assumption that you would prefer to have a "cooler" car earlier in life rather than later. I see two possibilities: (1) you stay single, in which case there's no way you get a "less cool" car at any point in the foreseeable future -- in fact, you will likely continue to upgrade from the $30-35k level rather than from the $20k level (and by the way, why not consider a $10-15k car?); (2) you get married and have children, as you indicate above is what you consider the likeliest scenario, and that puts a huge crimp in your savings rate. We can't predict what salary your spouse will bring in, but I doubt you'll be saving 43.1% of gross when you have children.

I say make hay while the sun shines -- buy a more affordable car, save as much as you can, and re-evaluate a few years down the road. If you stack up money now, you'll have more options later.

You say that you know the last reason above is lame, but honestly I can't believe you even mentioned it. You see dumb financial decisions being made (well, dumb unless your friends have inherited money that you don't know about) and you decide that if you discount that dumb decision by 25% you can follow suit?

One last point. I believe you that you don't splurge much, but is there no other, less expensive splurge that will scratch that itch? Disclosure: I'm not a car guy, so I just don't get that one, but I'm not averse to a good splurge -- is there anything less expensive than a car that you can splash out on? You can even brag about it to your friends :D .

NightOwl
"Volatility provokes the constant dread that some investors know more than we do, making us fearful of ignoring such powerful price movements." | Peter Bernstein, "The 60/40 Solution."

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by CaliJim » Sat Jul 13, 2013 12:22 am

You got a bad case of the "I wants". This car is kind of like dark side calling out to Anakin. It is almost irresistible isn't it?

Anyway - my advice: Print this thread. Put it in an envelope. On the front of the envelope - write "SAVE - NOTES TO FUTURE SELF - OPEN IN 2020".

I don't even care if you buy the more expensive car or not. I don't think that is the point. I think the point has more to do with learning about yourself, learning about society, and learning about the source of happiness.

Wisdom will come if you keep your mind and eyes open.
-calijim- | | For more info, click this Wiki

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by lostInFinance » Sat Jul 13, 2013 1:30 am

Yes, you can afford the more expensive car. Most people don't save 40% of their income. How did you reach a six figure salary as a fed? Most feds don't hit the $100k point until their mid thirties, even with LA locality pay and you're too young to have gone to med or law school.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by BestWishes » Sat Jul 13, 2013 1:37 am

My friend who is pretty frugal has been driving a very old Honda Civic for many years which he bought used. Several months ago he decided he wants a nicer car and leased one. He still uses his Honda for commute and drives the nicer car for fun. A couple other posters also suggested leasing.

If you want to buy one, you think that will make you happy and you can afford it, go ahead. Happiness cannot always be measured by money. I live below my means but once in a while (not too often) I might splurge if I think that makes me happy. I can afford it.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by Perpetual » Sat Jul 13, 2013 6:14 am

You say you're going to drive it for 10-12 years, but I think you're telling that to yourself to justify your decision.

Some quick math to drive the point home - note that I won't even include things like maintenance and insurance in this math:

A 30k car driven over 10 years comes to $3,000 per year. In the end its resale value may be $10k.

A 10k car driven over 5 years comes to $2,000 per year. In the end its resale value may be $5k.

Despite the fact that you're driving the $30k car for twice as long, you are still paying %50 more per year. And it will have lost a greater % of its value over 10 years.

If you really, really want a nice car, at least buy one that has been used for 1-2 years. You'll avoid the initial loss of value and still enjoy a car that's almost brand new.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by Professor Emeritus » Sat Jul 13, 2013 6:43 am

IMHO its an expensive ego trip and the car owns you rather than the reverse.

I bought my first new car ( a mini van , I had kids) when I was 37 years old .
I'm now 62 , my wife and I have owned exactly 4 new cars in our combined lives. (3 mini vans and a Vibe that would fit my mother's wheelchair.)
Cars are machines for getting you and stuff from one place to another. If I drive on a vacation, I rent what I need.

We currently own a 7 year old Vibe and a 10 year old Subaru (bought used).
Could we afford fancier cars, sure. But WHY?

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by ramsfan » Sat Jul 13, 2013 6:51 am

Another way to consider the used option is that most cars depreciate in value hard the first year, pretty hard the second, and then less each year. Something like 20% in year one, 10% in year two, then 6% every year after, etc...

Why not let someone else take the big 30% depreciation hit, pick up a really great 2 year old car that still has warranty, etc...

I think there is value to you in making a hard stand to NOT use things to boost your ego, keep up with friends, etc... that is a great mentality to BREAK now.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by Carlton » Sat Jul 13, 2013 6:54 am

First, I would never buy -anything- for the purpose of impressing others. I purchase things because I want/need them. If you're a car guy, enjoy driving and a vehicle is more than just an bland transportation appliance, then spend a few extra bucks especially if you plan on keeping the car a long time. If it's just because you want automotive "jewelry", then no.

As a motorcyclist for close to 35 years, I'm very glad I bought my sport-bike(s) when I was young, did some track time, and generally had a blast. You can be young, have some fun, spend some money and still be a prudent saver/investor. Life is short and hoping to be being the richest guy in the grave yard isn't the best plan either. Maybe find a good used low milage car a few years old that already took the initial depreciation.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by 168gr » Sat Jul 13, 2013 7:12 am

Of course if you ask an investing forum what you should do with $1 or $5 or $100 or $10,000 everyone's going to tell you to invest it.

Here's the right answer, IMHO: Make a conservative plan to meet your retirement goals, both in terms of timing and dollar value, with a cushion sufficient to let you sleep easily at night, and then implement a disciplined plan to get there. Pay yourself first. Spend what's left over on a car or a trip to the pyramids (when the revolution is over) or maybe just a truckload of Jalapeno Doritos if that's what you want, and live your life. The point isn't to die 70 years from now with 3x as much money as you need having lived a spartan life.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by jebmke » Sat Jul 13, 2013 7:22 am

Carlton wrote:If it's just because you want automotive "jewelry", then no.
When I lived in Wisconsin, I met a guy at an event who turned out to be one of the senior marketing execs for Harley. We were talking about how companies view themselves and he related that Harley's view of the company was as a jewelry provider.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by TRC » Sat Jul 13, 2013 7:27 am

What kind of cars are you considering?

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by PaddyMac » Sat Jul 13, 2013 7:49 am

Paul78 wrote:no debt

-60k so far in various retirement sources (roth/taxable/tsp)
-20k in a savings account
-will get an additional 7-8k in early November (short term investment)
-expenses of 2k a month

100k a year job in Cali.
Oh for goodness sake, you're doing just fine, and IF buying a nice new car will make you happy driving to work and back, then go for it. And if it does impress your friends, what of it. You're young, and being proud of yourself and how well you are doing should be seen as a good thing; I don't see it as keeping up the Joneses. I just bought myself a new Miata (with cash) and it is so much fun to drive.

If I were you though, I would try to pay at least half in cash, assuming you can finance the rest for a low interest rate for no more than three years (if you need longer, then you can't afford it). Then take the payments you are making AFTER the three years are up, and put the same amount in a savings account until you have enough to buy the next car in cash.

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Re: how bad would it hurt to spend an extra 10k on a car (24

Post by M_to_the_G » Sat Jul 13, 2013 11:12 am

I think it's sad that so many young people feel the need to impress others with their appearances (car, clothes, watch, etc.). It says something about society. You should be proud of your contributions and your sense of duty, not your car.

I fully understand that some people need to maintain certain appearances. [(Removed) --admin LadyGeek], I'm in the Foreign Service. Nice suit, watch, and shoes are obligatory. But I don't wear them to impress people. I wear them to meet expectations. I guess a salesman or company rep or something would have a practical reason to drive a nice car. Wouldn't want clients to think you're not doing well, after all.
"It’s basically the plot of 'Charlie and the Chocolate Factory.' If you stick around, doing nothing, while everyone around you ****s up, you’re going to win big." - John Oliver

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