Struggling with Justifying an Expensive Car Purchase

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VWENX
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Struggling with Justifying an Expensive Car Purchase

Post by VWENX » Thu Aug 10, 2017 11:17 am

Apologies in advance for the long post but I need some expert advice.

It's become clear since my child was born that I need to buy a new car. Both my wife and I agree on this. My current car is only 5 years old, and was purchased used a year and a half ago, around the time my child was born (in retrospect, yes I should have waited, but the timing made it such that I could replace my old car for roughly the same price as the this car). The two main problems with the car is that it is very difficult to get my child in and out of her car seat (my wife trying to put her in one day convinced her of this, as she hit her head multiple times), and that it has extremely limited cargo space and is cramped, so we need to use my wife's car anytime we go somewhere as a family.

For my next car, my main goals are to (1) gain much more cargo and interior space so it's comfortable to go places, (2) better quality materials than my current car, and (3) to have this be our car for the next 10 years and beyond. I'm tired of buying cars every few years. I've narrowed my options to two choices that seem like my best options. However, they are in vastly different price ranges. The cheaper option is literally half the price of the other (think $35k vs $70k). With the lower priced option, I could see myself getting tired of the vehicle in 3 or so years, and then regretting the choice because of where we should be financially at that time (more on that below). The second option has slightly less cargo space but is vastly more luxurious and has more features that appeal to me. I can't see why I would not want to drive this car for 10 plus years. If money was no object, this is probably the vehicle I'd get.

However, money is an object, of course, so this brings me to our financial situation. Here are the basics:

Age: 34, wife 34, child 1
Annual Income: $164k, jobs are pretty secure
Net Worth: Just crossed $1 million after years of being as frugal as possible
Savings Rate: Roughly 60%, going to be dialing it back a bit starting next year
Home: Probably $350k after realtor and selling fees if we were to sell it, but plan to live here forever
Mortgage: None, paid it off earlier this year
Other Debt: None
Maxing out wife's Roth IRA, my Roth IRA, and my 401k each year, wife also has a pension
Investments: $594k all in a 3 fund portfolio, 90/10 AA
Cash/Taxable: Currently $100k all cash, but planning on about $40k of spending on home improvements in the next year
Desired Emergency Fund: 1 year of expenses, about $35k (included in cash/taxable)
Cars: $25k

We've worked hard to pay off our mortgage with the primary reason of increasing our cash flow for investments and to be able to spend more on fun.

Going forward financially, we want to fund our child's 529 ($19k currently) with $10k or so per year in order to pay for her college, continue maxing out our retirement accounts, start investing a bit in a taxable account instead of holding so much cash, and put things on financial auto pilot so to speak. Aside from a car and the home improvements, there are no major purchases we need to make in the next few years.

I've tinkered with a lot of retirement calculators and when I consider my wife's pension, my social security, our investments, how much we contribute per year, and our typical expenses, it seems that we vastly oversave for what we actually will need in retirement. I don't currently have a desire to retire early. Next year we want to increase our "fun budget" currently $700 per month per person to $1000 per month per person, so that we can start to enjoy our money more.

Now back to the car situation. In both options, we would be able to pay for the cars without totally depleting our funds. I'm looking to buy toward the end of this year or early next year. The cheaper option obviously would be doable, and would not affect our emergency fund at all. The more expensive option would drop us down to around to the minimum amount of our emergency fund for about 2 months, and then we'd quickly resume building up our cash reserves.

If I chose to buy the more expensive car, I'd reduce my own monthly "fun" budget over a number of years in order to virtually pay for the difference out of my own bucket myself, since I feel that it would be my decision to splurge on a car that I'd want to drive (wife couldn't care less about cars, whereas I do).

The only thing holding me back is that spending so much on a car goes against everything that I've ever read about how to manage money properly. If it sounds like I'm asking for justification to go buy the more expensive car, of course I am. There is no financial justification to do so, but I ask Bogleheads because I don't want to make a stupid decision that's not within my means. Am I able to responsibly spend the money to get the more expensive car? If you also struggle with spending money on yourself, how do you convince yourself that you can within reason?

DiMAn0684
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Re: Struggling with Justifying an Expensive Car Purchase

Post by DiMAn0684 » Thu Aug 10, 2017 11:32 am

Define `expensive car`.

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bligh
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Re: Struggling with Justifying an Expensive Car Purchase

Post by bligh » Thu Aug 10, 2017 11:37 am

In the end we humans are not robots. It would be silly to live your entire life optimizing for money. The most financially prudent way to live is in your car, while holding down two jobs, and never going on a vacation or ever retiring. Anything less and your are not maximizing your financial goals.

The truth is that we need rest. We need fun. We need vacations. We like pretty little doo-dahs and toys. Is buying an expensive car a good financial decision? Ofcourse not.. but neither is retiring. :)

Some things in life are not about being optimal financial decisions. They are about being happy. This is obviously an over simplification because you can make decisions that will hurt your finances enough that you will later regret them.

Anyway, if the $70K car would make you happy, and you'd hold on to it for 10 years.. I don't see the harm in it frankly. You seem to be frugal and sensible in general so the odd splurge isn't going to wreck the financial house. If you find yourself doing it more and more for different toys, then I'd advise you to re-evaluate. Lifestyle inflation is a real thing and it sneaks up on you.

CppCoder
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Re: Struggling with Justifying an Expensive Car Purchase

Post by CppCoder » Thu Aug 10, 2017 11:38 am

You can get a great kid friendly car for $25k new, so neither of your options are financially savvy. That doesn't mean they are bad decisions. If you want the fancy toy, then buy the fancy toy and enjoy it. It sounds like you have a plan to pay for it without incurring debt. Just stop trying to convince yourself that it's financially sensible. It isn't, and that's ok.

thangngo
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Re: Struggling with Justifying an Expensive Car Purchase

Post by thangngo » Thu Aug 10, 2017 11:45 am

VWENX wrote: It's become clear since my child was born that I need to buy a new car. Both my wife and I agree on this. My current car is only 5 years old, and was purchased used a year and a half ago, around the time my child was born (in retrospect, yes I should have waited, but the timing made it such that I could replace my old car for roughly the same price as the this car). The two main problems with the car is that it is very difficult to get my child in and out of her car seat (my wife trying to put her in one day convinced her of this, as she hit her head multiple times), and that it has extremely limited cargo space and is cramped, so we need to use my wife's car anytime we go somewhere as a family.
It sounds like you need a bigger car/SUV.
For my next car, my main goals are to (1) gain much more cargo and interior space so it's comfortable to go places, (2) better quality materials than my current car, and (3) to have this be our car for the next 10 years and beyond. I'm tired of buying cars every few years. I've narrowed my options to two choices that seem like my best options. However, they are in vastly different price ranges. The cheaper option is literally half the price of the other (think $35k vs $70k). With the lower priced option, I could see myself getting tired of the vehicle in 3 or so years, and then regretting the choice because of where we should be financially at that time (more on that below). The second option has slightly less cargo space but is vastly more luxurious and has more features that appeal to me. I can't see why I would not want to drive this car for 10 plus years. If money was no object, this is probably the vehicle I'd get.
This is the "wants" vs. "needs". You need a 3 year used 15k SUV with under 20,000 miles. You want a brand new 70k luxury car.
However, money is an object, of course, so this brings me to our financial situation. Here are the basics:

Age: 34, wife 34, child 1
Annual Income: $164k, jobs are pretty secure
Net Worth: Just crossed $1 million after years of being as frugal as possible
Savings Rate: Roughly 60%, going to be dialing it back a bit starting next year
Home: Probably $350k after realtor and selling fees if we were to sell it, but plan to live here forever
Mortgage: None, paid it off earlier this year
Other Debt: None
Maxing out wife's Roth IRA, my Roth IRA, and my 401k each year, wife also has a pension
Investments: $594k all in a 3 fund portfolio, 90/10 AA
Cash/Taxable: Currently $100k all cash, but planning on about $40k of spending on home improvements in the next year
Desired Emergency Fund: 1 year of expenses, about $35k (included in cash/taxable)
Cars: $25k
Looks like you can afford your "want" car.
If I chose to buy the more expensive car, I'd reduce my own monthly "fun" budget over a number of years in order to virtually pay for the difference out of my own bucket myself, since I feel that it would be my decision to splurge on a car that I'd want to drive (wife couldn't care less about cars, whereas I do).
Good plan! Move one bucket of budget to another. Keep you 60% saving rate more or less constant.
The only thing holding me back is that spending so much on a car goes against everything that I've ever read about how to manage money properly. If it sounds like I'm asking for justification to go buy the more expensive car, of course I am. There is no financial justification to do so, but I ask Bogleheads because I don't want to make a stupid decision that's not within my means. Am I able to responsibly spend the money to get the more expensive car? If you also struggle with spending money on yourself, how do you convince yourself that you can within reason?
[/quote]
You have different stages in life. It seems like you and your wife have the right principles of personal finance to have a happy and fulfilling life. You'll find a middle ground of spending vs. savings that you'll be comfortable with. Then, go with your decision.

SeaToTheBay
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Re: Struggling with Justifying an Expensive Car Purchase

Post by SeaToTheBay » Thu Aug 10, 2017 12:00 pm

I'm a huge car guy, but I'm a little confused why you have only two options, one of which is twice the cost of the other (which itself is already not cheap).

Can you tell us what the cars in question are? Can you buy the $70k "want" car a year or two used for a price that's in between the two? There aren't any options between these two that would create a compromise? I am not sure I believe that. But then again I am the one who shopped for literally a year before finding the exact right sport sedan and shipped it 2,000 miles home.

stoptothink
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Re: Struggling with Justifying an Expensive Car Purchase

Post by stoptothink » Thu Aug 10, 2017 12:05 pm

I don't necessarily agree/understand the reasoning, so justifying it isn't going to happen, but you can afford it.

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Kenkat
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Re: Struggling with Justifying an Expensive Car Purchase

Post by Kenkat » Thu Aug 10, 2017 12:11 pm

It sure would help if you included what the current car is and what the two cars you are looking at are...

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bottlecap
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Re: Struggling with Justifying an Expensive Car Purchase

Post by bottlecap » Thu Aug 10, 2017 12:13 pm

Buy the car you want. You are doing better than 99% of 54 year olds in this, the richest country on earth. And you're 20 years their junior.

Will it set you back a few years? Sure, but you'll survive.

You're having trouble because you know the $70k is a semi-foolish luxury want, not a need. There are obviously far cheaper alternatives that meet your needs and are still nice.

But it's your money. Spend it how you want. You just lose the right to judge anyone else for their spending habits! Small price to pay... ;-)

Good luck,

JT

lazydavid
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Re: Struggling with Justifying an Expensive Car Purchase

Post by lazydavid » Thu Aug 10, 2017 12:13 pm

Can you share what the two cars are? That might influence the advise you get. You can clearly afford either, but that in and of itself does not mean that the purchase is/is not a good idea outside of the financial realm.

afan
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Re: Struggling with Justifying an Expensive Car Purchase

Post by afan » Thu Aug 10, 2017 12:14 pm

Cars come off lease at 3, 4 and 5 years. Get one used.
$35,000 is a huge amount of money to pay for a car. $70,000 is absurd.

Since it will be your child mobile, start with a list of IIHS Top Safety Picks, look for ones with relatively low mileage and pay a lot less than $35,000.
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

aristotelian
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Re: Struggling with Justifying an Expensive Car Purchase

Post by aristotelian » Thu Aug 10, 2017 12:25 pm

Look on the bright side. You have a built-in excuse to keep the child out of your car as long as you are driving it. When the child is a little older you will realize this is a huge blessing. No toys and food wrappers and crumbs strewn about. No muddy footprints. No pee stains and drink spills. That all goes in your wife's car and you have an excuse not to deal with it!!!

bufo
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Re: Struggling with Justifying an Expensive Car Purchase

Post by bufo » Thu Aug 10, 2017 12:28 pm

We had a 2005 Honda Accord and would bump our baby's head many times trying to get him in his car seat. Last year we bought an SUV, and now it's much easier to get him in. I was really hesitant to buy it, but I'm glad we did. Road trips are more enjoyable. The trunk can easily fit our stroller and other luggage. Also, the trunk of an SUV makes it really convenient to change diapers!

Just like you, I'm hoping to keep this car for 10 years, so that's why we bought a Lexus. I believe they have the best reliability out of all car manufacturers. I never owned a Lexus before, but I'm guessing it would be cheaper to fix than german luxury cars since it uses some Toyota parts. It cost us 46k before tax for an RX350 F Sport which is kind of in the middle of your price range. I would suggest buying an SUV, but maybe look for a slightly cheaper and more reliable option.

SeaToTheBay
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Re: Struggling with Justifying an Expensive Car Purchase

Post by SeaToTheBay » Thu Aug 10, 2017 12:34 pm

afan wrote:Cars come off lease at 3, 4 and 5 years. Get one used.
$35,000 is a huge amount of money to pay for a car. $70,000 is absurd.
While nobody really needs a $70k car, it is not "absurd" and not our place to judge one's purchasing decisions. Some might think a $700k vacation home, a $7k vacation, or a $700 watch are absurd, but people who appreciate those things certainly do not. And actually, the average price of a new car is now $33,560, so $35k is not really a huge amount of money to pay for a car these days.

Cars even come off lease after a year or two - plenty of people who either want the latest and greatest or realize they cannot afford it.

caffeperfavore
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Re: Struggling with Justifying an Expensive Car Purchase

Post by caffeperfavore » Thu Aug 10, 2017 12:40 pm

People usually don't struggle with smart decisions.

There's are lots of luxurious cars out there that cost a lot less than $70k and that are capable of carrying you and your kid around. You're doing a lot of things right, so sure, you could probably swing it. But, once the new car smell wears off, will you regret it?

Rupert
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Re: Struggling with Justifying an Expensive Car Purchase

Post by Rupert » Thu Aug 10, 2017 12:53 pm

Have you considered how you will react the first time you notice muddy footprints from your kid's soccer cleats on the nice leather of your 70k car? It won't completely wash off (ask me how I know).

bloom2708
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Re: Struggling with Justifying an Expensive Car Purchase

Post by bloom2708 » Thu Aug 10, 2017 12:55 pm

The one problem I see is your Cash/taxable is three things:

Emergency Fund, House Improvement Fund and Car Fund.

I don't think there is enough money currently to do all the things. Plus if you spend it all on house/cars, your Emergency Fund is gone too.

You can get a pretty awesome car for $30k. Name each dollar of cash and see what you can spend on a car without dipping too low on cash.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

OnTrack2020
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Re: Struggling with Justifying an Expensive Car Purchase

Post by OnTrack2020 » Thu Aug 10, 2017 12:56 pm

You have not mentioned what vehicles you are thinking about?

surfstar
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Re: Struggling with Justifying an Expensive Car Purchase

Post by surfstar » Thu Aug 10, 2017 12:57 pm

If the car is what makes you "happy", go for it.
By the extreme savings you've pulled off to get to this point, I doubt that you guys are much for travel? I would have suggested a cheaper car, more trips, and an early retirement, but that doesn't seem to be your motivation.

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HomerJ
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Re: Struggling with Justifying an Expensive Car Purchase

Post by HomerJ » Thu Aug 10, 2017 12:59 pm

VWENX wrote:If I chose to buy the more expensive car, I'd reduce my own monthly "fun" budget over a number of years in order to virtually pay for the difference out of my own bucket myself, since I feel that it would be my decision to splurge on a car that I'd want to drive (wife couldn't care less about cars, whereas I do).
Will you actually get more enjoyment over the next few years driving a 70k car and limited "fun money" over a 35k car, and a ton more "fun money"?

This is exactly the choice my wife and I make. She drives a $50k car, and is frugal everywhere else.

I drive a $15k car, and I feel free to waste $50, $100, even $500 occasionally on fun stuff whenever I want. I find that far more valuable.

As a side note, $35k already gets you a nice car, and $70k is big jump up. You can't find a car you'd like for $50k? My wife's SUV is pretty darn nice.
The only thing holding me back is that spending so much on a car goes against everything that I've ever read about how to manage money properly.
Yes, it's a huge purchase that probably won't give you a lot more happiness. But maybe it will. The real problem is that you'll never be able to go back. If you buy a $70k car, you will very likely be buying $70k cars from now on. Lifestyle creep is real.

But you can indeed afford it.

visualguy
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Re: Struggling with Justifying an Expensive Car Purchase

Post by visualguy » Thu Aug 10, 2017 1:04 pm

I know some people are into cars, and I used to be one of those as well. However, at least in my case, I discovered that a car truly is almost entirely a tool, and a tool which is subject to constant wear and tear, so not worth spending too much on, and nice to replace before it deteriorates too much. I also discovered that consistently owning higher end cars is more expensive than it seems initially - I was somewhat surprised by how significant the financial impact was when looking at it carefully.

There are nice cars that don't cost way too much; for example, an Acura TLX. Is it really worth spending the extra few tens of thousands (almost double) on, say, a BMW 5-series which is admittedly a nicer car? Would you really want to keep a BMW for 10 years, and what would be the expense/hassle of maintaining it? You could buy a new Acura TLX every 5 years, and it would cost you much less than replacing a BMW 5-series every 10 years. Those are the kind of things that kept going through my mind (TLX and 5-series are just examples.)

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DaftInvestor
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Re: Struggling with Justifying an Expensive Car Purchase

Post by DaftInvestor » Thu Aug 10, 2017 1:15 pm

If all your savings goals are met and won't go off-track through a purchase which you see as something you've worked hard for and really want - then you should make the decision to purchase it guilt-free. If you feel you will live with guilt - then you probably shouldn't. Have $1M net worth at your age and income is a good achievement and you can probably afford either car. Personally - I think spending roughly half your annual income on a car a bit much - but I'm not much of a car guy. I like a nice reliable and comfortable car (Honda, Subaru, Toyota) and don't want luxury.

To answer what I think is your real question:
If you also struggle with spending money on yourself, how do you convince yourself that you can within reason?
I ask myself - is there anything I'd rather do with the money (and this is the question I ask my wife as well)?
So in your case - if I was trying to decide between a $35K car and a $70K car I'd sit down with my wife and we'd discuss if the extra $35K was really worth it to us. I would start postulating what else the money could do - "For $35 K - we could take a couple of really nice vacation - European trip or cruise, etc." and as soon as I said that we'd have our answer and my wife would be off planning a really nice vacation. In your case, since you don't say anything about a 529 plan, I might also say "Gee - $35K would pay for one or two years of college for our child - should we put this in a 529 plan instead?" For us - putting our kids through college was a real priority - so once we were secure and maxing all retirement accounts - the decision to start funding a 529 was a no-brainer.

Nate79
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Re: Struggling with Justifying an Expensive Car Purchase

Post by Nate79 » Thu Aug 10, 2017 1:16 pm

I think $70k new car purchase on $164k income is absurd. This is a luxury purchase and isn't anything related to a financially smart choice. You should post the 2 cars that you are thinking about to give more information but I bet that $70k luxury car, whatever it is could be picked up 3 years old for almost half price considering the huge depreciation of luxury cars.

caffeperfavore
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Re: Struggling with Justifying an Expensive Car Purchase

Post by caffeperfavore » Thu Aug 10, 2017 1:17 pm

The kid is going to vomit in it at some point. How will you feel about it then?

Kids do terrible things to cars. Somehow stuff just gets everywhere. It's like dark magic.

Having a cheaper car can be kind of liberating. If my child pee'd all over my $70k car's back seat, it would be a difficult moment. When my child pee'd all over the back seat of my $30k Toyota the other day (and I thought the potty training was going well), I didn't sweat it, because I own the car, whereas a $70k car would own me.

Btw, our net worth is similar, but income is a far amount more and I wouldn't dream of spending that much, and I consider myself a car guy. I'm glad I opted for cheap and disposable.

afan
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Re: Struggling with Justifying an Expensive Car Purchase

Post by afan » Thu Aug 10, 2017 1:23 pm

visualguy wrote:
There are nice cars that don't cost way too much; for example, an Acura TLX. Is it really worth spending the extra few tens of thousands (almost double) on, say, a BMW 5-series which is admittedly a nicer car? Would you really want to keep a BMW for 10 years, and what would be the expense/hassle of maintaining it? You could buy a new Acura TLX every 5 years, and it would cost you much less than replacing a BMW 5-series every 10 years. Those are the kind of things that kept going through my mind (TLX and 5-series are just examples.)
Or get a used Camry and keep it for 12-15 years.
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

visualguy
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Re: Struggling with Justifying an Expensive Car Purchase

Post by visualguy » Thu Aug 10, 2017 1:33 pm

afan wrote:
visualguy wrote:
There are nice cars that don't cost way too much; for example, an Acura TLX. Is it really worth spending the extra few tens of thousands (almost double) on, say, a BMW 5-series which is admittedly a nicer car? Would you really want to keep a BMW for 10 years, and what would be the expense/hassle of maintaining it? You could buy a new Acura TLX every 5 years, and it would cost you much less than replacing a BMW 5-series every 10 years. Those are the kind of things that kept going through my mind (TLX and 5-series are just examples.)
Or get a used Camry and keep it for 12-15 years.
Yes, but that's going to the other extreme, and you may get that Toyota that the previous poster's kid peed in (or have to live with the one your kid peed in for way too long...)

VWENX
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Re: Struggling with Justifying an Expensive Car Purchase

Post by VWENX » Thu Aug 10, 2017 2:18 pm

Nice discussion thus far. Thanks to everyone who has replied.

Regarding the questions of which cars/SUVs I'm considering, I don't want to reveal that as it will devolve the discussion into the merits of those cars versus others and whatnot.

Regarding how I arrived at these two options, I went to an auto show and saw/sat in many cars and SUVs. I then picked the six that I liked the most and researched them, assigning point ratings to them in a lot of different categories and divided the points by the assumed 10 year cost of ownership (yes, this is pretty embarrassing to admit). I did not just pull them out of the air. It just so happens that the top two choices were the second cheapest and the most expensive. My main concern with the cheaper option is that I'll get tired of it and feel like I got something I didn't love solely because it was cheaper.

Regarding the new/used debate, yes, I strongly considered this, especially for the more expensive option, but there were a lot of better features in the newer model that appealed to me, and the older styling wasn't my favorite. That plus it is from a very low depreciation brand, so the used prices weren't dramatically lower.

And finally, I know that there is always a more frugal option. That is not really what the debate is about. I realize that what I should do is carpool with my wife or maybe just walk everywhere. I'm also aware that the $35k difference if invested for 30 years is over $200k after that time assuming a 6% return. However I could be dead by then as well and I'm already maxing out my retirement accounts. I really want to know if others think I can afford this given the information provided.

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HomerJ
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Re: Struggling with Justifying an Expensive Car Purchase

Post by HomerJ » Thu Aug 10, 2017 2:19 pm

caffeperfavore wrote:Having a cheaper car can be kind of liberating.
Some teenager hit me in the parking lot a few years back when I was driving my old Civic. Small dent and a scratch. Poor girl was having a heart attack.

Made me very happy that I could tell her "Don't worry about it".

VWENX
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Re: Struggling with Justifying an Expensive Car Purchase

Post by VWENX » Thu Aug 10, 2017 2:24 pm

aristotelian wrote:Look on the bright side. You have a built-in excuse to keep the child out of your car as long as you are driving it. When the child is a little older you will realize this is a huge blessing. No toys and food wrappers and crumbs strewn about. No muddy footprints. No pee stains and drink spills. That all goes in your wife's car and you have an excuse not to deal with it!!!
Good point, and I already use this as an excuse sometimes!

VWENX
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Re: Struggling with Justifying an Expensive Car Purchase

Post by VWENX » Thu Aug 10, 2017 2:38 pm

DaftInvestor wrote:Have $1M net worth at your age and income is a good achievement and you can probably afford either car. Personally - I think spending roughly half your annual income on a car a bit much - but I'm not much of a car guy.
I agree with everyone that has said the car to income ratio would be out of whack. I feel that way too. However, this year we were extremely fortunate and our income is actually going to be north of $250k as a one time thing. Next year it will return back to normal.

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DaftInvestor
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Re: Struggling with Justifying an Expensive Car Purchase

Post by DaftInvestor » Thu Aug 10, 2017 2:42 pm

VWENX wrote:
DaftInvestor wrote:Have $1M net worth at your age and income is a good achievement and you can probably afford either car. Personally - I think spending roughly half your annual income on a car a bit much - but I'm not much of a car guy.
I agree with everyone that has said the car to income ratio would be out of whack. I feel that way too. However, this year we were extremely fortunate and our income is actually going to be north of $250k as a one time thing. Next year it will return back to normal.
Then you can think of the buying the car as a one-time celebration of your larger earnings this year. There is nothing wrong with that (especially since you said you plan to keep it for 10 years) provided you don't value the money "more" for something else.

Just keep in mind that a car double the price is also going to cost more to insure, pay taxes on (if applicable in your state) and maintain.

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weltschmerz
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Re: Struggling with Justifying an Expensive Car Purchase

Post by weltschmerz » Thu Aug 10, 2017 2:50 pm

Nate79 wrote:I think $70k new car purchase on $164k income is absurd. This is a luxury purchase and isn't anything related to a financially smart choice. You should post the 2 cars that you are thinking about to give more information but I bet that $70k luxury car, whatever it is could be picked up 3 years old for almost half price considering the huge depreciation of luxury cars.
I agree with Nate79. Just looking at the numbers, ($164k income, $1M net worth), you just aren't yet at a place where you should be spending $70k on a car. That's 7% of your net worth, on an asset that essentially will become worthless. Others may disagree, but that is my opinion.

Buy the 3-year old version of that $70k car, it will only cost $35-40k. I know you said you wanted all the latest safety features. Don't be a sucker for all that crap. Blind spot monitoring, self-parking, Front and rear distance sensors, it's all a bunch of stuff designed to get you salivating for a new car, but if you're a good driver, you don't need any of that stuff. The best thing you can do is not text while driving, pay attention, and you will be just fine. Even a 3 year old car will have the air bags, the ESC, all the important safety stuff.

If you really want to be safe, make sure the car has some MASS. The new cars today keep getting lighter (which is great for fuel efficiency and the planet), but in a collision do you want your family to be in the 3-year old SUV or the brand-new lightweight sedan?

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Re: Struggling with Justifying an Expensive Car Purchase

Post by caffeperfavore » Thu Aug 10, 2017 2:57 pm

The Dan wrote: If you really want to be safe, make sure the car has some MASS. The new cars today keep getting lighter (which is great for fuel efficiency and the planet), but in a collision do you want your family to be in the 3-year old SUV or the brand-new lightweight sedan?
You don't need mass to stay safe. This idea is based on looking at the correlation alone between mass and accident outcomes. When you plot the actual data, you see many, many outliers. You also see it's far from a perfect correlation. Things like accident avoidance capabilities (breaking, emergency handling), crumple zones, and engineering play a big role. Not to mention far more important things like how often you drive, where you drive, how you drive, etc.

/end rant (sorry, this is a bugbear of mine)

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Re: Struggling with Justifying an Expensive Car Purchase

Post by bloom2708 » Thu Aug 10, 2017 2:59 pm

"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

seity
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Re: Struggling with Justifying an Expensive Car Purchase

Post by seity » Thu Aug 10, 2017 3:10 pm

My kids randomly decided to 'draw' on my car with sticks one day. Luckily I have a beater that's not even worth $2k. I can't begin to tell you the number of times they have vomited in the car and the dirt and grime they manage to track into it is insane. (They are only 7 and 4)
You want a more comfortable car that you intend to use as a family car, you do not want the 70k car.

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Re: Struggling with Justifying an Expensive Car Purchase

Post by alfaspider » Thu Aug 10, 2017 3:14 pm

VWENX wrote:I really want to know if others think I can afford this given the information provided.
Can afford? Of course. You have enough cash to just buy it outright.

Should afford? That's an entirely different question. It's a big splurge. Make sure you wouldn't be happier retiring a year or two earlier instead before you pull the trigger. I can afford to drive a Ferrari in the sense that I could purchase one without risking repossession or failing to meet my immediate financial commitments. I'd love to drive a Ferrari, but I'd love to retire early much more than I'd love to drive a Ferrari.
Last edited by alfaspider on Thu Aug 10, 2017 3:17 pm, edited 1 time in total.

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Re: Struggling with Justifying an Expensive Car Purchase

Post by dspencer » Thu Aug 10, 2017 3:14 pm

caffeperfavore wrote:
The Dan wrote: If you really want to be safe, make sure the car has some MASS. The new cars today keep getting lighter (which is great for fuel efficiency and the planet), but in a collision do you want your family to be in the 3-year old SUV or the brand-new lightweight sedan?
You don't need mass to stay safe. This idea is based on looking at the correlation alone between mass and accident outcomes. When you plot the actual data, you see many, many outliers. You also see it's far from a perfect correlation. Things like accident avoidance capabilities (breaking, emergency handling), crumple zones, and engineering play a big role. Not to mention far more important things like how often you drive, where you drive, how you drive, etc.

/end rant (sorry, this is a bugbear of mine)
https://www.youtube.com/watch?v=joMK1WZjP7g

Good demonstration that while cars have gotten lighter, they have also gotten safer. Maybe the safest car is a new car that's also massive, but it seems more logical to buy a highly safety-rated car than simply buying the heaviest car.

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Re: Struggling with Justifying an Expensive Car Purchase

Post by alfaspider » Thu Aug 10, 2017 3:18 pm

dspencer wrote:
caffeperfavore wrote:
The Dan wrote: If you really want to be safe, make sure the car has some MASS. The new cars today keep getting lighter (which is great for fuel efficiency and the planet), but in a collision do you want your family to be in the 3-year old SUV or the brand-new lightweight sedan?
You don't need mass to stay safe. This idea is based on looking at the correlation alone between mass and accident outcomes. When you plot the actual data, you see many, many outliers. You also see it's far from a perfect correlation. Things like accident avoidance capabilities (breaking, emergency handling), crumple zones, and engineering play a big role. Not to mention far more important things like how often you drive, where you drive, how you drive, etc.

/end rant (sorry, this is a bugbear of mine)
https://www.youtube.com/watch?v=joMK1WZjP7g

Good demonstration that while cars have gotten lighter, they have also gotten safer. Maybe the safest car is a new car that's also massive, but it seems more logical to buy a highly safety-rated car than simply buying the heaviest car.
Interestingly enough, as big as the old bel-air is, it's only about 2-300lbs heavier than the newer Malibu. Newer cars tend to be heavier for a given size (more dense).

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Re: Struggling with Justifying an Expensive Car Purchase

Post by reallyconfused » Thu Aug 10, 2017 3:19 pm

I would just go ahead and buy the Tesla. :beer

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Kenkat
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Re: Struggling with Justifying an Expensive Car Purchase

Post by Kenkat » Thu Aug 10, 2017 3:22 pm

Buy the cheaper car. When your kid(s) get older and start driving, give them the cheaper car and buy the expensive car. You will have earned it at that point.

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Re: Struggling with Justifying an Expensive Car Purchase

Post by Grt2bOutdoors » Thu Aug 10, 2017 3:27 pm

You're nuts! :P Let's view this another way - brand new spacious vehicle with all the safety whistles - $40K AND lump sum $35K into child's 529 plan OR $70K on a depreciating asset with double the insurance and upkeep costs. God forbid someone hits your luxury car or scratches it or you get a ding in it from years 1-3. If you are struggling it's because in your gut you know you are not making the right choice. But hey, you only live once so if you want to spend 28% of gross on a one time purchase (70/250) or 43% of current gross, by all means......
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Alexa9
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Re: Struggling with Justifying an Expensive Car Purchase

Post by Alexa9 » Thu Aug 10, 2017 3:35 pm

Should I buy a 35k car or 70k car but I'm not going to tell you what they are... :oops:

SeaToTheBay
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Re: Struggling with Justifying an Expensive Car Purchase

Post by SeaToTheBay » Thu Aug 10, 2017 3:48 pm

VWENX wrote:My main concern with the cheaper option is that I'll get tired of it and feel like I got something I didn't love solely because it was cheaper.
The thing is, if this happens, you can still sell the cheaper car at a relatively smaller depreciation loss and upgrade to the newer, nicer car (which by that point the new body style you like will be available a couple of years used with a certified warranty). Whereas if you unload $70k on the new car now and realize that you either A) don't love it as much as you thought, or B) it doesn't fit your lifestyle like you thought it would, with the mess kids bring, you're out likely tens of thousands of $ just in a couple of years. You said yourself you bought a car a year and a half ago that now doesn't meet your needs. Who's to say a similar thing won't happen again?
The Dan wrote:
Nate79 wrote: If you really want to be safe, make sure the car has some MASS. The new cars today keep getting lighter (which is great for fuel efficiency and the planet), but in a collision do you want your family to be in the 3-year old SUV or the brand-new lightweight sedan?
Most new cars are getting heavier, not lighter. And mass only matters when hitting another movable object. Doesn't matter one bit when hitting a tree, pole, wall, etc. and doesn't matter much when hitting a commercial truck/van.

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Re: Struggling with Justifying an Expensive Car Purchase

Post by a5ehren » Thu Aug 10, 2017 3:55 pm

1) Running a 60% savings rate with no intention of an early retirement is odd to me. I would say "take more vacations", but you have an 18-month old so that isn't really happening any time soon :P

2) Childcare is really dang expensive. This will probably take care of #1 by itself :!:

3) Buy the cheaper car. Or lease it if you really, really think you're going to be tired of it in 3 years. The quality gap between luxury and mainstream brands is as narrow as ever while the price gap is getting larger.

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Re: Struggling with Justifying an Expensive Car Purchase

Post by dspencer » Thu Aug 10, 2017 3:56 pm

VWENX wrote:Nice discussion thus far. Thanks to everyone who has replied.

Regarding the questions of which cars/SUVs I'm considering, I don't want to reveal that as it will devolve the discussion into the merits of those cars versus others and whatnot.

Regarding how I arrived at these two options, I went to an auto show and saw/sat in many cars and SUVs. I then picked the six that I liked the most and researched them, assigning point ratings to them in a lot of different categories and divided the points by the assumed 10 year cost of ownership (yes, this is pretty embarrassing to admit). I did not just pull them out of the air. It just so happens that the top two choices were the second cheapest and the most expensive. My main concern with the cheaper option is that I'll get tired of it and feel like I got something I didn't love solely because it was cheaper.

Regarding the new/used debate, yes, I strongly considered this, especially for the more expensive option, but there were a lot of better features in the newer model that appealed to me, and the older styling wasn't my favorite. That plus it is from a very low depreciation brand, so the used prices weren't dramatically lower.

And finally, I know that there is always a more frugal option. That is not really what the debate is about. I realize that what I should do is carpool with my wife or maybe just walk everywhere. I'm also aware that the $35k difference if invested for 30 years is over $200k after that time assuming a 6% return. However I could be dead by then as well and I'm already maxing out my retirement accounts. I really want to know if others think I can afford this given the information provided.
So basically you are deciding between getting a Tesla Model S and some other car? You really want that Tesla, but can't bring yourself to justify the expense?

That's basically the only way that my brain can make sense of this. In almost every category of car there are 5+ options that are damn near identical. How could this rigorous scoring system you developed end up with such a huge price gap? And how can the 2nd place car be so boring that you expect to replace it after 3 years?

I'm 33. With a wife and a kid (and one on the way). I make even more money than you, live in a cheaper house in a LCOL area. I drive a 10+ year old Mustang and I still can't bring myself to buy a Tesla. Even the Model 3 seems to expensive. I'll probably end up with a Honda Civic because that will seem reasonable. But I have no idea if I'm an idiot for living like this, so don't listen to me.

At least tell us after you decide what the options were!

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Re: Struggling with Justifying an Expensive Car Purchase

Post by dspencer » Thu Aug 10, 2017 3:57 pm

alfaspider wrote:
dspencer wrote:
caffeperfavore wrote:
The Dan wrote: If you really want to be safe, make sure the car has some MASS. The new cars today keep getting lighter (which is great for fuel efficiency and the planet), but in a collision do you want your family to be in the 3-year old SUV or the brand-new lightweight sedan?
You don't need mass to stay safe. This idea is based on looking at the correlation alone between mass and accident outcomes. When you plot the actual data, you see many, many outliers. You also see it's far from a perfect correlation. Things like accident avoidance capabilities (breaking, emergency handling), crumple zones, and engineering play a big role. Not to mention far more important things like how often you drive, where you drive, how you drive, etc.

/end rant (sorry, this is a bugbear of mine)
https://www.youtube.com/watch?v=joMK1WZjP7g

Good demonstration that while cars have gotten lighter, they have also gotten safer. Maybe the safest car is a new car that's also massive, but it seems more logical to buy a highly safety-rated car than simply buying the heaviest car.
Interestingly enough, as big as the old bel-air is, it's only about 2-300lbs heavier than the newer Malibu. Newer cars tend to be heavier for a given size (more dense).
That is interesting. I assumed it would be a much bigger difference.

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Re: Struggling with Justifying an Expensive Car Purchase

Post by dspencer » Thu Aug 10, 2017 3:58 pm

reallyconfused wrote:I would just go ahead and buy the Tesla. :beer
You beat me to it! If this isn't about buying a Tesla then I am completely befuddled and desperate to know what this one of a kind $70k car is.

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Re: Struggling with Justifying an Expensive Car Purchase

Post by Texanbybirth » Thu Aug 10, 2017 4:04 pm

Grt2bOutdoors wrote:You're nuts! :P Let's view this another way - brand new spacious vehicle with all the safety whistles - $40K AND lump sum $35K into child's 529 plan OR $70K on a depreciating asset with double the insurance and upkeep costs. God forbid someone hits your luxury car or scratches it or you get a ding in it from years 1-3. If you are struggling it's because in your gut you know you are not making the right choice. But hey, you only live once so if you want to spend 28% of gross on a one time purchase (70/250) or 43% of current gross, by all means......
+1

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Re: Struggling with Justifying an Expensive Car Purchase

Post by weltschmerz » Thu Aug 10, 2017 4:06 pm

Alexa9 wrote:Should I buy a 35k car or 70k car but I'm not going to tell you what they are... :oops:
These types of threads usually devolve into a guessing game. I remember a while back, somebody started a post: "I want to open up a huge position in this one stock, I'm not going to tell you which one, do you think it's a good idea?". Everyone started guessing, and the consensus was that it was Tesla. Eventually he admitted, yup it's Tesla. I think most people told him that he was crazy. Tesla was around $200 I think. Hopefully he ignored the responses and did his own thing. He'd be up big time by now.

I will make a guess: The 2 cars are Tesla Model S ($70k) and Chevy Bolt ($35k). Perhaps the correct decision is to get a 3-year old Tesla Model, S, and invest the other $35k in Tesla stock.
Last edited by weltschmerz on Thu Aug 10, 2017 4:12 pm, edited 1 time in total.

KnowNth
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Re: Struggling with Justifying an Expensive Car Purchase

Post by KnowNth » Thu Aug 10, 2017 4:10 pm

I am more interested in how OP accumulated 1M net worth with 160K income (I assume much less when started working) in a little over 10 years.

And I believe even with the expensive car purchase, he will be able to retire early and have a nice life.

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