Struggling with Justifying an Expensive Car Purchase

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Globalviewer58
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Re: Struggling with Justifying an Expensive Car Purchase

Post by Globalviewer58 » Thu Aug 10, 2017 4:13 pm

The expectation of autopilot capability and other technology advances being widely available in the next 5 years would give me pause when considering a 10-year commitment to a $70K car. If autopilot is really going to happen then you can bet that you will want that feature ASAP. Enjoy the less costly vehicle for a while.

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bottlecap
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Re: Struggling with Justifying an Expensive Car Purchase

Post by bottlecap » Thu Aug 10, 2017 4:15 pm

I can't help you with this subjectively. I don't buy cars "every few years." I recently drove a $100,000+ vehicle and was more excited to jump back into my $1,200, 17 year old vehicle (but not a "beater", thank you). Although the HUD showing the vehicle speed was cool, everything else was "meh." Plus, I would also feel goofy driving around in a car that was half my yearly salary, no less my household's yearly salary.

However, my objective advice is this:

a) If you would get bored in 3 years with a $35k car, don't kid yourself that you will keep a $70k 10+ years. That's just rationalization. And your next car will have to be "nicer" than $70k.

b) In the likely event that the above doesn't cause hesitation, ask whether you and your spouse would feel comfortable buying a $70,000 vehicle if your net worth was $600k. If so, then go ahead and buy it.

I base this on the fact that both the value of your home and your investments could drop as much as 40% in a fairly short amount of time. In fact, it happened about 10 years ago. And that's by no means a floor.

You started working at a really, really good time to save and invest. Both home values and market values have done nothing but grow for most of this time. I hope it continues, but my experience tells me it will not.

Realizing the fact that your wealth is all on paper puts reality into perspective.

Good luck,

JT

mw1739
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Re: Struggling with Justifying an Expensive Car Purchase

Post by mw1739 » Thu Aug 10, 2017 4:16 pm

My situation is not dissimilar to yours, and I bought a $35k car last year. The wife will likely get a new car in the next 18 months, probably 40-50k. With that said, everybody places different priorities on their spending and you're in a better position than most.

reallyconfused
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Re: Struggling with Justifying an Expensive Car Purchase

Post by reallyconfused » Thu Aug 10, 2017 4:21 pm

dspencer wrote:
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.
Great minds think alike. :sharebeer

VWENX
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Re: Struggling with Justifying an Expensive Car Purchase

Post by VWENX » Thu Aug 10, 2017 4:22 pm

Since everyone is very concerned, both are Japanese SUVs.

bloom2708
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Re: Struggling with Justifying an Expensive Car Purchase

Post by bloom2708 » Thu Aug 10, 2017 4:23 pm

reallyconfused wrote:
dspencer wrote:
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.
Great minds think alike. :sharebeer
Your nickname reminded me of Steve Martin in this video?

https://vimeo.com/41152287

Do you have the cash? :wink:
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead | | Want to buy something? Watch this first: https://vimeo.com/41152287

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Watty
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Re: Struggling with Justifying an Expensive Car Purchase

Post by Watty » Thu Aug 10, 2017 4:26 pm

You can afford it but the big problem is that you likely can't afford it and also all the other things that you might want to do with your discretionary income.

For example is it worth cutting back on your vacation spending and taking less expensive vacations for the next five years.

You can play with the numbers but I would as a wild guess I would think that if the extra $35K was invested for 20 years you could retire a year or two earlier. To me working an extra couple of years is a tradeoff that would not be worth it.

It would be good if you talked it over with your spouse to make sure if she thinks that the tradeoff is worthwhile.

I have never had a real expensive car but when I have bought a nice new car or done something like nice remodel of a kitchen what found was that six months later it was just "the car" or "the kitchen" that I rarely noticed when I used them since I was pretty much as functional as the car or kitchen that it replaced.
VWENX wrote:Age: 34, wife 34, child 1
If you might have more kids then I would also be cautious.

You could have twins or a special needs kid and your financial plans could change or you might need expensive fertility treatments if you have difficulty in having your next kid. If you have a kid with even minor and temporary health issues then day car could be impractical or impossible so you might need to have a stay at home parent and one income for a while.

I also didn't see any mention of any college savings yet.

Doom&Gloom
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Re: Struggling with Justifying an Expensive Car Purchase

Post by Doom&Gloom » Thu Aug 10, 2017 4:27 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.
I am interested in the part I bolded. Do you mind sharing the categories? It reads as if they were all weighted equally.

In all my years of buying cars I probably went through a process similar to yours in narrowing the field to a handful. From that point on though, my most heavily weighted "mental category" was a nebulous one that could have been labeled "Value."

Leemiller
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Re: Struggling with Justifying an Expensive Car Purchase

Post by Leemiller » Thu Aug 10, 2017 5:24 pm

I think if you're used to spending so little then you will be putting a lot of pressure on this car purchase. You much save a huge percentage of takehome to get to that amount of savings at your income and age. I can assure you that it is easy to get used to anything. The car will become just your car whether you buy one for 35k or 70k. I keep my expensive purchases to a limited amount of net worth and income because I'm too familiar with how familiarity can breed boredom.

reallyconfused
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Re: Struggling with Justifying an Expensive Car Purchase

Post by reallyconfused » Thu Aug 10, 2017 6:12 pm

bloom2708 wrote:
Your nickname reminded me of Steve Martin in this video?

https://vimeo.com/41152287

Do you have the cash? :wink:
To answer your question, no but does that mean I can afford it?

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Alexa9
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Re: Struggling with Justifying an Expensive Car Purchase

Post by Alexa9 » Thu Aug 10, 2017 6:18 pm

I love playing "Guess Who?" as much as anyone but we can give you better advice if you tell us what make/model and what these killer features are that are worth $35k.

chevca
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Re: Struggling with Justifying an Expensive Car Purchase

Post by chevca » Thu Aug 10, 2017 6:24 pm

I didn't read all the posts, but saw one or two that touched on it.... Want a reason to justify buying the cheaper car? Kids!!

You have a little one and I don't know if you plan to have more. You have yet to see what a kid or two can do to a car. Wait until they're 2, 3, 4, or shoot 11. I just had one of mine at age 11 put a pen mark on the back of the driver's seat... well, just because that's how an 11 year old thinks.

I take it from the thread and wants and need, the cargo space needs is for hauling the kid around, or pets, or vacations, or... I would never pay $70k for a vehicle that will be used that way. It would give me a heart attack worrying about the kids trashing. Or, I'd be a freak about no food, no fun, no... in the vehicle. It would be a really nice car, but it wouldn't be any fun.

afan
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Re: Struggling with Justifying an Expensive Car Purchase

Post by afan » Thu Aug 10, 2017 6:25 pm

Actually, the OP asked a financial question and the model cars under consideration do not matter for that.

$35,000 is a lot of money for a car. There are many new cars and many, many late model used cars that are safe and reliable that cost a lot less than that.
$70,000 for a car is absurd. How much do you spend on toothbrushes? I would be happy to sell you one for $100. As long as you do not expect it to get your teeth any cleaner.
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

VWENX
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Re: Struggling with Justifying an Expensive Car Purchase

Post by VWENX » Thu Aug 10, 2017 6:27 pm

KnowNth wrote: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.
Worked throughout college and was lucky to learn about investing the Boglehead way early. Have a wife with a similar mindset on saving as me. Waited to have a child. Didn't spend a lot. Drove cars like Honda Civics. That sort of stuff.

wrongfunds
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Re: Struggling with Justifying an Expensive Car Purchase

Post by wrongfunds » Thu Aug 10, 2017 6:38 pm

When somebody asks here for "our permission" to do something, the person already understands that it is NOT the most prudent decision to make. He is generally hoping that he will get at least few to agree with him. It is usually futile to argue against him.

You can buy that $70K car as long as you can write that check without flinching. If you end up taking 72 month loan because your think you can get better return in the market than the interest rate, then you can not afford that car.

Also using the metric of spending more than daily change in your investment portfolio ($600K) value on your car purchase, you do not qualify for $70K car but you already knew that before asking it here.

But you have the cash and you want the car. Why should we discourage you from buying what you want?

VWENX
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Re: Struggling with Justifying an Expensive Car Purchase

Post by VWENX » Thu Aug 10, 2017 6:40 pm

a5ehren wrote: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.
1) When we started off I read the Boglehead's Guide to Investing and decided to max out everything I could and figure everything out later.

2) It is.

3) I was reasonably impressed with the cheaper SUV but really impressed with the more expensive one.

SeaToTheBay
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Re: Struggling with Justifying an Expensive Car Purchase

Post by SeaToTheBay » Thu Aug 10, 2017 6:58 pm

afan wrote: $70,000 for a car is absurd. How much do you spend on toothbrushes? I would be happy to sell you one for $100. As long as you do not expect it to get your teeth any cleaner.
Again with the "absurd" comment. He admits $70k on a car is a luxury. We get that a $7k car will get from Point A to Point B just as effectively. That is not to say that a more expensive car does not provide additional value to the right person, whether objective or perceived. Why would they make these expensive cars if people didn't see enough value in them to buy them?

If we all thought in terms of only spending what you have to in order to accomplish the main job, we'd only stay in $49.99 Motel 6s and never a 5-star resort, cook beans and rice instead of going out to a nice meal on an anniversary or birthday, and live in an old, dingy, small apartment/condo rather than a nice, renovated house. What's the point of saving so much if we don't splurge once in a while on something we like?

Note, I am not saying he should go for the $70k car. I'm saying passing judgment on what is "absurd" is not someone else's responsibility. An absurd expense to me would be more like the fact that 2.1M Americans in 2017 pay for AOL dial-up...
wrongfunds wrote: If you end up taking 72 month loan because your think you can get better return in the market than the interest rate, then you can not afford that car.
I disagree. A year ago, I owed $5k on a 60-month car loan at a whopping 1.74%. I took that loan out in April 2013 even though I didn't have to, and paid it off September 2016 when I sold the car (for more than I paid for it, by the way!). I could have easily afforded to not finance, but took the loan because of the exact reason you state. And sure enough, the S&P 500 rose something like 65% during that time, while I was invested effectively using funds I borrowed at roughly the rate of inflation. What does that have to do with me being able to afford the car or not? To someone who's not highly risk-averse, that is just taking advantage of a good rate.

What if the financing was 0%? Not uncommon with new cars these days.
wrongfunds wrote: Also using the metric of spending more than daily change in your investment portfolio ($600K) value on your car purchase, you do not qualify for $70K car but you already knew that before asking it here.
A pretty significant daily swing we can probably agree is maybe 1%. You're saying if you have an investment portfolio of $600k, you should limit yourself to a $6k car? So if I have a $2M portfolio, I cannot treat myself to a new midlevel Honda Civic?

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HomerJ
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Re: Struggling with Justifying an Expensive Car Purchase

Post by HomerJ » Thu Aug 10, 2017 7:27 pm

wrongfunds wrote:Also using the metric of spending more than daily change in your investment portfolio ($600K) value on your car purchase, you do not qualify for $70K car but you already knew that before asking it here.
Yeah, um... that's a livesoft "metric". More like a humble brag. No one should really take that goofy statement seriously. :)

People don't have to wait until they have $1 or $2 million dollars to buy a $20,000 Honda Civic.
Last edited by HomerJ on Thu Aug 10, 2017 7:30 pm, edited 1 time in total.

sambb
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Re: Struggling with Justifying an Expensive Car Purchase

Post by sambb » Thu Aug 10, 2017 7:28 pm

70k car? no. not with young kids.

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iceman99
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Re: Struggling with Justifying an Expensive Car Purchase

Post by iceman99 » Thu Aug 10, 2017 8:07 pm

I'll take a stab at the $70K SUV and go with Lexus GX460. For the $35K SUV, I'll pick Toyota Highlander or Honda Pilot.

Although everyone here seems to be focusing on your financial situation, I'm a car guy and have kids and I would pick the Highlander (or Honda Pilot). With the $ you save, buy a real sports car such as a Miata, S2000, Mustang, etc

My 2 cents...

Please tell us what you decide and congrats on your success! You are way ahead of most people at 34.

davegreen10
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Re: Struggling with Justifying an Expensive Car Purchase

Post by davegreen10 » Thu Aug 10, 2017 8:11 pm

Buy the $35k car. If you don't get sick of it, you made the right decision. If you get tired of it after a few years, sell it and take the hit on the depreciation. :x

But wait. You can now buy the current $70k car model used and it's taken an even bigger depreciation hit so you come out ahead. :sharebeer

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bottlecap
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Re: Struggling with Justifying an Expensive Car Purchase

Post by bottlecap » Thu Aug 10, 2017 8:50 pm

VWENX wrote:
KnowNth wrote: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.
Worked throughout college and was lucky to learn about investing the Boglehead way early. Have a wife with a similar mindset on saving as me. Waited to have a child. Didn't spend a lot. Drove cars like Honda Civics. That sort of stuff.
Kudos for saving and buying "normal people" cars for the first 10 or 12 years. I mean it. Most people don't.

BUT...

You kidding yourself. A large part of your success is simply due to when you started investing, as per my previous post. You've done a good job, but you've only known "plenty.".
I did the same thing and lost near half my wealth in 2000 and again in 2008. Have you had that experience once?

This is not something you deserve because you've done anything different from the rest of us here. You started acculmulating during a crash. You bought everything low and it is now high. Your diligence has so far been rewarded with a huge dose of luck.

That said, it's your money and your decision. Just keep your eyes open here.

JT

VWENX
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Re: Struggling with Justifying an Expensive Car Purchase

Post by VWENX » Thu Aug 10, 2017 8:52 pm

iceman99 wrote:I'll take a stab at the $70K SUV and go with Lexus GX460. For the $35K SUV, I'll pick Toyota Highlander or Honda Pilot.

Although everyone here seems to be focusing on your financial situation, I'm a car guy and have kids and I would pick the Highlander (or Honda Pilot). With the $ you save, buy a real sports car such as a Miata, S2000, Mustang, etc

My 2 cents...

Please tell us what you decide and congrats on your success! You are way ahead of most people at 34.
You're definitely the closest of the guesses. Also they would not be exactly $35k and $70k, more around $32-34k and $64-66k respectively after tax. I just rounded up the original amounts.

VWENX
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Re: Struggling with Justifying an Expensive Car Purchase

Post by VWENX » Thu Aug 10, 2017 9:00 pm

bottlecap wrote: You kidding yourself. A large part of your success is simply due to when you started investing, as per my previous post. You've done a good job, but you've only known "plenty.".
I did the same thing and lost near half my wealth in 2000 and again in 2008. Have you had that experience once?
I won't pretend that I have not been lucky with the current bull market, but yes, I fully experienced 2008 and remember it well. I had started investing in 2005. The amount of money I had during the financial crisis may have been negligible compared to you, but I definitely went through it. In fact, it is because of 2008 that I did something like pay off my mortgage rather than going all in with taxable investing, despite that decision probably costing me more than both of these cars are worth.

ncbill
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Re: Struggling with Justifying an Expensive Car Purchase

Post by ncbill » Thu Aug 10, 2017 9:03 pm

Globalviewer58 wrote:The expectation of autopilot capability and other technology advances being widely available in the next 5 years would give me pause when considering a 10-year commitment to a $70K car. If autopilot is really going to happen then you can bet that you will want that feature ASAP. Enjoy the less costly vehicle for a while.
Or lease the lower-cost vehicle and have 2-3 years to see if the OP "gets tired of it."

If not, then lease the higher-end vehicle to see if the extra cost is worth the bells & whistles.

I bet the OP can cash-flow either option, which also results in more $ into the 529/retirement/taxable accounts.

VWENX
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Re: Struggling with Justifying an Expensive Car Purchase

Post by VWENX » Thu Aug 10, 2017 9:09 pm

Watty wrote:You can afford it but the big problem is that you likely can't afford it and also all the other things that you might want to do with your discretionary income.

For example is it worth cutting back on your vacation spending and taking less expensive vacations for the next five years.

If you might have more kids then I would also be cautious.

I also didn't see any mention of any college savings yet.
I butchered your post, but I wanted to reply to some of your points. We take a lot of "road-trip" types of vacations, and we're kind of tired of doing it in compact economy cars. Those things hurt you when you're driving for 12 hours or more a day, not to mention having to cram a bunch of stuff in a limited cargo area. Both SUVs would be an improvement, but one would be a vast improvement in comfort.

We are definitely not having any more kids.

The 529 currently has $19k, and we plan to contribute $10k per year. However, I think even that has a chance of being too much.

Thank you for the input!

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Re: Struggling with Justifying an Expensive Car Purchase

Post by bloom2708 » Thu Aug 10, 2017 9:12 pm

I would love a GX 460. I would go with one with ~50k miles.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead | | Want to buy something? Watch this first: https://vimeo.com/41152287

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gloss151
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Re: Struggling with Justifying an Expensive Car Purchase

Post by gloss151 » Thu Aug 10, 2017 9:18 pm

https://radicalpersonalfinance.com/356/

Listen to this radical personal finance podcast on the merits of a minivan, its really great and I always recommend our younger engineers at work get a minivan to stave off spendthrift women. I don't own a car, but my wife does and if we were to replace her CRV with something bigger I'd go with the Honda Odyssey. My arguments in favor of the minivan over the CRV seem to not be effective at this moment.
Aim above morality. Be not simply good, be good for something. -Thoreau

Spooky
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Re: Struggling with Justifying an Expensive Car Purchase

Post by Spooky » Thu Aug 10, 2017 9:25 pm

I would think about a different car seat.

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bottlecap
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Re: Struggling with Justifying an Expensive Car Purchase

Post by bottlecap » Thu Aug 10, 2017 9:25 pm

VWENX wrote:
bottlecap wrote: You kidding yourself. A large part of your success is simply due to when you started investing, as per my previous post. You've done a good job, but you've only known "plenty.".
I did the same thing and lost near half my wealth in 2000 and again in 2008. Have you had that experience once?
I won't pretend that I have not been lucky with the current bull market, but yes, I fully experienced 2008 and remember it well. I had started investing in 2005. The amount of money I had during the financial crisis may have been negligible compared to you, but I definitely went through it. In fact, it is because of 2008 that I did something like pay off my mortgage rather than going all in with taxable investing, despite that decision probably costing me more than both of these cars are worth.
I feel you miss my point. I know you've experienced a market downturn, precisely because you began investing at almost the perfect time - a year or two before a downturn.

But you likely had less than your yearly salary invested at that point and lost only 40% of that. You had almost nothing to lose at a time in your life when you could lose it all without batting an eye.

Now you have 6 times your family's yearly salary invested, have started a family, and are probably eyeing retirement in 20 to 25 years. When you lose half what you have now, you will know what a downturn is like, you will realize you don't have 40 years of working life left, and you won't feel quite as comfortable spending on an uber-luxury item.

With a downturn, you could easily find yourself looking for a new luxury car in 7 years with a similar net worth as you have now, just due to sub par market returns.

JT

letsgobobby
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Re: Struggling with Justifying an Expensive Car Purchase

Post by letsgobobby » Fri Aug 11, 2017 12:24 am

$70k a stretch for your situation

WildBill
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Re: Struggling with Justifying an Expensive Car Purchase

Post by WildBill » Fri Aug 11, 2017 12:49 am

Howdy

Sorry for the amateur analysis, but you might have what my colleague describes as "car fever".

You already know the cheaper one ticks all the boxes. The more expensive one does ....what?

In six months the more expensive one will be just another car, along with a substantially decreased bank account, much heftier monthly depreciation and less room for other toys and adventures.

Hedonic adaptation really sucks. :?

Happy motoring

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

KnowNth
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Re: Struggling with Justifying an Expensive Car Purchase

Post by KnowNth » Fri Aug 11, 2017 1:00 am

I have to say I am very surprised by the overwhelming NO answers. Why save money if can't spend it?

Let me rephrase the question and see if the answers will be different:

Can OP afford to reduce the saving rate from 60% to 30% for two years? then maybe back up to 40 or 50% afterward?

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HomerJ
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Re: Struggling with Justifying an Expensive Car Purchase

Post by HomerJ » Fri Aug 11, 2017 1:07 am

VWENX wrote:We take a lot of "road-trip" types of vacations, and we're kind of tired of doing it in compact economy cars. Those things hurt you when you're driving for 12 hours or more a day, not to mention having to cram a bunch of stuff in a limited cargo area. Both SUVs would be an improvement, but one would be a vast improvement in comfort.
Mini-vans are amazing for long trips. Get captain chairs that fully recline for the kids... Plenty of space for a cooler in between them.

But I know you won't buy a mini-van. But we owned one for 5 years, and it really was useful. Automatic sliding doors are a big plus.

:)

JBTX
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Re: Struggling with Justifying an Expensive Car Purchase

Post by JBTX » Fri Aug 11, 2017 1:25 am

Bottom line is you are doing a great job of saving overall and one expensive car purchase isn't going to change that. We would never spend that kind of money on a car, but we probably waste tens of thousands every year on discretionary spending.

Biggest concern is purchase of car and renovation which depletes emergency liquid fund. An alternative would be to take out a car loan or HELOC for a short period and if you don't need it pay it off in a couple of years

I am kind of puzzled about how hard it is to get kids in car seats. We raised two kids my wife driving a Honda Accord and Toyota Avalon and i had Nissan Maxima. It was a bit of a pain but never one we would have dropped $70k to make go away.

daveydoo
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Re: Struggling with Justifying an Expensive Car Purchase

Post by daveydoo » Fri Aug 11, 2017 1:39 am

VWENX wrote: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.
But you kinda did -- you picked the best-looking kids in the yearbook. I don't know anyone who buys cars by going around the auto show, although a lot of folks like to see what's new and what's out there. Does driving the cars come into play at any point? If you enjoy driving, or have high expectations vis-a-vis driving enjoyment, 90% of cars are terrible. Many of the others are too unreliable to consider.

Most people start with the tiny list of cars that don't suck, and then compare them. Some BH are saying "well, of course" but you backed yourself into this corner comparing apples and oranges. There are simply too many cars out there so it's really helpful to come up with some initial criteria to winnow the field, imo. Otherwise, they end up in your shoes. Many threads here where folks fall in love with a giant SUV and can't decide between that and a Tesla (etc.). And then others point out that no one can help them decide if they need a tractor or a rocket.

So, is it OK to buy an (unnamed) 70K car that differs in unknown respects from an unnamed 35K car? Presumably. But you might as well ask us if you should take a two-week vacation instead of a one-week vacation. As others have pointed out, there are some amazing cars for way less than 70K. And, in my experience, fall-in-love cars tend to lose their appeal quickly (well, A7 aside :D ) -- like those songs you love after hearing them only twice.

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Re: Struggling with Justifying an Expensive Car Purchase

Post by inbox788 » Fri Aug 11, 2017 2:19 am

KnowNth wrote: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.
+1. If this can be repeated again in the next 10-20 years, OP should be pretty set up for retirement (new $1M plus old $1M plus all the growth).

I'd say buy the more expensive car and enjoy it!

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Re: Struggling with Justifying an Expensive Car Purchase

Post by lazydavid » Fri Aug 11, 2017 5:36 am

iceman99 wrote:I'll take a stab at the $70K SUV and go with Lexus GX460. For the $35K SUV, I'll pick Toyota Highlander or Honda Pilot.
GX460 was my thought as well, as it's the only Japanese SUV that's actually worth near $70k (two are worth more, but substantially more). But he said he was impressed by new whiz-bang features that aren't available on used examples, so the 8-year-old GX (introduced in MY2010, facelifted in MY2014) can't be it.

That leaves the RX, which CAN be optioned up into the upper $60s, but shouldn't be--once you get past the mid-50s, the focus should shift to the more comfortable, capable and absolutely bulletproof GX. Or better yet, an Audi Q7 :)

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Re: Struggling with Justifying an Expensive Car Purchase

Post by blaugranamd » Fri Aug 11, 2017 6:02 am

Financially you're doing great and can probably afford either. Just remember lifestyle creep is hard to roll back. I am also looking to replace my car in the next 1 to 2 years and struggle finding that balance. One you're used to $70k car and your wife's car needs replaced, that $35k car will seem frugal and the minimum. That's where you start to lose control of expenses. I would have a very hard time owning a $70k new luxury SUV and then buying another car that's more reasonably priced later. I would think very hard about whether you will get $35k more enjoyment out of the $70k car as well. Price numbness might be creeping to far into this decision.
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Re: Struggling with Justifying an Expensive Car Purchase

Post by UncleBen » Fri Aug 11, 2017 6:06 am

Who lugs the kiddo around the most? That spouse gets to pick the new family "mom" mobile/SUV. The other spouse gets to drive what is currently the DW's car as their daily driver. The impractical car gets sold.

I might be wrong but my guess is that this solves your dilemma because your wife does most of the child shuttling but you got the car bug going to a car show and you are trying to justify your new luxury vehicle. You can certainly afford to indulge yourself. But only you can decide what is more important to you - a luxury vehicle, vacations, early retirement, savings, home improvements, etc.

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Re: Struggling with Justifying an Expensive Car Purchase

Post by msk » Fri Aug 11, 2017 6:34 am

I think the OP is too BH :shock: You can afford it, go ahead and splurge. Tomorrow I am going to put down a deposit for a special order Mercedes going for $165k. Even more silly at my age. You only live once. Looking back over my 73 years, my rules-of-thumb have been, since the 1970s: Never buy a house costing more than 3 years' income, never buy a car costing more than 6 months' income, do not save more than 30% of income (otherwise I am being too mean). Obeyed the first 2, failed on the 3rd as soon as my investments got going like gangbusters. OP fails miserably on the 3rd too! Over-saving. In my youth I was making a good income and investing a lot in RE. I still do not comprehend why your "income" should not include the income from your investing. On top of the $160k the OP has at least another $50k from his investments (he can find out how much by taking, say, an average over 3 years). Overall I think you have focused too much on saving and not enough on living your life in luxury appropriate to income. Would be OK if you wanted to retire in a few years. Enjoy...

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Re: Struggling with Justifying an Expensive Car Purchase

Post by Grt2bOutdoors » Fri Aug 11, 2017 6:38 am

KnowNth wrote:I have to say I am very surprised by the overwhelming NO answers. Why save money if can't spend it?

Let me rephrase the question and see if the answers will be different:

Can OP afford to reduce the saving rate from 60% to 30% for two years? then maybe back up to 40 or 50% afterward?
For the unknown - illness, lose your "secure" job, family member's illness, a tornado knocks house down, your 7% deductible is on you, and ih, the market just tanked by 30% and takes 10 years to recover!
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Re: Struggling with Justifying an Expensive Car Purchase

Post by VWENX » Fri Aug 11, 2017 7:11 am

Grt2bOutdoors wrote:
KnowNth wrote:I have to say I am very surprised by the overwhelming NO answers. Why save money if can't spend it?

Let me rephrase the question and see if the answers will be different:

Can OP afford to reduce the saving rate from 60% to 30% for two years? then maybe back up to 40 or 50% afterward?
For the unknown - illness, lose your "secure" job, family member's illness, a tornado knocks house down, your 7% deductible is on you, and ih, the market just tanked by 30% and takes 10 years to recover!
To KnowNth, Grt2bOutdoors:
I’m not surprised at the amount of “no” posts. This is a very conservative bunch, and after all, this is not an international vacation, so it is not one of the pre-approved Bogleheads spending categories. But I do appreciate all the input everyone has given thus far. Bottom line is I don’t know what I’ll do. I could even keep my existing car, maybe get a slimmer car seat, and just live with it. Who knows.

To others:
Also, stop trying to guess the cars - this isn’t a debate about the cars themselves, I’d go to a car forum for that. In my original post I said “think” 35k-70k, but later clarified that they are actually a little bit less, and probably would be even lower due to negotiation, sales, etc. I just wanted even numbers everyone could start with.

Finally, I want to provide some more context to my original post about where we will be in 2 years (end of 2019).

-My 401k will be maxed out regardless of purchase
-My Roth IRA will be maxed out regardless of purchase
-Wife’s Roth IRA will be maxed out regardless of purchase
-Even with our monthly “fun budget” increased, savings rate will still be 55% regardless of purchase
-Child’s 529 will have 20k more in contributions regardless of purchase
-Home renovations should be completed regardless of purchase
-Taxable/cash will be at $87k with buying ~$70k car, will be at $122k by buying ~$35k car
-The difference in price, should we go with the more expensive car, will be made up by reducing my “fun budget” since it was my splurge, not my wife’s. This would go on for several years.

In the next two years, we have no real plans to do anything major (except maybe a couple vacations, but they come out of our “fun budget”), since we’re spending all that money on the home improvements and possibly buying a long term car.

Given the numbers above, is this a sound plan when trying to make a large purchase? Imagine it’s not a car if that helps you.

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Re: Struggling with Justifying an Expensive Car Purchase

Post by VWENX » Fri Aug 11, 2017 7:13 am

msk wrote:I think the OP is too BH :shock: You can afford it, go ahead and splurge. Tomorrow I am going to put down a deposit for a special order Mercedes going for $165k. Even more silly at my age. You only live once. Looking back over my 73 years, my rules-of-thumb have been, since the 1970s: Never buy a house costing more than 3 years' income, never buy a car costing more than 6 months' income, do not save more than 30% of income (otherwise I am being too mean). Obeyed the first 2, failed on the 3rd as soon as my investments got going like gangbusters. OP fails miserably on the 3rd too! Over-saving. In my youth I was making a good income and investing a lot in RE. I still do not comprehend why your "income" should not include the income from your investing. On top of the $160k the OP has at least another $50k from his investments (he can find out how much by taking, say, an average over 3 years). Overall I think you have focused too much on saving and not enough on living your life in luxury appropriate to income. Would be OK if you wanted to retire in a few years. Enjoy...
Good point about the income from investments. I'll have to go in and look at that.

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Re: Struggling with Justifying an Expensive Car Purchase

Post by bloom2708 » Fri Aug 11, 2017 7:22 am

With all the yes and no, I am leaning to the buy side.

How about a CPO or one with 10k miles? Start at $50k or $55k vs. $70k would help my psyche.

Go do it and report back often. :D
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Re: Struggling with Justifying an Expensive Car Purchase

Post by Leemiller » Fri Aug 11, 2017 7:28 am

Just looked back at your numbers and you would be destroying your liquid savings to do this. Also, I think you need to get some real sense of what the renovations cost because we've be constantly surprised at how expensive they are. I'm not sure how on board your spouse is with this expensive car, but you might not be able to afford the renovation or be stuck pinching pennies for it. I'd rather have a nice enough car and a nice renovation with a few splurges myself. For each renovation we've done we have splurged in some key areas for comfort, impact or just good looks.

I think I'm also having a hard time wrapping my head around your car budget as a percentage of income. But to be fair you don't have a mortgage.

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Re: Struggling with Justifying an Expensive Car Purchase

Post by VWENX » Fri Aug 11, 2017 7:39 am

Leemiller wrote:Just looked back at your numbers and you would be destroying your liquid savings to do this. Also, I think you need to get some real sense of what the renovations cost because we've be constantly surprised at how expensive they are. I'm not sure how on board your spouse is with this expensive car, but you might not be able to afford the renovation or be stuck pinching pennies for it. I'd rather have a nice enough car and a nice renovation with a few splurges myself. For each renovation we've done we have splurged in some key areas for comfort, impact or just good looks.

I think I'm also having a hard time wrapping my head around your car budget as a percentage of income. But to be fair you don't have a mortgage.
Yep, the depletion of the liquid cash is the primary worry for me. Went through that for an extended period of time after paying off the mortgage and didn't like it one bit. But the home renovations are going to be done over a period of time and we would only be under 12 months of EF for about 1 month if we bought this year. When we paid off the mortgage we were under 12 months for about 6 or 7 months.

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Re: Struggling with Justifying an Expensive Car Purchase

Post by VWENX » Fri Aug 11, 2017 7:40 am

bloom2708 wrote:With all the yes and no, I am leaning to the buy side.

How about a CPO or one with 10k miles? Start at $50k or $55k vs. $70k would help my psyche.

Go do it and report back often. :D
CPO is a consideration but there's limited inventory.

BeneIRA
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Re: Struggling with Justifying an Expensive Car Purchase

Post by BeneIRA » Fri Aug 11, 2017 8:12 am

OP, this might be an unpopular opinion, but why not lease either the cheaper or more expensive car? Judging based on your responses, I don't believe that you will be satisfied with even the more expensive car once the new one comes out in a few years. I think you're going to be looking over the fence and seeing all the new, more awesome features the newer car has. I would probably lease the cheaper one for three years, then determine if you want the more expensive car at that point. Buying the cheaper one and then getting bored in three years and selling is essentially leasing. Normally, leasing is a bad deal, but I remember a few threads over the years where the consensus was that if one is only using a car for three years anyway, then leasing isn't so bad.

The big pro is your child will be a few years old and you'l have an idea what you do and don't need and how much you feel comfortable spending. Besides, looking down the pipeline, I wonder how cars will even look in 2020 or 2021. With all of these autonomous tests going on and technology improving as fast as it is, I don't know that I would want to be stuck in a car for 10 years, especially when you have the mentality that you want a truly awesome car.

Additionally, I would take the extra money you're saving and go on several trips or something. The trips will be more memorable. Go to Europe a few times or somewhere foreign. To the person who said a car is a tool, it really is. In my experience, no matter how awesome the car I'm driving is, after about a week, it just blends into the background and I don't notice the upgrade. There is some psychological phenomenon at play, I just can't remember the name of it, but the gist is that when one upgrades something in one's life, soon enough, the person gets used to it and it becomes normal. Down the line, if you get the $70,000 car, will you be able to downgrade to a $40,000 car?

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Re: Struggling with Justifying an Expensive Car Purchase

Post by tomservo14 » Fri Aug 11, 2017 8:21 am

Given your paid off mortgage and savings rate, you can afford it. Buy it. Have fun.

I was faced with this exact problem a couple of months ago and I posted a similar question (highlander vs MDX/X5/Q7). I was mostly worried about regret. I initially opted for the highlander, but then the deal fell through, and I ended up buying a more premium vehicle. I have zero regrets. In retrospect, I think the reason I posted the question in the first place was because spending that much on a luxury went against my penny-pinching ways. The many responses I received saying it was a waste of money, that I should get a used one, blah blah blah ...only made me realize how much I personally valued having a sweet ride.

I love cars. I spent 2 years researching which car I'd want to buy. If I had gotten the cheaper one, I would have spent the next ten years hating the car and myself for being a cheapskate. As it is, I love driving it, looking at it, and thinking about it. Yes, my kids are on their way to trashing it. I don't care. For me, the cost was worth it, and I'll be driving the wheels off it.

You can afford it, so the real question is whether you'll get enjoyment out of it for the next 10 years. If so, then do it.
VWENX wrote:
Grt2bOutdoors wrote:
KnowNth wrote:I have to say I am very surprised by the overwhelming NO answers. Why save money if can't spend it?

Let me rephrase the question and see if the answers will be different:

Can OP afford to reduce the saving rate from 60% to 30% for two years? then maybe back up to 40 or 50% afterward?
For the unknown - illness, lose your "secure" job, family member's illness, a tornado knocks house down, your 7% deductible is on you, and ih, the market just tanked by 30% and takes 10 years to recover!
To KnowNth, Grt2bOutdoors:
I’m not surprised at the amount of “no” posts. This is a very conservative bunch, and after all, this is not an international vacation, so it is not one of the pre-approved Bogleheads spending categories. But I do appreciate all the input everyone has given thus far. Bottom line is I don’t know what I’ll do. I could even keep my existing car, maybe get a slimmer car seat, and just live with it. Who knows.

To others:
Also, stop trying to guess the cars - this isn’t a debate about the cars themselves, I’d go to a car forum for that. In my original post I said “think” 35k-70k, but later clarified that they are actually a little bit less, and probably would be even lower due to negotiation, sales, etc. I just wanted even numbers everyone could start with.

Finally, I want to provide some more context to my original post about where we will be in 2 years (end of 2019).

-My 401k will be maxed out regardless of purchase
-My Roth IRA will be maxed out regardless of purchase
-Wife’s Roth IRA will be maxed out regardless of purchase
-Even with our monthly “fun budget” increased, savings rate will still be 55% regardless of purchase
-Child’s 529 will have 20k more in contributions regardless of purchase
-Home renovations should be completed regardless of purchase
-Taxable/cash will be at $87k with buying ~$70k car, will be at $122k by buying ~$35k car
-The difference in price, should we go with the more expensive car, will be made up by reducing my “fun budget” since it was my splurge, not my wife’s. This would go on for several years.

In the next two years, we have no real plans to do anything major (except maybe a couple vacations, but they come out of our “fun budget”), since we’re spending all that money on the home improvements and possibly buying a long term car.

Given the numbers above, is this a sound plan when trying to make a large purchase? Imagine it’s not a car if that helps you.

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