car thread- too much money?

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jayk238
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car thread- too much money?

Post by jayk238 » Sat Dec 23, 2017 9:59 pm

Income next year 255k
student debt 300 at 3.4%
net worth- 0 now

currently drive a honda but on its last legs and prob wont last

plan to buy 2 cars subaru outback at 38k (with 5 down) and toyota camry at 29k

plan to finance 5 year purchase at approx 6k each year per car

goal is to save 80k each year first 2 years

is this too much money to spend?

My parents are adamently against buying used beaters - safety etc etc and Im kind of ingrained on that

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C4NT
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Re: car thread- too much money?

Post by C4NT » Sat Dec 23, 2017 10:03 pm

Why do you need two cars?

DorothyB
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Re: car thread- too much money?

Post by DorothyB » Sat Dec 23, 2017 10:05 pm

Why not save and pay cash for the vehicles? Any maybe look for last year's model with less than 10K miles if you want safety & reliability

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Re: car thread- too much money?

Post by Grt2bOutdoors » Sat Dec 23, 2017 10:16 pm

Buy a certified used Subaru from dealer, can get a car that is two years old with less than average mileage for $25K with all the major safety bells and whistles, put $5K down, now you only have 20K in debt, and you have a car that is not a beater that will last you at least 80K more miles before you need to undertake major maintenance. You just saved $13K. The same $13K that can be applied towards paying down your other debt or beefing up your EF.
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eye.surgeon
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Re: car thread- too much money?

Post by eye.surgeon » Sat Dec 23, 2017 10:25 pm

With that much student debt I'd buy used cars. Not beaters but 3 yrs old. You could get two for the price of one of your planned new cars and they will get you by until loans are paid off. A 3 year old car is not unsafe.
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bubbadog
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Re: car thread- too much money?

Post by bubbadog » Sat Dec 23, 2017 10:37 pm

jayk238 wrote:
Sat Dec 23, 2017 9:59 pm
Income next year 255k
student debt 300 at 3.4%
net worth- 0 now

currently drive a honda but on its last legs and prob wont last

plan to buy 2 cars subaru outback at 38k (with 5 down) and toyota camry at 29k

plan to finance 5 year purchase at approx 6k each year per car

goal is to save 80k each year first 2 years

is this too much money to spend?

My parents are adamently against buying used beaters - safety etc etc and Im kind of ingrained on that
Unless you left out some information, your net worth is -$300,000. Buy used and pay off the loans. Just because it is a used car does not make it a "beater".

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Watty
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Re: car thread- too much money?

Post by Watty » Sat Dec 23, 2017 10:48 pm

jayk238 wrote:
Sat Dec 23, 2017 9:59 pm
Income next year 255k
student debt 300 at 3.4%
net worth- 0 now
Unless you have a lot of saving you didn't mention then your net worth is negative $300K and won't be positive for a long time.

One thing that has helped me is to make a very simple spreadsheet that I update each year on with my net worth as of January 1st. That would help you see the progress you are making over the years.

I would assume that with your income and debt that you might be a new doctor. If so you should check out the white coat investor website and get their input on how much to spend on cars. That website is run by a regular poster here.

https://www.whitecoatinvestor.com/

jayk238 wrote:
Sat Dec 23, 2017 9:59 pm
is this too much money to spend?
You could easily have them paid off in less than a year if you wanted to so in itself it is not a problem.

The big question is if spending almost $70k on cars is the best use of your money and if would interfere with other goals that you might have like buying a house or becoming financially comfortable with having kids in the near future.

If you are planning on either of those, or something similar, then I would not spend that much on cars until you can pay easily cash for them. For example even with new cars you could buy a base model Forester and Corolla instead and get them both for around $40K. In a few years when you are better established you could upgrade and both those models should have a reasonable resale value.
jayk238 wrote:
Sat Dec 23, 2017 9:59 pm
plan to finance 5 year purchase at approx 6k each year per car
It would be good to reduce the loans to three years so they are paid off by the time the full warranty ends. Even if you can afford it, it is real frustrating to be making a car payment and to also pay for repairs at the same time.

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Re: car thread- too much money?

Post by livesoft » Sat Dec 23, 2017 10:54 pm

One could buy two 3-year-old off-lease Lexus RX-350s with all the safety features in the new cars for less than you intend to spend on the Outback and Camry. And that includes sales taxes which I hope you were including in your estimates for the Outback and Camry.
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Re: car thread- too much money?

Post by Vanguard Fan 1367 » Sun Dec 24, 2017 12:30 am

I agree with those posters who say that looking for good used cars is something to consider.

raisinsaregrapes
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Re: car thread- too much money?

Post by raisinsaregrapes » Sun Dec 24, 2017 12:43 am

You are broke, but you make a lot of money. How secure is your income? I would get a cheap car and focus on getting out of debt and building some wealth before spending 38k for a Subaru Outback. That seems high.

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warowits
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Re: car thread- too much money?

Post by warowits » Sun Dec 24, 2017 12:49 am

DorothyB wrote:
Sat Dec 23, 2017 10:05 pm
Why not save and pay cash for the vehicles? Any maybe look for last year's model with less than 10K miles if you want safety & reliability
This is something I always think should work, but in practice it seems cheaper to buy a new one, especially with Japanese cars.
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OldSport
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Re: car thread- too much money?

Post by OldSport » Sun Dec 24, 2017 1:20 am

jayk238 wrote:
Sat Dec 23, 2017 9:59 pm
Income next year 255k
student debt 300 at 3.4%
net worth- 0 now

currently drive a honda but on its last legs and prob wont last

plan to buy 2 cars subaru outback at 38k (with 5 down) and toyota camry at 29k

plan to finance 5 year purchase at approx 6k each year per car

goal is to save 80k each year first 2 years

is this too much money to spend?

My parents are adamently against buying used beaters - safety etc etc and Im kind of ingrained on that
With income like that, you can certainly afford them, save $80k/year, and make a sizeable chunk to your debt. I'd say go for it under the condition that the income is stable for at least the next 5 years. If not then I'd reconsider until getting something more stable.

If that income is stable, those cars are living below your means.

Why do you need 2 cars?

The Wizard
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Re: car thread- too much money?

Post by The Wizard » Sun Dec 24, 2017 3:07 am

OldSport wrote:
Sun Dec 24, 2017 1:20 am

...Why do you need 2 cars?
I suspect it's for the same reason British royals always try to come up with an heir and a spare...
Attempted new signature...

2Birds1Stone
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Re: car thread- too much money?

Post by 2Birds1Stone » Sun Dec 24, 2017 4:16 am

There is a whole world of gently used cars that fall somewhere between "used beater" and a $70k loan......

I've spent between $5k and $16k on my last 3 cars and each has lasted well over 5 years and 100k miles before selling and upgrading.

I would not start your career with such poor choices.

jayk238
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Re: car thread- too much money?

Post by jayk238 » Sun Dec 24, 2017 5:03 am

Inccome is stable

How to make sure used choice wont fall apart in the middle of the road?

Afty
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Re: car thread- too much money?

Post by Afty » Sun Dec 24, 2017 5:25 am

raisinsaregrapes wrote:
Sun Dec 24, 2017 12:43 am
You are broke, but you make a lot of money. How secure is your income? I would get a cheap car and focus on getting out of debt and building some wealth before spending 38k for a Subaru Outback. That seems high.
He doesn't make a lot of money yet -- he's a resident who will graduate next year (see this previous thread). That said, I think these car choices are reasonable given where he is in life.

OP, do you have/want kids? If not, I would go with something smaller and more fun than the Outback. A VW GTI comes to mind. It would be cheaper, too. :)

jayk238
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Re: car thread- too much money?

Post by jayk238 » Sun Dec 24, 2017 5:42 am

2 Cars needed because we are sharing one vehicle and now will need 2, I was secretly hoping it would last another 5 years :/

I mean I guess I could get a used vehicle, lets say instead of 38 for the outback I spend 20 on a used outback thats a few years old and I spend 20 on a used camry- thats a 30k savings over 5 years. Im not sure what the extra 30 k over 5 years or 6 k saved a year on top of the 80k will do for me.

I dont want to sound flippant its why Im here to ask for advice, Im feeling like theres diminished returns for every dollars saved occasionally.

sambb
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Re: car thread- too much money?

Post by sambb » Sun Dec 24, 2017 6:17 am

jayk238 wrote:
Sun Dec 24, 2017 5:42 am
2 Cars needed because we are sharing one vehicle and now will need 2, I was secretly hoping it would last another 5 years :/

I mean I guess I could get a used vehicle, lets say instead of 38 for the outback I spend 20 on a used outback thats a few years old and I spend 20 on a used camry- thats a 30k savings over 5 years. Im not sure what the extra 30 k over 5 years or 6 k saved a year on top of the 80k will do for me.

I dont want to sound flippant its why Im here to ask for advice, Im feeling like theres diminished returns for every dollars saved occasionally.
i would not buy 2 new cars given your situation.

raisinsaregrapes
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Re: car thread- too much money?

Post by raisinsaregrapes » Sun Dec 24, 2017 7:59 am

I'm a fan of Dave Ramsey (many are not). This is his thoughts on a situation similar to yours.
https://www.youtube.com/watch?v=orJKh-tj4mI

Jack FFR1846
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Re: car thread- too much money?

Post by Jack FFR1846 » Sun Dec 24, 2017 8:21 am

Why Outback. Looking at my local Subaru dealer's inventory, a Legacy base MSRPs for $25k. So you're little more than half what you're talking for an Outback. Camrys are a dime a dozen. End of year, last year model are cheap.
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TwstdSista
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Re: car thread- too much money?

Post by TwstdSista » Sun Dec 24, 2017 9:16 am

If you have to ask, you probably already know the answer....

multiham
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Re: car thread- too much money?

Post by multiham » Sun Dec 24, 2017 11:33 am

Buy the cars. You seem worried about being able to find reliable used cars. Since this is the case, just buy the new ones. Your income is fine, you already said your job is stable. Find some great financing and get the deal done. Please understand I'm a car guy who loves driving and doesn't believe a car is simply transportation to get you from point A to point B. I spend about 2 hours in my car each work day commuting and for me it was well worth it to buy the VW that I currently have as it exceeds all my expectations.

sport
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Re: car thread- too much money?

Post by sport » Sun Dec 24, 2017 12:29 pm

jayk238 wrote:
Sun Dec 24, 2017 5:42 am
...and I spend 20 on a used camry-
If you look at the base model, you should be able to buy a new Camry for 20K, or not much more. If you can find a new 2017 model, it would be even less expensive. A base model Camry is not a bad car.

OldSport
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Re: car thread- too much money?

Post by OldSport » Sun Dec 24, 2017 3:14 pm

The OP stated that he will be making $255k in stable income. The OP can easily afford this, plus save a lot, and pay down debt. The OP can afford this.

I see why OP needs two cars. If I were the OP, what I would do is buy one of the new cars as a 2017 model and get multiple competitive quotes and buy end of December to get year end closeout deals. Then I would wait to get the next vehicle, sometime in the next year.

Toyotas and Subarus hold their value, so these vehicles make sense to buy new if the OP can afford it, get a good deal, and keep them for a while.

I understand the benefits of living below your means, but many non-bogleheads making $255k buy or lease new German and spend double that on vehicles. The OP can afford this and for $255k, a new Subaru and Toyota is living below means.

abonder
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Re: car thread- too much money?

Post by abonder » Sun Dec 24, 2017 10:04 pm

The OP can definitely afford to buy two new, reasonably-priced, reliable, practical vehicles. There's a million threads on new vs. used, but if you're buying a reliable vehicle and using for many years, then you're basically doing most things right. Could the OP possibly identify high-quality used options that have enough depreciation to warrant buying used - yes, but this isn't absolutely necessary and may not be worth OPs time/effort.

I don't think you need to spend 38 and 29 for outback and Camry. Definitely spend some time learning how to shop new cars. The Finance Buff had a nice post on this recently and he happened to buy a 2018 Outback Premium 2.5. Here is the link: https://thefinancebuff.com/buy-new-car- ... rvice.html. There are also tons of threads in Bogleheads on this process. If you are going to go new, know that you can get a good deal if you're willing to put in a little effort.

Best of luck.

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Re: car thread- too much money?

Post by Lafder » Sun Dec 24, 2017 10:17 pm

Whether you get new or used, get the "eye sight" safety features on the Subaru and the equivalent on the Camry.

I would be torn between new and used. Interest rates are often higher on used, so the payment will be more for less car.

You are looking at moderately priced reliable, safe cars that will last you a long time.

A 3 year old car may be a returned lease vehicle as 3 years is a common lease term. I looked at new and slightly used, and in the end chose the security of peace of mind of warranties with new. With those popular vehicles, the price of used newer cars was not less enough to be worth it to me.

The difference in price between new and used could go towards loan payments.

An in between would be to buy one car now and wait for the second car til you need it.

It also may depend on what used cars are available. You might walk in and find a perfect used car, or not. And that is in the equation as to what is best.

If you buy new, be sure to get exactly what you want. Note that next week the dealers may be very motivated to make month end quotas as well as year end quotas so it may be a time they are want to make a deal. Car dealers can get kickbacks based on volume of sales so that they can make more by selling volume in bonuses vs profit on each car sale directly.

In my opinion it is ok to buy a new car from time to time. Just not too often, and not the most expensive :)

lafder

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Re: car thread- too much money?

Post by BogleMelon » Sun Dec 24, 2017 10:58 pm

jayk238 wrote:
Sun Dec 24, 2017 5:03 am


How to make sure used choice wont fall apart in the middle of the road?
- Buy from a reputable dealer
- Check its Carfax
- Check its Vin for any open recalls
- Take a test drive and inspect every knob and switch!
- Let a trusted mechanic give it a full inspection
- Make sure that you get at least a 3 months warranty from the dealer at no additional cost to you
- Check your state law (lemon law) and know your rights in case the car turned to be a lemaon
- Enjoy your new used car!

Alternatively: You may want to try buying rental retired cars at Hertz or Enterprise. With Hertz they have a rent to buy program where you can rent the car for 3 years, if you bought it they will waive the rental fees. Enterprise on the other hand have a 7 days return policy
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

Palatineman
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Re: car thread- too much money?

Post by Palatineman » Sun Dec 24, 2017 11:56 pm

jayk238 wrote:
Sat Dec 23, 2017 9:59 pm
Income next year 255k
student debt 300 at 3.4%
net worth- 0 now

currently drive a honda but on its last legs and prob wont last

plan to buy 2 cars subaru outback at 38k (with 5 down) and toyota camry at 29k

plan to finance 5 year purchase at approx 6k each year per car

goal is to save 80k each year first 2 years

is this too much money to spend?

My parents are adamently against buying used beaters - safety etc etc and Im kind of ingrained on that
How about lease a couple of new cars that are reliable and have high residual value for 3 years and then you can add the savings from having all that capital tied up and continue to pay off your student loan debt.

Your parents have a great point! I will never again buy a used car and risk being stuck on the road. Driving to and from a mechanic to get them fixed and the additional stress that it would cost to reduce my abilities to concentrating on my primary job.

The nature of my business requires that I show up to work on time and driving more reliable cars that have full warranties covered are an additional insurance that will reduce the risk of this happening. You look like you have more than sufficient income to cover this.

Once three years are up, you can determine if you want to turn in the leases or buy those new cars, if you are satisfied with them.

eg: I currently lease a 2016 Honda Civic Touring for $330/month - zero down. If I were to buy even a used one, I would have Capital tied up in a depreciating asset and I would not have the potential life saving safety features that the current technology this car offers and my payment would be close to double.

If I were to get a BMW - like I have done before my lease payment would be double this amount and the benefit of leasing goes down substantially.

This obviously depends on how many miles you would drive a year as the cost of extra miles add up as well as your risk tolerance as well as your employer's, of skipping one day at work and having to explain that you have car problems and will be late for work and have to take it to the mechanic, taking an uber/rental back and forth, etc.

I am unsure what you do for a living, but if it's a surgeon that needs to be at the operating table in one hour or a lawyer that has to show up in court on time, I would spend the extra money and not even worry about it.

IMHO - if you can avoid these scenarios as much as possible, especially when starting your career, you will make a better impression in the long run and give anyone less excuses to ensure they consider you reliable.

Best wishes!

OldSport
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Re: car thread- too much money?

Post by OldSport » Mon Dec 25, 2017 12:10 am

The OP can definitely afford those two new cars without adversely impacting the $80k/year savings goal and making a large dent in the student loan. The OP said the income was stable. To say the OP could not afford this would be ridiculous.

Now are a $38k and $29k the most practical options? No. I'd say a slightly used or new base level Toyota or Subaru are the most practical. If the OP would enjoy the features and/or performance of the slightly more expensive vehicles, the OP can easily afford this and should get it. Whatever the OP gets, the OP should shop around and get a good deal. End of year closeouts on 2017 models or even some 2018s should be widely available.

We make slightly less than the OP and we bought new vehicles for around those prices. We got good deals and bought vehicles that normally cost much more. With the new cars we got 0-1% financing. We enjoy the nicer features/performance of those vehicles and the increased cost was worth it over the more 'practical' vehicle options. The increased costs for luxury or prestige vehicles above those levels was not worth it for us.

Buying vehicles at those prices did not adversely affect our savings goals. We make a little less than the OP and had no problem whatsoever affording this.

WL2034
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Re: car thread- too much money?

Post by WL2034 » Mon Dec 25, 2017 12:44 am

Can you afford it? Yes. Whether it’s “too much money” depends on your goals.

I prefer to live like a resident for 3-5 years after residency, which would include not taking on a $38k car immediately.

When you say the Honda is on it’s last legs—unless it has 300k miles on it, fender is hanging off, and it’s burning oil, it will probably last longer than you think. It’s a Honda. I would drive that car until it literally died on the road. Don’t worry, your coworkers won’t care. Buy your spouse the Camry if that’s what you choose—can’t go wrong with a Camry.

I would take the $38k and put it directly on the student loan ASAP. Replace the Honda when it actually dies, not because it might.

This is coming from someone who paid off $250k loans (combined with spouse, so really only $125k each) in well under a year after residency on a similar salary to yours—so I obviously prefer to get rid of the student loans ASAP.

Lynx310650
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Re: car thread- too much money?

Post by Lynx310650 » Mon Dec 25, 2017 1:45 am

With your income you should be fine. IF you are concerned and don't want to buy used, I'd consider going a bit cheaper in cost. You are looking at $67k combined for the 2 cars. I'd consider maybe a Toyota RAV-4 / Honda Accord base model combination or the like, you might be able to come in at about 50k total for the 2 cars with some good negotiation. Or CR-V/Camry, whatever. But I think you can get 2 new reliable cars and spend $17k less than you were planning. $17k spread out over the years you will own the cars are a drop in the bucket with your income, but to the extent you are wondering whether you are spending too much for your cars and you don't want used, spending less on 2 new cars may be a good compromise.

Dottie57
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Re: car thread- too much money?

Post by Dottie57 » Mon Dec 25, 2017 9:22 am

What are is your real net worth. It is not clear from first post.

Student loan of 300k. What assets do you have?

I suspect your networth is actually negative and I would then buy less expensive vehicles.

thangngo
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Re: car thread- too much money?

Post by thangngo » Mon Dec 25, 2017 10:02 am

jayk238 wrote:
Sat Dec 23, 2017 9:59 pm
Income next year 255k
student debt 300 at 3.4%
net worth- 0 now

currently drive a honda but on its last legs and prob wont last

plan to buy 2 cars subaru outback at 38k (with 5 down) and toyota camry at 29k

plan to finance 5 year purchase at approx 6k each year per car

goal is to save 80k each year first 2 years

is this too much money to spend?

My parents are adamently against buying used beaters - safety etc etc and Im kind of ingrained on that
You're car dealers' new best friend 8-)

1) Bad decision financially. Affect your net worth negatively and you'll have to work more to catch up.
2) Might give you some satisfaction on instant gratification of two new cars
3) Might make your parents happy because you listen to them

kerplunk
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Re: car thread- too much money?

Post by kerplunk » Mon Dec 25, 2017 10:13 am

I’m sure the dealer would give you a fantastic deal on two vehicles purchased at the same time. :P

If it were me, I would lease something like a Honda or Toyota for two years and then reassess my situation at that time.

OldSport
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Re: car thread- too much money?

Post by OldSport » Mon Dec 25, 2017 10:27 am

thangngo wrote:
Mon Dec 25, 2017 10:02 am
jayk238 wrote:
Sat Dec 23, 2017 9:59 pm
Income next year 255k
student debt 300 at 3.4%
net worth- 0 now

currently drive a honda but on its last legs and prob wont last

plan to buy 2 cars subaru outback at 38k (with 5 down) and toyota camry at 29k

plan to finance 5 year purchase at approx 6k each year per car

goal is to save 80k each year first 2 years

is this too much money to spend?

My parents are adamently against buying used beaters - safety etc etc and Im kind of ingrained on that
You're car dealers' new best friend 8-)

1) Bad decision financially. Affect your net worth negatively and you'll have to work more to catch up.
2) Might give you some satisfaction on instant gratification of two new cars
3) Might make your parents happy because you listen to them
The OP makes or will make $255k stable. The OP can clearly afford it, save, and pay down debt all at the same time. To say the OP cannot afford this or would be a foolish decision is ridiculous!! Now is it the most practical option? No. But the OP can clearly afford it without adversely affecting the long term financial health.

It is more practical for the OP to buy two new reliable cars the OP likes and keeps them for a while, then buy two used cars or cheaper cars, and then buy another set of new cars in 2-3 years if the OP really wanted these cars. Just my 2 cents having gone through it myself. Now if the OP is perfectly happy with cheaper cars, then that is more practical.

Merry Christmas and Happy Holidays.

thangngo
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Re: car thread- too much money?

Post by thangngo » Mon Dec 25, 2017 10:39 am

OldSport wrote:
Mon Dec 25, 2017 10:27 am
thangngo wrote:
Mon Dec 25, 2017 10:02 am
jayk238 wrote:
Sat Dec 23, 2017 9:59 pm
Income next year 255k
student debt 300 at 3.4%
net worth- 0 now

currently drive a honda but on its last legs and prob wont last

plan to buy 2 cars subaru outback at 38k (with 5 down) and toyota camry at 29k

plan to finance 5 year purchase at approx 6k each year per car

goal is to save 80k each year first 2 years

is this too much money to spend?

My parents are adamently against buying used beaters - safety etc etc and Im kind of ingrained on that
You're car dealers' new best friend 8-)

1) Bad decision financially. Affect your net worth negatively and you'll have to work more to catch up.
2) Might give you some satisfaction on instant gratification of two new cars
3) Might make your parents happy because you listen to them
The OP makes or will make $255k stable. The OP can clearly afford it, save, and pay down debt all at the same time. To say the OP cannot afford this or would be a foolish decision is ridiculous!! Now is it the most practical option? No. But the OP can clearly afford it without adversely affecting the long term financial health.

It is more practical for the OP to buy two new reliable cars the OP likes and keeps them for a while, then buy two used cars or cheaper cars, and then buy another set of new cars in 2-3 years if the OP really wanted these cars. Just my 2 cents having gone through it myself. Now if the OP is perfectly happy with cheaper cars, then that is more practical.

Merry Christmas and Happy Holidays.
No. It's irresponsible to take on more debts where the 300k student loan is still outstanding. Pay that off and show that they can achieve their saving goals (80k each year) with ease, then they can afford it. Guess we have different opinions on this. You just suggest a worse decision on top of a bad decision financially. My first car was an used car and I had it for 12 years. I also bought my second car used and have been using it for 6 years.

jayk238
Posts: 381
Joined: Tue Jan 31, 2017 1:02 pm

Re: car thread- too much money?

Post by jayk238 » Mon Dec 25, 2017 10:48 am

thanks all for the replies!
First, merry christmas! Speaking of cars- Drive safe.

I have zero net worth at this time to clarify my original post. I had mentioned there that my debt is 300 and my net worth was zero but Ill state it again for clarity.

I have thought about the idea of buying cheaper and I still cant understand why its a financial boondoggle. Granted I have debts to pay and thats an issue - I watched the video posted earlier about the physician coupe that has high debts and the challenges of paying them off. They were told not to buy anything and to pay it because if anything happened to them they would struggle to pay it off.

This is true, but its true in many cases as well. I think one has to balance risk vs the benefits of here and now.

I agree that I could definitely go cheaper than the outback and even get less than the top of the line trim- I think thats a given and I will heavily consider this.

I also wonder, however, if buying used is the way to go- if my commute and work are dependent on having reliability then I have to take that into account.

As you guys can see- there is a split between saying it is affordable and those saying its not. I feel like its basically at that line between what is and isnt ok which is why the responses are split even though some are saying its obvious regarding either point of view.

I always believe in wisdom of the crowd assuming they have good facts. Bogleheads is as good as it comes for reliable and smart crowd wisdom.

jayk238
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Re: car thread- too much money?

Post by jayk238 » Mon Dec 25, 2017 10:52 am

thangngo wrote:
Mon Dec 25, 2017 10:39 am
OldSport wrote:
Mon Dec 25, 2017 10:27 am
thangngo wrote:
Mon Dec 25, 2017 10:02 am
jayk238 wrote:
Sat Dec 23, 2017 9:59 pm
Income next year 255k
student debt 300 at 3.4%
net worth- 0 now

currently drive a honda but on its last legs and prob wont last

plan to buy 2 cars subaru outback at 38k (with 5 down) and toyota camry at 29k

plan to finance 5 year purchase at approx 6k each year per car

goal is to save 80k each year first 2 years

is this too much money to spend?

My parents are adamently against buying used beaters - safety etc etc and Im kind of ingrained on that
You're car dealers' new best friend 8-)

1) Bad decision financially. Affect your net worth negatively and you'll have to work more to catch up.
2) Might give you some satisfaction on instant gratification of two new cars
3) Might make your parents happy because you listen to them
The OP makes or will make $255k stable. The OP can clearly afford it, save, and pay down debt all at the same time. To say the OP cannot afford this or would be a foolish decision is ridiculous!! Now is it the most practical option? No. But the OP can clearly afford it without adversely affecting the long term financial health.

It is more practical for the OP to buy two new reliable cars the OP likes and keeps them for a while, then buy two used cars or cheaper cars, and then buy another set of new cars in 2-3 years if the OP really wanted these cars. Just my 2 cents having gone through it myself. Now if the OP is perfectly happy with cheaper cars, then that is more practical.

Merry Christmas and Happy Holidays.
No. It's irresponsible to take on more debts where the 300k student loan is still outstanding. Pay that off and show that they can achieve their saving goals (80k each year) with ease, then they can afford it. Guess we have different opinions on this. You just suggest a worse decision on top of a bad decision financially. My first car was an used car and I had it for 12 years. I also bought my second car used and have been using it for 6 years.
I agree that paying debt down is paramount. But what exactly are the scenarios that make one better than the other. ie what are the worst case scenarios that I should be seeing that I am not?

I mean- of the 300k, 160 is on pslf - loan forgiveness over 10 years. No guarantees with this business and I have yet to meet people who have received it- but so far I meet all the criteria plan to continue to do so.

The other 140 needs to be paid asap i agree. Goal was to pay it off with the 80 each year until its gone.

Now, with the 70k in loan for the car- I would be basically paying 12k a year over 5 years. If I had the additional 12 k each year that would mean 92k instead of 80 and Im not sure I've wrapped my head around how the 12 makes life better.

worst case scenario would be that year 3 off the guarantee Id make less- say substantially at 180k. As a result my wife and I would have to downsize - but I think we could still save approx 60 and just live cheaply (literally like residents) and still pay down the car payments of 12k

I did mention my income was stable- but I assumed this was referring to whether Id be unemployed- which I do not anticipate at all
In terms of stability of the salary itself -based on having spoken to others at the hospital group and it seems that many of them are making this income at a minimum - only by choice (and almost all substantially more)
Last edited by jayk238 on Mon Dec 25, 2017 11:00 am, edited 1 time in total.

letsgobobby
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Re: car thread- too much money?

Post by letsgobobby » Mon Dec 25, 2017 10:59 am

jayk238 wrote:
Sun Dec 24, 2017 5:42 am
2 Cars needed because we are sharing one vehicle and now will need 2, I was secretly hoping it would last another 5 years :/

I mean I guess I could get a used vehicle, lets say instead of 38 for the outback I spend 20 on a used outback thats a few years old and I spend 20 on a used camry- thats a 30k savings over 5 years. Im not sure what the extra 30 k over 5 years or 6 k saved a year on top of the 80k will do for me.

I dont want to sound flippant its why Im here to ask for advice, Im feeling like theres diminished returns for every dollars saved occasionally.
Wrong mentality; and a bad way to start off your financial journey.

You’re dead broke now. Saving $80k per year is a good start, nothing more. If you’ll also be paying off $100k of your student loan debt each year, now you’ve got my attention - but then paying off an additional $70k of car loans quickly is going to be a burden. You planning to buy a home anytime soon?

If you’re set on these two cars, something about 3 years old will save you enough money to be worthwhile. I do understand that these makes don’t drop a ton in value, but I think you’ll save enough to make it worthwhile. It’s not the money - it’s the mindset that you still have a negative net worth and a row to hoe before you are in a position to start dropping nearly $40k on new cars.

Live like a resident for the first five years and your future, early retired, financially independent self will thank you. WCI says to live like a resident for 3-4 years; we did it for almost 7 and increeased our net worth by a seven figure amount in the first 6 years. We bought one car during that time, a new base model Toyota which cost $23k. We still drive that car 11 years and 180,000 miles later (we keep our cars forever, which is why we felt justified buying new).

Good luck

jayk238
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Re: car thread- too much money?

Post by jayk238 » Mon Dec 25, 2017 11:02 am

letsgobobby wrote:
Mon Dec 25, 2017 10:59 am
jayk238 wrote:
Sun Dec 24, 2017 5:42 am
2 Cars needed because we are sharing one vehicle and now will need 2, I was secretly hoping it would last another 5 years :/

I mean I guess I could get a used vehicle, lets say instead of 38 for the outback I spend 20 on a used outback thats a few years old and I spend 20 on a used camry- thats a 30k savings over 5 years. Im not sure what the extra 30 k over 5 years or 6 k saved a year on top of the 80k will do for me.

I dont want to sound flippant its why Im here to ask for advice, Im feeling like theres diminished returns for every dollars saved occasionally.
Wrong mentality; and a bad way to start off your financial journey.

You’re dead broke now. Saving $80k per year is a good start, nothing more. If you’ll also be paying off $100k of your student loan debt each year, now you’ve got my attention - but then paying off an additional $70k of car loans quickly is going to be a burden. You planning to buy a home anytime soon?

If you’re set on these two cars, something about 3 years old will save you enough money to be worthwhile. I do understand that these makes don’t drop a ton in value, but I think you’ll save enough to make it worthwhile. It’s not the money - it’s the mindset that you still have a negative net worth and a row to hoe before you are in a position to start dropping nearly $40k on new cars.

Live like a resident for the first five years and your future, early retired, financially independent self will thank you. WCI says to live like a resident for 3-4 years; we did it for almost 7 and increeased our net worth by a seven figure amount in the first 6 years. We bought one car during that time, a new base model Toyota which cost $23k. We still drive that car 11 years and 180,000 miles later (we keep our cars forever, which is why we felt justified buying new).

Good luck
thanks! appreciate the advice.
I agree with you and I may just make further adjustments to the high price point for that subaru

thangngo
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Re: car thread- too much money?

Post by thangngo » Mon Dec 25, 2017 11:41 am

jayk238 wrote:
Mon Dec 25, 2017 10:52 am
I agree that paying debt down is paramount. But what exactly are the scenarios that make one better than the other. ie what are the worst case scenarios that I should be seeing that I am not?

I mean- of the 300k, 160 is on pslf - loan forgiveness over 10 years. No guarantees with this business and I have yet to meet people who have received it- but so far I meet all the criteria plan to continue to do so.

The other 140 needs to be paid asap i agree. Goal was to pay it off with the 80 each year until its gone.

Now, with the 70k in loan for the car- I would be basically paying 12k a year over 5 years. If I had the additional 12 k each year that would mean 92k instead of 80 and Im not sure I've wrapped my head around how the 12 makes life better.

worst case scenario would be that year 3 off the guarantee Id make less- say substantially at 180k. As a result my wife and I would have to downsize - but I think we could still save approx 60 and just live cheaply (literally like residents) and still pay down the car payments of 12k

I did mention my income was stable- but I assumed this was referring to whether Id be unemployed- which I do not anticipate at all
In terms of stability of the salary itself -based on having spoken to others at the hospital group and it seems that many of them are making this income at a minimum - only by choice (and almost all substantially more)
I understand what you're saying. Take a step back and look at your rationalization: you are justifying how much you'd pay a year for the car rather than how much it's actually costing you. It's a common technique of many car salesman: focus their customers' attention on how much they can make car payment each month and force them to buy more car than they can afford.

At boglehead, many will look at your financials differently than car salesman does. I see that you have zero net worth, 300k student debt and you are making a purchasing decision to add 70k debt on top of that. Assuming you're not counting 300k to your net worth, your current net worth will be: -300k - 70k = -$370k.

Do you have a budget keeping track of how much your earnings go to spending/savings/paying off debt? Instead of focusing on buying new cars, you can focus on paying off debt and saving. Now 3 or 4 years later, if you save 240k (80k x 3) and pay off your student debt, then you can afford the new cars.

You can also research new cars vs. used cars. Cars' reliability has increased over the years.
https://www.nerdwallet.com/blog/loans/c ... r-vs-used/
Last edited by thangngo on Mon Dec 25, 2017 11:47 am, edited 2 times in total.

investorpeter
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Re: car thread- too much money?

Post by investorpeter » Mon Dec 25, 2017 11:44 am

As a compromise, I would buy the new Toyota and drive the Honda into the ground, and then consider your options at that point. Financing two new cars straight out of residency is a bit extravagant when you have 300k of student debt hanging over your head. You'll be surprised how quickly the expenses creep up on you as you transition from resident to attending salary. See how things go for the first couple of years as you ponder other major events to come (home purchase, kids, etc.) and get a better sense of how to prioritize your spending and saving (reducing debt vs. home vs. saving)

pannkake
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Re: car thread- too much money?

Post by pannkake » Mon Dec 25, 2017 12:07 pm

Buy the cars, but review iihs.org to get the safest cars you can. At your income you can’t afford an injury in a crash.

onourway
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Re: car thread- too much money?

Post by onourway » Mon Dec 25, 2017 1:02 pm

To me the issue here is that this is an immediate and substantial lifestyle inflation, and for what reason? Cars are a commodity and you could buy a pair of cars for 1/4 of this price that would not be materially different in their utility to you. We make similar incomes, have a good 7-figure net worth, still early in our careers, and I would be hesitant to spend that much money on vehicles, especially if I had $300k of student debt hanging over me as well.

I would buy used cars, pay off the loans as fast as possible, be wary of lifestyle inflation, build your cash reserves, and in a few years, re-assess.

jayk238
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Re: car thread- too much money?

Post by jayk238 » Mon Dec 25, 2017 1:41 pm

I don't know that they wouldnt be any different.

Smaller cars are a concern for both of us. After having driven a CRV I definitely prefer to be on a perch. Thats actually materially significant for me. Teh stress levels I experience driving a smaller car (civic etc) has been much higher than with the crv. And generally smaller vehicles are the cheaper options but its not something I want to expose myself to.

Furthermore, having allwheel drive is a must in snow for me. I dont need to get stuck, or have difficulty in inclement weather driving to work everyday.

Finally, having certain things like the car safety features definitely reduces my stress burden and has shown to improve safety assuming you dont abuse them.

Most vehicles that offer these criteria usually are in the 28k and up range. Thats a 10 grand difference and if bought used could jump to 15k difference. For two vehicles that would be 30k savings over the cost of my current choices. So thats where I Would be looking at.

How old are you and how far along your career to have a 7 figure salary?!! Congrats. Thats impressive.

letsgobobby
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Re: car thread- too much money?

Post by letsgobobby » Mon Dec 25, 2017 1:57 pm

The only recent safety feature which has been shown to significantly improve safety is ESC, which is standard on all cars and has been for around a decade. The blind spot monitoring, intelligent cruise, etc., I don’t think have been proven yet to reduce accidents.

You can get an AWD CRV or RAV that is lightly used for under $20k. For example, there are dozens of 2015 RAV4s with around 30k miles on sale in my town for under $20k.

joeblow
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Re: car thread- too much money?

Post by joeblow » Mon Dec 25, 2017 2:48 pm

jayk238 wrote:
Sun Dec 24, 2017 5:03 am
Inccome is stable

How to make sure used choice wont fall apart in the middle of the road?
How do you make sure your new car is not a lemon and will not fall apart in the middle of the road?

Do some diligence, I think both scenarios are rare. Worrying about a used car "falling apart in the middle of the road" seems like a rationalization to get you to a predetermined decision.

If I were in your shoes I'd buy a couple of used reliable vehicles, assuming you actually need two new cars. Maybe post up some details on your existing vehicles that you are intending to replace.

Paying off/down your monster debt is going to feel much better than driving around in an outback or camry.

Shikoku
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Re: car thread- too much money?

Post by Shikoku » Mon Dec 25, 2017 4:41 pm

letsgobobby wrote:
Mon Dec 25, 2017 1:57 pm
The only recent safety feature which has been shown to significantly improve safety is ESC, which is standard on all cars and has been for around a decade. The blind spot monitoring, intelligent cruise, etc., I don’t think have been proven yet to reduce accidents.
Not quite true. Some technologies beyond ESC are having some positive impact.

Volvo City Safety Reduces Crashes
http://www.iihs.org/iihs/news/desktopne ... es-crashes

Volvo City Safety Loss Experience -- A Long Term Update*
http://www.iihs.org/media/d237130f-5a52 ... qCucRMtLZA

The Promise and Reality of Crash Avoidance Technology
http://www.iihs.org/Lifesavers/pdfs/LS_ ... y%20of.pdf

*"In the latest study, updated results for the XC60 and S60 confirm that City Safety is reducing losses substantially. Property damage liability loss frequency was estimated to be 14 percent lower for the XC60 than for relevant control vehicles and 15 percent lower for the S60. Collision claim frequencies were reduced by an estimated 21 percent for the XC60 and 12 percent for the S60. Both vehicles also showed reductions in collision claim severity and overall losses for collision and property damage liability. Under bodily injury liability, claim frequency was 28 percent lower for the XC60 and 31 percent lower for the S60.

This report also examines the effect City Safety is having on personal injury protection (PIP) and medical payment (MedPay) coverages. Under PIP, claim frequency was 21 percent lower for the XC60 and 23 percent lower for the S60. Under MedPay, claim frequency was 19 percent lower for the XC60 and 30 percent lower for the S60"
"I don't worry too much about pointing fingers at the past. I operate on the theory that every saint has a past, every sinner has a future." -- Warren Buffett

letsgobobby
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Re: car thread- too much money?

Post by letsgobobby » Mon Dec 25, 2017 4:46 pm

Shikoku wrote:
Mon Dec 25, 2017 4:41 pm
letsgobobby wrote:
Mon Dec 25, 2017 1:57 pm
The only recent safety feature which has been shown to significantly improve safety is ESC, which is standard on all cars and has been for around a decade. The blind spot monitoring, intelligent cruise, etc., I don’t think have been proven yet to reduce accidents.
Not quite true. Some technologies beyond ESC are having some positive impact.

Volvo City Safety Reduces Crashes
http://www.iihs.org/iihs/news/desktopne ... es-crashes

Volvo City Safety Loss Experience -- A Long Term Update*
http://www.iihs.org/media/d237130f-5a52 ... qCucRMtLZA

The Promise and Reality of Crash Avoidance Technology
http://www.iihs.org/Lifesavers/pdfs/LS_ ... y%20of.pdf

*"In the latest study, updated results for the XC60 and S60 confirm that City Safety is reducing losses substantially. Property damage liability loss frequency was estimated to be 14 percent lower for the XC60 than for relevant control vehicles and 15 percent lower for the S60. Collision claim frequencies were reduced by an estimated 21 percent for the XC60 and 12 percent for the S60. Both vehicles also showed reductions in collision claim severity and overall losses for collision and property damage liability. Under bodily injury liability, claim frequency was 28 percent lower for the XC60 and 31 percent lower for the S60.

This report also examines the effect City Safety is having on personal injury protection (PIP) and medical payment (MedPay) coverages. Under PIP, claim frequency was 21 percent lower for the XC60 and 23 percent lower for the S60. Under MedPay, claim frequency was 19 percent lower for the XC60 and 30 percent lower for the S60"
thanks for the update. are those technologies available on the cars the OP is considering?

Shikoku
Posts: 270
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Location: USA

Re: car thread- too much money?

Post by Shikoku » Mon Dec 25, 2017 5:13 pm

letsgobobby wrote:
Mon Dec 25, 2017 4:46 pm
Shikoku wrote:
Mon Dec 25, 2017 4:41 pm
letsgobobby wrote:
Mon Dec 25, 2017 1:57 pm
The only recent safety feature which has been shown to significantly improve safety is ESC, which is standard on all cars and has been for around a decade. The blind spot monitoring, intelligent cruise, etc., I don’t think have been proven yet to reduce accidents.
Not quite true. Some technologies beyond ESC are having some positive impact.

Volvo City Safety Reduces Crashes
http://www.iihs.org/iihs/news/desktopne ... es-crashes

Volvo City Safety Loss Experience -- A Long Term Update*
http://www.iihs.org/media/d237130f-5a52 ... qCucRMtLZA

The Promise and Reality of Crash Avoidance Technology
http://www.iihs.org/Lifesavers/pdfs/LS_ ... y%20of.pdf

*"In the latest study, updated results for the XC60 and S60 confirm that City Safety is reducing losses substantially. Property damage liability loss frequency was estimated to be 14 percent lower for the XC60 than for relevant control vehicles and 15 percent lower for the S60. Collision claim frequencies were reduced by an estimated 21 percent for the XC60 and 12 percent for the S60. Both vehicles also showed reductions in collision claim severity and overall losses for collision and property damage liability. Under bodily injury liability, claim frequency was 28 percent lower for the XC60 and 31 percent lower for the S60.

This report also examines the effect City Safety is having on personal injury protection (PIP) and medical payment (MedPay) coverages. Under PIP, claim frequency was 21 percent lower for the XC60 and 23 percent lower for the S60. Under MedPay, claim frequency was 19 percent lower for the XC60 and 30 percent lower for the S60"
thanks for the update. are those technologies available on the cars the OP is considering?
Subaru Outback is one of the vehicles that OP is considering. It comes with EyeSight which has some commonalities with Volvo City Safety used in the IIHS studies.
"I don't worry too much about pointing fingers at the past. I operate on the theory that every saint has a past, every sinner has a future." -- Warren Buffett

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