Max % of gross pay on a car?

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m@ver1ck
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Max % of gross pay on a car?

Post by m@ver1ck » Sat Mar 30, 2019 2:37 pm

I bring in about 300K a year. Have hankering for a new car or two... maybe it will pass.

One is a 10yr old RAV4 - bought the base model for 22K / mildly depressing every time I drive it - but the fact that it’s saving me 500 a month kind of makes up for it.

The second car is a 2 yr old Subaru Forester. Like what it does and it’s features / only issue is that it’s super uncomfortable to drive - like painfully so. Pedals too far apart leading to pain in the right groin muscles...

Anyway - thinking of getting a VW GTI and a VW Tiguan - not necessarily in that order...

Do I need these? No! I can drive the RAV4 for another 10 yrs I guess, and my wife is happy with the Forester - could always rent a car for a long road trip...

Feels kinda sucky and too bogleheadish...

Financial situation - house worth a million / still owe 250K on it. Oh - mortgage rate is 2.75% for 15yrs. Probably 9 more years to go.

Have around 300K in taxable accounts and 700K in retirement and 529s combined. Two kids - 2 and 8. Spouse doesn’t work...

I’m 43.

Japanese cars too boring. Other German cars too expensive for what I’m ready to pay. The 20K between the VW and BMW/Audi is better put away to the 529 IMHO.
VW not great from a reliability / but I’ve driven it 10yrs prior to the RAV4... and I guess I can afford to have it repaired...
Thoughts?
Last edited by m@ver1ck on Sat Mar 30, 2019 2:46 pm, edited 2 times in total.

Topic Author
m@ver1ck
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Re: Max % of gross pay on a car?

Post by m@ver1ck » Sat Mar 30, 2019 2:41 pm

Oh - mortgage rate is 2.75% for 15yrs. Probably 9 more years to go. Age is 42.

MotoTrojan
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Re: Max % of gross pay on a car?

Post by MotoTrojan » Sat Mar 30, 2019 2:43 pm

Buy what you want and make it last. This is a no brainer. Test drive it first; better yet rent one on turo.

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Kenkat
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Re: Max % of gross pay on a car?

Post by Kenkat » Sat Mar 30, 2019 2:44 pm

For your income level and level of assets, a GTI and Tiguan are conservative choices; you could certainly afford more but those are two nice vehicles overall. I wouldn’t have any guilt over trading in a 10 year old Rav4 and a Forrester which just isn’t working out.

Smoke
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Re: Max % of gross pay on a car?

Post by Smoke » Sat Mar 30, 2019 2:48 pm

Check out what they will give you on your trade in's.
Or what you can sell them for yourself.

I traded in my 21 yr old caprice for 2,000 at VW for a Sportswagon. Paid 10k for the caprice 16 yrs earlier.
Knowing the bottom line will help.
Arguing for the sake of arguing is something I am not going to engage in.

delamer
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Re: Max % of gross pay on a car?

Post by delamer » Sat Mar 30, 2019 2:57 pm

Your subject line is a bit misleading.

You are really asking about car costs relative to your whole financial situation, not just your income.

Which is really the best way to look at it.

We have bought a few used German luxury vehicles for good prices. They were well maintained with low mileage and someone else took the big depreciation hit. They are more expensive to maintain/repair though. You can prepay for standard maintenance to lower the cost.

It isn’t clear which car you are driving regularly. If your wife likes the Subaru and she is the principal driver, than get rid of the RAV.

sambb
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Re: Max % of gross pay on a car?

Post by sambb » Sat Mar 30, 2019 3:02 pm

Doesnt matter what you buy, just drive it for at least 100k miles or at least 6 years, so bias towards reliable. Always can do well with a one year old car, no matter what the price point.

helloeveryone
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Re: Max % of gross pay on a car?

Post by helloeveryone » Sat Mar 30, 2019 3:07 pm

m@ver1ck wrote:
Sat Mar 30, 2019 2:37 pm
I bring in about 300K a year. Have hankering for a new car or two... maybe it will pass.

One is a 10yr old RAV4 - bought the base model for 22K / mildly depressing every time I drive it - but the fact that it’s saving me 500 a month kind of makes up for it.

The second car is a 2 yr old Subaru Forester. Like what it does and it’s features / only issue is that it’s super uncomfortable to drive - like painfully so. Pedals too far apart leading to pain in the right groin muscles...

Anyway - thinking of getting a VW GTI and a VW Tiguan - not necessarily in that order...

Do I need these? No! I can drive the RAV4 for another 10 yrs I guess, and my wife is happy with the Forester - could always rent a car for a long road trip...

Feels kinda sucky and too bogleheadish...

Financial situation - house worth a million / still owe 250K on it. Oh - mortgage rate is 2.75% for 15yrs. Probably 9 more years to go.

Have around 300K in taxable accounts and 700K in retirement and 529s combined. Two kids - 2 and 8. Spouse doesn’t work...

I’m 43.

Japanese cars too boring. Other German cars too expensive for what I’m ready to pay. The 20K between the VW and BMW/Audi is better put away to the 529 IMHO.
VW not great from a reliability / but I’ve driven it 10yrs prior to the RAV4... and I guess I can afford to have it repaired...
Thoughts?
Very reasonable to replace the RAV4. Since your wife is fine with the forester leave that be for now.

KlangFool
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Re: Max % of gross pay on a car?

Post by KlangFool » Sat Mar 30, 2019 3:18 pm

OP,

What is your annual savings every year? If it is 100K and above and you can save at that level after buying the car, go right ahead.

KlangFool

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m@ver1ck
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Re: Max % of gross pay on a car?

Post by m@ver1ck » Sat Mar 30, 2019 4:26 pm

KlangFool wrote:
Sat Mar 30, 2019 3:18 pm
OP,

What is your annual savings every year? If it is 100K and above and you can save at that level after buying the car, go right ahead.

KlangFool
Now that’s a great question. I don’t know the answer - but once I find out, I’ll be able to buy the cars without any hesitation.

Flyer24
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Re: Max % of gross pay on a car?

Post by Flyer24 » Sat Mar 30, 2019 6:54 pm

You can easily afford it. Buy the car and enjoy life. Of course, I say that but I hate spending money on cars. Ha.
Last edited by Flyer24 on Sat Mar 30, 2019 7:07 pm, edited 1 time in total.

Figuring_it_out
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Re: Max % of gross pay on a car?

Post by Figuring_it_out » Sat Mar 30, 2019 7:03 pm

Dave Ramsey approach. Save cash for the car and only spend that much. That puts you in a better negotiating position with yourself. You would let the dealer lull you to sleep and tack on a bunch of extra goodies to jack up the price.

I absolutely HATE buying cars. Always feel like a need a shower after dealing with these shady sales people and their bosses. :twisted:

Walking in with a fixed amount to spend, you either get the car you want for that price or you walk.

abonder
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Re: Max % of gross pay on a car?

Post by abonder » Sat Mar 30, 2019 7:49 pm

I’d but the GTI. It’s an incredibly reasonable sporty-yet-practical option. I think you get 90% of the BMW experience for a fraction of the price. Do a lot of reading on GTIs - you can get a good deal on a new one if you do your homework. Check forums where people post their out-the-door prices paid to give you an idea. It’s a hatchback so it’s actuallly a reasonably useful vehicle. It’s my personal dream car but I have a totally useable 8-year-old Mazda with <40k miles so I’m waiting for now since my car has so much life left.

The GTI will be more expensive and less reliable than the rav4, but you’re not talking Range Rover or jaguar insanity. Check out the forums - there are well known problems but nothing terrible. Just accept that servicing a German car (even a vw) will be more expensive than a Japanese car.

I’d be in less of a rush to go the Tiguan route - not because there’s any problem with the car. It just seems like replacing a 3-yr-old well-regarded family car that your wife likes would be a lower priority. It’s still quite new and you don’t drive it daily so I’d just let it be for now.

But at your fiscal level you could easily replace both without it being much of a big deal in terms of your financial well-being.

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Re: Max % of gross pay on a car?

Post by Jack FFR1846 » Sat Mar 30, 2019 8:20 pm

A GTi is one hundred million percent more fun to drive than a Rav 4. If you feel that you have to save money, wait until late in the fall. VW decimates prices every fall. Like $6k off. I've watched GTi's for about 4 years and every fall, they do the same thing. I've watched Jettas too and they've been easy to buy for well under $13k. Didn't VW just put in a longer warranty too?
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Cycle
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Re: Max % of gross pay on a car?

Post by Cycle » Sat Mar 30, 2019 8:39 pm

People who drive cars create a ton of noise pollution in my neighborhood, which is annoying and avoidable.

People who drive cars kill 2MM people a year, with their cars. Three people were killed a few blocks up on my street recently, not a shocker but sad nonetheless. Everyone I've personally known to die young has died in a car crash.

Cars are really, really expensive.
viewtopic.php?t=276379
Assuming we drive for 40 years (ages 25-65), what is the cumulative return of the $9,039/year savings?

According to bankrate.com., $9,039 saved each year for 40 years at 9% (stock market's average return) is (hold your breath) $4,026,858.95.
Ever consider a bike?

Riding a bike can be dangerous, but living in a city with good bike infrastructure, like Minneapolis, is quite safe. Overall the health benefits of cycling instead of driving are substantial. https://www.washingtonpost.com/national ... story.html
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whodidntante
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Re: Max % of gross pay on a car?

Post by whodidntante » Sat Mar 30, 2019 8:52 pm

If I somehow woke up owning a Rav4, I would sell it too. You're able to afford something you like more.

letsgobobby
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Re: Max % of gross pay on a car?

Post by letsgobobby » Sat Mar 30, 2019 9:01 pm

Deleted
Last edited by letsgobobby on Thu Apr 18, 2019 12:39 am, edited 1 time in total.

Rob1
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Re: Max % of gross pay on a car?

Post by Rob1 » Sat Mar 30, 2019 9:18 pm

As others have mentioned you can probably afford it...particularly if you can still hit your savings goals.

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m@ver1ck
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Re: Max % of gross pay on a car?

Post by m@ver1ck » Sun Mar 31, 2019 10:00 am

Looking to put away 55K in retirement via mega-Backdoor IRA. An additional 20K into kids 529. (Can use Roth for kids education if need be).
Another 25K ear marked for ESPP can get sold and converted to vanguard balanced fund into a don’t touch fund.
That’s a 100K saved.

That leaves with me around 7K each month, out of which 3500 goes to mortgage. Leaving 3500 to spend or save.

Luckily, my job requires me to dress like a slob. A dress shirt is seriously overdressed. A polo is dressy. I can get away with a t-shirt and a hoodie most days. And don’t even own leather shoes. Have been wearing running shoes to work since the last 12yrs. :-) My pants are LLBean. T/shirts are JCrew on sale.

So yeah - don’t have to worry too much about spending. Most $$ goes towards kids books (they love reading) and food - organic, local - Whole Foods and PCC.

Writing this up brings me to the conclusion that a new car won’t materially impact my happiness. The $$ is probably better spent on several Hawaii vacations.
The sun is coming out / and that always makes me super happy. I get miserable and depressed in the winter in Seattle...

surfstar
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Re: Max % of gross pay on a car?

Post by surfstar » Sun Mar 31, 2019 10:14 am

GTI or even a base Golf will be way more fun to drive than an old Rav4 and they offer a solid value.
Review the prices of what people have paid lately at VWvortex - I know for the wagons you can score deals of up to 20% off MSRP. That keeps it boglehead-ish :sharebeer

(my Golf Sportwagen was my first and only new car purchase - base model, 2016, $18,425 + TTL = a lot of value for a new car)

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StevieG72
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Re: Max % of gross pay on a car?

Post by StevieG72 » Sun Mar 31, 2019 10:21 am

Buy the Tiguan more room for the kiddos.

Not a excessive expenditure by any stretch.
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Katietsu
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Re: Max % of gross pay on a car?

Post by Katietsu » Sun Mar 31, 2019 10:28 am

Just make sure you do feel that a Hawaii vacation would have more value than an upgraded car. If my choice was the vacations vs a RAV4 10 year old base model, I would upgrade the car. But I live in an area that requires a car for everything and all my family is a 90 mile trip. If I lived in a walkable part of Seattle and flew to visit family, I would likely make a different choice. Note that I did keep my last car for 250,000 miles and 15 years. But I really liked it up to the last 18 months of ownership. Wish I had pulled the plug a year sooner.

I do question though your math that upgrading from the RAV4 will cost you $500 extra a month. You are already spending on liability insurance, gas, parking that will not change. So increased expense for collision insurance, depreciation predominantly. I guess opportunity cost or interest as well. I think there are quite a few choices that would be a huge improvement with an increased cost much less than the $500 you are projecting.

FireSekr
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Re: Max % of gross pay on a car?

Post by FireSekr » Sun Mar 31, 2019 10:38 am

letsgobobby wrote:
Sat Mar 30, 2019 9:01 pm
Cycle wrote:
Sat Mar 30, 2019 8:39 pm
People who drive cars create a ton of noise pollution in my neighborhood, which is annoying and avoidable.

People who drive cars kill 2MM people a year, with their cars. Three people were killed a few blocks up on my street recently, not a shocker but sad nonetheless. Everyone I've personally known to die young has died in a car crash.

Cars are really, really expensive.
viewtopic.php?t=276379
Assuming we drive for 40 years (ages 25-65), what is the cumulative return of the $9,039/year savings?

According to bankrate.com., $9,039 saved each year for 40 years at 9% (stock market's average return) is (hold your breath) $4,026,858.95.
Ever consider a bike?

Riding a bike can be dangerous, but living in a city with good bike infrastructure, like Minneapolis, is quite safe. Overall the health benefits of cycling instead of driving are substantial. https://www.washingtonpost.com/national ... story.html
I think you win the award for least on topic reply of the day.

:beer
He’s probably from the Pacific Northwest

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