What should a 23 year old consider before purchasing a Tesla?

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Danimals543
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What should a 23 year old consider before purchasing a Tesla?

Post by Danimals543 »

Update: I ended up not buying the car. Was super difficult decision. When I do buy my next car I’ll make sure I can pay cash.
Last edited by Danimals543 on Sun Dec 13, 2020 2:41 am, edited 2 times in total.
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AerialWombat
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by AerialWombat »

Perhaps consider the fact that Consumer Reports just rated Tesla the second most unreliable auto brand in the US market. The stories of Tesla quality and reliability issues are, by now, notorious. They just have too many problems. That alone is reason enough not to buy one, in my opinion.
For entertainment purposes only.
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Danimals543
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Danimals543 »

AerialWombat wrote: Tue Dec 08, 2020 1:29 am Perhaps consider the fact that Consumer Reports just rated Tesla the second most unreliable auto brand in the US market. The stories of Tesla quality and reliability issues are, by now, notorious. They just have too many problems. That alone is reason enough not to buy one, in my opinion.
It’s the #1 top safety pick and they have really stepped up quality. My friend has one and has never had any issues. The quality issues were from the 2016 model
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AerialWombat
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by AerialWombat »

Danimals543 wrote: Tue Dec 08, 2020 1:32 am
AerialWombat wrote: Tue Dec 08, 2020 1:29 am Perhaps consider the fact that Consumer Reports just rated Tesla the second most unreliable auto brand in the US market. The stories of Tesla quality and reliability issues are, by now, notorious. They just have too many problems. That alone is reason enough not to buy one, in my opinion.
It’s the #1 top safety pick and they have really stepped up quality. My friend has one and has never had any issues. The quality issues were from the 2016 model
I live near a city where they are disproportionately abundant. I know quite a few people that own one, mostly built within the last couple years. It feels like half the people I know with one are constantly complaining about things that break. Totally anecdotal, but I never hear similar complaints from Subaru owners (the car everybody else around here drives, myself included).
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LFKB
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by LFKB »

It’s your money - do what you want with it. Not one anyone else wants you to do. Just ensure you understand your options and alternatives.

For example:

Option 1 - spend $50k on the Tesla over 5 years

Option 2 - spend $25k for a cheaper car over next 5 years and invest the other $25k, which growing at 8% over the next 30 years becomes $250k
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Danimals543
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Danimals543 »

LFKB wrote: Tue Dec 08, 2020 1:46 am It’s your money - do what you want with it. Not one anyone else wants you to do. Just ensure you understand your options and alternatives.

For example:

Option 1 - spend $50k on the Tesla over 5 years

Option 2 - spend $25k for a cheaper car over next 5 years and invest the other $25k, which growing at 8% over the next 30 years becomes $250k
I would spend $25k if a cheaper Tesla was available. I don’t want to spend $25k on a gas car and have it outdated since the world is moving towards electricity.
LFKB
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by LFKB »

Danimals543 wrote: Tue Dec 08, 2020 1:50 am
LFKB wrote: Tue Dec 08, 2020 1:46 am It’s your money - do what you want with it. Not one anyone else wants you to do. Just ensure you understand your options and alternatives.

For example:

Option 1 - spend $50k on the Tesla over 5 years

Option 2 - spend $25k for a cheaper car over next 5 years and invest the other $25k, which growing at 8% over the next 30 years becomes $250k
I would spend $25k if a cheaper Tesla was available. I don’t want to spend $25k on a gas car and have it outdated since the world is moving towards electricity.
It sounds like you have your answer. Buy the car if it’ll make you happy.
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HomerJ
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by HomerJ »

Don't get a luxury car until you can pay cash for it.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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Danimals543
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Danimals543 »

HomerJ wrote: Tue Dec 08, 2020 1:52 am Don't get a luxury car until you can pay cash for it.
Cash doesn’t max sense with a 2.5% loan. Would rather take out a loan and invest the cash.
OCDinvestor
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by OCDinvestor »

Danimals543 wrote: Tue Dec 08, 2020 1:50 am
LFKB wrote: Tue Dec 08, 2020 1:46 am It’s your money - do what you want with it. Not one anyone else wants you to do. Just ensure you understand your options and alternatives.

For example:

Option 1 - spend $50k on the Tesla over 5 years

Option 2 - spend $25k for a cheaper car over next 5 years and invest the other $25k, which growing at 8% over the next 30 years becomes $250k
I would spend $25k if a cheaper Tesla was available. I don’t want to spend $25k on a gas car and have it outdated since the world is moving towards electricity.
Outdated? You will have to specify what you mean.

Do you mean in 10 years it will be frowned upon to still be driving a gas burning vehicle?

Do you mean in 10 years it will be difficult to obtain gasoline or service maintenance for a gas burning vehicle,

It sounds like you have made up your mind, but gas burning vehicles will not be outdated in the lifetime of a new 2021 vehicle.
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Danimals543
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Danimals543 »

OCDinvestor wrote: Tue Dec 08, 2020 2:01 am
Danimals543 wrote: Tue Dec 08, 2020 1:50 am
LFKB wrote: Tue Dec 08, 2020 1:46 am It’s your money - do what you want with it. Not one anyone else wants you to do. Just ensure you understand your options and alternatives.

For example:

Option 1 - spend $50k on the Tesla over 5 years

Option 2 - spend $25k for a cheaper car over next 5 years and invest the other $25k, which growing at 8% over the next 30 years becomes $250k
I would spend $25k if a cheaper Tesla was available. I don’t want to spend $25k on a gas car and have it outdated since the world is moving towards electricity.
Outdated? You will have to specify what you mean.

Do you mean in 10 years it will be frowned upon to still be driving a gas burning vehicle?

Do you mean in 10 years it will be difficult to obtain gasoline or service maintenance for a gas burning vehicle,

It sounds like you have made up your mind, but gas burning vehicles will not be outdated in the lifetime of a new 2021 vehicle.
I know I’ve made up my mind but I’m also considering just waiting until Tesla’s become cheaper. Used ones are nearly the same price as a new one otherwise I would just buy used.

ICE vehicles do not provide instant torque. Also I live in the state with the cheapest electricity cost in the country. So gas is expensive at $3.50 a gallon (sometimes more).
OCDinvestor
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by OCDinvestor »

Again, it sounds like you made up your mind. You seem to be trying to justify the purchase to the BH community?

If you meet your saving goals, and can afford the car, you can afford it.

IN my experience, the novelty of a new car is fleeting. A few months into buying it, you may find between meeting your savings goals and a $700-$1,000 payment, that your discretionary income is limited.
kiwi123
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by kiwi123 »

'Boglehead advice' will be a 23-yr old making $100k is too soon to be buying a $50k eclectic vehicle (that will be outdated in 3 years as EV tech is progressing rapidly). "Wisdom" on this forum would be to get a cheaper new or used vehicle for <$30k which has the same utility as the Tesla (although not the same 'cool' or 'fun' factor) e.g. your usual suspects of toyota, hyundai, honda, etc. etc. You'll also have an extra financial cushion if you lose your job in 6 months.

In the non-boglehead world you can certainly get it if you want it... it will just delay financial independence by 2-3 years and potentially set you on a path of living beyond your means as you'll probably want to upgrade to the newest tesla in 4 years because you just got a fat raise to $150k :-)

(Anyway, you already know the answers you'll get on this forum for that kind of question)
Waiting_for_Godot
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Waiting_for_Godot »

I don't remember the timeline for the Model 2, but that, in theory, will be in the 25k range. I am a fan of smaller cars (city parking).
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Danimals543
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Danimals543 »

kiwi123 wrote: Tue Dec 08, 2020 2:18 am 'Boglehead advice' will be a 23-yr old making $100k is too soon to be buying a $50k eclectic vehicle (that will be outdated in 3 years as EV tech is progressing rapidly). "Wisdom" on this forum would be to get a cheaper new or used vehicle for <$30k which has the same utility as the Tesla (although not the same 'cool' or 'fun' factor) e.g. your usual suspects of toyota, hyundai, honda, etc. etc. You'll also have an extra financial cushion if you lose your job in 6 months.

In the non-boglehead world you can certainly get it if you want it... it will just delay financial independence by 2-3 years and potentially set you on a path of living beyond your means as you'll probably want to upgrade to the newest tesla in 4 years because you just got a fat raise to $150k :-)

(Anyway, you already know the answers you'll get on this forum for that kind of question)
How can it delay financial independence? I’m already maxing out my 401k and Roth IRA. Most Americans barely contribute anything to retirement.

Would a $25k car be a poor choice? I’m considering getting a more reliable car but at $25k now...
vasaver
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by vasaver »

Danimals543 wrote: Tue Dec 08, 2020 2:04 am
I know I’ve made up my mind but I’m also considering just waiting until Tesla’s become cheaper. Used ones are nearly the same price as a new one otherwise I would just buy used.

ICE vehicles do not provide instant torque. Also I live in the state with the cheapest electricity cost in the country. So gas is expensive at $3.50 a gallon (sometimes more).
You need to do some homework. If you really think used ones (Model 3?) sell for the same price as a new one - what do you think a LR RWD sold for originally? Even with the tax credit you are talking solid depreciation.

Used ones start about 35k - and look a little deeper FSD is depreciating as well. Add in the delivery fee and taxes on a new car depending on the state.

https://www.autotrader.com/cars-for-sal ... Records=25
Last edited by vasaver on Tue Dec 08, 2020 2:52 am, edited 1 time in total.
abonder
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by abonder »

If you want to go battery electric but save a ton of money, check out off-lease 2017 Chevy bolts. Definitely not the Tesla aesthetic but they can be had for impressively little money for a car with a 200 plus mile range and a good overall reputation.
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Danimals543
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Danimals543 »

vasaver wrote: Tue Dec 08, 2020 2:45 am
Danimals543 wrote: Tue Dec 08, 2020 2:04 am
I know I’ve made up my mind but I’m also considering just waiting until Tesla’s become cheaper. Used ones are nearly the same price as a new one otherwise I would just buy used.

ICE vehicles do not provide instant torque. Also I live in the state with the cheapest electricity cost in the country. So gas is expensive at $3.50 a gallon (sometimes more).
You need to do some homework. If you really think used ones (Model 3?) sell for the same price as a new one - what do you think a LR RWD sold for originally?

Used ones start about 36k

https://www.autotrader.com/cars-for-sal ... Records=25
I do not live in Virginia. In Washington state you won't find the cars for that price. Trust me I looked. I'm not looking at the RWD model. AWD Long Range.
Last edited by Danimals543 on Tue Dec 08, 2020 2:50 am, edited 1 time in total.
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Danimals543
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Danimals543 »

abonder wrote: Tue Dec 08, 2020 2:47 am If you want to go battery electric but save a ton of money, check out off-lease 2017 Chevy bolts. Definitely not the Tesla aesthetic but they can be had for impressively little money for a car with a 200 plus mile range and a good overall reputation.
Other electric manufacturers have slow cars. Chevy Bolt's 0-60 is 6.5 seconds, while the model 3 I'm looking at is 4.2. Plus no self-driving. I would rather just get a gas car at that point for the performance rather than get a crappy EV.
onourway
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by onourway »

Danimals543 wrote: Tue Dec 08, 2020 2:00 am
HomerJ wrote: Tue Dec 08, 2020 1:52 am Don't get a luxury car until you can pay cash for it.
Cash doesn’t max sense with a 2.5% loan. Would rather take out a loan and invest the cash.
Sure it does.

One, it doesn't sound like you actually have the cash to pay for it. Parting with $50k from your bank account is much more difficult than signing on the line for a monthly payment. It would likely have you re-thinking the purchase.

Two, most people don't have access to a low risk 2.5% return investment right now. You could invest the money instead, but over the timeline of the loan, you could easily come out in the negative, magnifying the 2.5% rate many times.

Third, at 23 jumping right into a brand new Tesla is a great way to permanently increase your automotive costs for the rest of your life. It is far harder to take a step backwards once you've gotten used to something fancy.

There is nothing at all wrong with a $25k vehicle. I'm a lifelong car-nut with net worth well into the two commas, and we have never owned a single vehicle that cost more than $25k. I know a number of people including my parents, who own Teslas, and have encouraged a number of those people to buy them - they are great cars! However our $25k vehicles are also great cars - frankly much better in a number of ways. We could easily afford a Tesla, but it's simply not worth the trade-offs vs. what it would get us over and above what our $25k vehicles already do.
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Danimals543
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Danimals543 »

onourway wrote: Tue Dec 08, 2020 2:51 am
Danimals543 wrote: Tue Dec 08, 2020 2:00 am
HomerJ wrote: Tue Dec 08, 2020 1:52 am Don't get a luxury car until you can pay cash for it.
Cash doesn’t max sense with a 2.5% loan. Would rather take out a loan and invest the cash.
Sure it does.

One, it doesn't sound like you actually have the cash to pay for it. Parting with $50k from your bank account is much more difficult than signing on the line for a monthly payment. It would likely have you re-thinking the purchase.

Two, most people don't have access to a low risk 2.5% return investment right now. You could invest the money instead, but over the timeline of the loan, you could easily come out in the negative, magnifying the 2.5% rate many times.

Third, at 23 jumping right into a brand new Tesla is a great way to permanently increase your automotive costs for the rest of your life. It is far harder to take a step backwards once you've gotten used to something fancy.

There is nothing at all wrong with a $25k vehicle. I'm a lifelong car-nut with net worth well into the two commas, and we have never owned a single vehicle that cost more than $25k. I know a number of people including my parents, who own Teslas, and have encouraged a number of those people to buy them - they are great cars! However our $25k vehicles are also great cars - frankly much better in a number of ways. We could easily afford a Tesla, but it's simply not worth the trade-offs vs. what it would get us over and above what our $25k vehicles already do.
What <$25k vehicles would you suggest? You're right, I only have $25,000 on top of my $15,000 emergency fund.
vasaver
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by vasaver »

Danimals543 wrote: Tue Dec 08, 2020 2:47 am
vasaver wrote: Tue Dec 08, 2020 2:45 am
Danimals543 wrote: Tue Dec 08, 2020 2:04 am
I know I’ve made up my mind but I’m also considering just waiting until Tesla’s become cheaper. Used ones are nearly the same price as a new one otherwise I would just buy used.

ICE vehicles do not provide instant torque. Also I live in the state with the cheapest electricity cost in the country. So gas is expensive at $3.50 a gallon (sometimes more).
You need to do some homework. If you really think used ones (Model 3?) sell for the same price as a new one - what do you think a LR RWD sold for originally?

Used ones start about 36k

https://www.autotrader.com/cars-for-sal ... Records=25
I do not live in Virginia. In Washington state you won't find the cars for that price. Trust me I looked. I'm not looking at the RWD model. AWD Long Range.
LR AWD starts about 40k used in Washington State

https://www.autotrader.com/cars-for-sal ... Records=25

I am still waiting on this one...“Buying a car today is an investment into the future. I think the most profound thing is that if you buy a Tesla today, I believe you are buying an appreciating asset – not a depreciating asset.”

If you want to know what depreciation looks like, talk to some P100D owners.

Here are some nice charts - will this time really be different? But if you really like lighting cash on fire, be my guest.

https://tesla-info.com/blog/tesla-depreciation.php
Last edited by vasaver on Tue Dec 08, 2020 3:06 am, edited 4 times in total.
onourway
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by onourway »

Danimals543 wrote: Tue Dec 08, 2020 2:54 am
What <$25k vehicles would you suggest? You're right, I only have $25,000 on top of my $15,000 emergency fund.
There are countless great vehicles in this price range and what I like is probably not what you like. Look around and see what floats your boat.

I will say that my parents also have a Chevy Volt that for whatever reason, they drive far more than the Tesla.
cacophony
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by cacophony »

Danimals543 wrote: Tue Dec 08, 2020 1:32 am
AerialWombat wrote: Tue Dec 08, 2020 1:29 am Perhaps consider the fact that Consumer Reports just rated Tesla the second most unreliable auto brand in the US market. The stories of Tesla quality and reliability issues are, by now, notorious. They just have too many problems. That alone is reason enough not to buy one, in my opinion.
It’s the #1 top safety pick and they have really stepped up quality. My friend has one and has never had any issues. The quality issues were from the 2016 model
If you're talking about the Model 3 then Consumer Reports reliability data shows the 2020 model to have significantly lower reliability than the 2018 or 2019 models. But there is no 2016 Model 3, so maybe you're talking about the Model S. The Model S reliability data is even worse in recent years. 2019 and 2020 both look terrible.
Last edited by cacophony on Tue Dec 08, 2020 3:07 am, edited 1 time in total.
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Danimals543
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Danimals543 »

onourway wrote: Tue Dec 08, 2020 2:58 am
Danimals543 wrote: Tue Dec 08, 2020 2:54 am
What <$25k vehicles would you suggest? You're right, I only have $25,000 on top of my $15,000 emergency fund.
There are countless great vehicles in this price range and what I like is probably not what you like. Look around and see what floats your boat.

I will say that my parents also have a Chevy Volt that for whatever reason, they drive far more than the Tesla.
I'm also considering a Subaru WRX for $22,000. Figured that it can be a lot of fun and not a crazy amount to spend on a fun car. Or a performance VW GTI for $20k ish.
keanoz
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by keanoz »

Danimals543 wrote: Tue Dec 08, 2020 2:54 am
onourway wrote: Tue Dec 08, 2020 2:51 am
Danimals543 wrote: Tue Dec 08, 2020 2:00 am
HomerJ wrote: Tue Dec 08, 2020 1:52 am Don't get a luxury car until you can pay cash for it.
Cash doesn’t max sense with a 2.5% loan. Would rather take out a loan and invest the cash.
Sure it does.

One, it doesn't sound like you actually have the cash to pay for it. Parting with $50k from your bank account is much more difficult than signing on the line for a monthly payment. It would likely have you re-thinking the purchase.

Two, most people don't have access to a low risk 2.5% return investment right now. You could invest the money instead, but over the timeline of the loan, you could easily come out in the negative, magnifying the 2.5% rate many times.

Third, at 23 jumping right into a brand new Tesla is a great way to permanently increase your automotive costs for the rest of your life. It is far harder to take a step backwards once you've gotten used to something fancy.

There is nothing at all wrong with a $25k vehicle. I'm a lifelong car-nut with net worth well into the two commas, and we have never owned a single vehicle that cost more than $25k. I know a number of people including my parents, who own Teslas, and have encouraged a number of those people to buy them - they are great cars! However our $25k vehicles are also great cars - frankly much better in a number of ways. We could easily afford a Tesla, but it's simply not worth the trade-offs vs. what it would get us over and above what our $25k vehicles already do.
What <$25k vehicles would you suggest? You're right, I only have $25,000 on top of my $15,000 emergency fund.
Honda accord...Great car but just doesnt have the wow factor
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Danimals543
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Danimals543 »

keanoz wrote: Tue Dec 08, 2020 3:07 am
Danimals543 wrote: Tue Dec 08, 2020 2:54 am
onourway wrote: Tue Dec 08, 2020 2:51 am
Danimals543 wrote: Tue Dec 08, 2020 2:00 am
HomerJ wrote: Tue Dec 08, 2020 1:52 am Don't get a luxury car until you can pay cash for it.
Cash doesn’t max sense with a 2.5% loan. Would rather take out a loan and invest the cash.
Sure it does.

One, it doesn't sound like you actually have the cash to pay for it. Parting with $50k from your bank account is much more difficult than signing on the line for a monthly payment. It would likely have you re-thinking the purchase.

Two, most people don't have access to a low risk 2.5% return investment right now. You could invest the money instead, but over the timeline of the loan, you could easily come out in the negative, magnifying the 2.5% rate many times.

Third, at 23 jumping right into a brand new Tesla is a great way to permanently increase your automotive costs for the rest of your life. It is far harder to take a step backwards once you've gotten used to something fancy.

There is nothing at all wrong with a $25k vehicle. I'm a lifelong car-nut with net worth well into the two commas, and we have never owned a single vehicle that cost more than $25k. I know a number of people including my parents, who own Teslas, and have encouraged a number of those people to buy them - they are great cars! However our $25k vehicles are also great cars - frankly much better in a number of ways. We could easily afford a Tesla, but it's simply not worth the trade-offs vs. what it would get us over and above what our $25k vehicles already do.
What <$25k vehicles would you suggest? You're right, I only have $25,000 on top of my $15,000 emergency fund.
Honda accord...Great car but just doesnt have the wow factor
Do you recommend getting CPO over new? Or looking at used? Yeah.....$50k is too much for a car. Sorry for being so dumb guys.
babystep
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by babystep »

Danimals543 wrote: Tue Dec 08, 2020 2:54 am
onourway wrote: Tue Dec 08, 2020 2:51 am
Danimals543 wrote: Tue Dec 08, 2020 2:00 am
HomerJ wrote: Tue Dec 08, 2020 1:52 am Don't get a luxury car until you can pay cash for it.
Cash doesn’t max sense with a 2.5% loan. Would rather take out a loan and invest the cash.
Sure it does.

One, it doesn't sound like you actually have the cash to pay for it. Parting with $50k from your bank account is much more difficult than signing on the line for a monthly payment. It would likely have you re-thinking the purchase.

Two, most people don't have access to a low risk 2.5% return investment right now. You could invest the money instead, but over the timeline of the loan, you could easily come out in the negative, magnifying the 2.5% rate many times.

Third, at 23 jumping right into a brand new Tesla is a great way to permanently increase your automotive costs for the rest of your life. It is far harder to take a step backwards once you've gotten used to something fancy.

There is nothing at all wrong with a $25k vehicle. I'm a lifelong car-nut with net worth well into the two commas, and we have never owned a single vehicle that cost more than $25k. I know a number of people including my parents, who own Teslas, and have encouraged a number of those people to buy them - they are great cars! However our $25k vehicles are also great cars - frankly much better in a number of ways. We could easily afford a Tesla, but it's simply not worth the trade-offs vs. what it would get us over and above what our $25k vehicles already do.
What <$25k vehicles would you suggest? You're right, I only have $25,000 on top of my $15,000 emergency fund.

It is great that you are contributing max to 401k, Roth IRA and have 40k in cash at the age of 23. Looks like buying the car will really make you happy.
Just pay $35k in cash and rest of it loan. Make sure that you have proper insurance.
Slowly re-build the emergency fund while paying down the loan. You have some money in Roth and 401k.
Please continue to max-out 401k and Roth. Check the HSA if available and you don't have it.
Open a brokerage account and start automatic investing. You are making less than 100k and won't be paying any tax on LTCGs so important to open brokerage now and not pay any tax on dividends.
Sourc3
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Sourc3 »

Of course you should get it. Every 23 year old needs to be able to look back in 10 years and say ‘that was stupid’. This could be your opportunity.

I’ve done my share of rightly justified but stupid financial decisions at your age like getting a bmw.
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Danimals543
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Danimals543 »

babystep wrote: Tue Dec 08, 2020 3:51 am
Danimals543 wrote: Tue Dec 08, 2020 2:54 am
onourway wrote: Tue Dec 08, 2020 2:51 am
Danimals543 wrote: Tue Dec 08, 2020 2:00 am
HomerJ wrote: Tue Dec 08, 2020 1:52 am Don't get a luxury car until you can pay cash for it.
Cash doesn’t max sense with a 2.5% loan. Would rather take out a loan and invest the cash.
Sure it does.

One, it doesn't sound like you actually have the cash to pay for it. Parting with $50k from your bank account is much more difficult than signing on the line for a monthly payment. It would likely have you re-thinking the purchase.

Two, most people don't have access to a low risk 2.5% return investment right now. You could invest the money instead, but over the timeline of the loan, you could easily come out in the negative, magnifying the 2.5% rate many times.

Third, at 23 jumping right into a brand new Tesla is a great way to permanently increase your automotive costs for the rest of your life. It is far harder to take a step backwards once you've gotten used to something fancy.

There is nothing at all wrong with a $25k vehicle. I'm a lifelong car-nut with net worth well into the two commas, and we have never owned a single vehicle that cost more than $25k. I know a number of people including my parents, who own Teslas, and have encouraged a number of those people to buy them - they are great cars! However our $25k vehicles are also great cars - frankly much better in a number of ways. We could easily afford a Tesla, but it's simply not worth the trade-offs vs. what it would get us over and above what our $25k vehicles already do.
What <$25k vehicles would you suggest? You're right, I only have $25,000 on top of my $15,000 emergency fund.

It is great that you are contributing max to 401k, Roth IRA and have 40k in cash at the age of 23. Looks like buying the car will really make you happy.
Just pay $35k in cash and rest of it loan. Make sure that you have proper insurance.
Slowly re-build the emergency fund while paying down the loan. You have some money in Roth and 401k.
Please continue to max-out 401k and Roth. Check the HSA if available and you don't have it.
Open a brokerage account and start automatic investing. You are making less than 100k and won't be paying any tax on LTCGs so important to open brokerage now and not pay any tax on dividends.
Would you still recommend the brokerage if I have access to a Mega Backdoor Roth IRA?
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Danimals543
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Danimals543 »

Sourc3 wrote: Tue Dec 08, 2020 4:06 am Of course you should get it. Every 23 year old needs to be able to look back in 10 years and say ‘that was stupid’. This could be your opportunity.

I’ve done my share of rightly justified but stupid financial decisions at your age like getting a bmw.
LOL
Hastur
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Hastur »

Go for 3-4 year old Panamera. A lot more reliable in the same price range.
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dogagility
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by dogagility »

Danimals543 wrote: Tue Dec 08, 2020 1:50 am
LFKB wrote: Tue Dec 08, 2020 1:46 am It’s your money - do what you want with it. Not one anyone else wants you to do. Just ensure you understand your options and alternatives.

For example:

Option 1 - spend $50k on the Tesla over 5 years

Option 2 - spend $25k for a cheaper car over next 5 years and invest the other $25k, which growing at 8% over the next 30 years becomes $250k
I would spend $25k if a cheaper Tesla was available. I don’t want to spend $25k on a gas car and have it outdated since the world is moving towards electricity.
I'd save your money and buy this rig from Vice Grip Garage: https://www.ebay.com/itm/1963-Buick-LeS ... 890.l49292
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mokaThought
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by mokaThought »

If you must get the Tesla, lease it. You won’t have to worry about reliability or resale value, you’ll know exactly how much damage you’ll have done, and you (hopefully) will get it out of your system. Then you can say you did something stupid at age 23 and go buy a Toyota or Subaru after that.
I gave in and went SCV. Wish me luck.
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by goblue100 »

I was 23 once. I bought a Chevy Camaro. I want to say it cost about a years salary at the time, maybe a year and a half. I enjoyed the car, but it only lasted me about 8 years before it smoked like chimney. What I will tell you is the new wears off really fast and in the end it will just end up being a vehicle to get you from point A to point B.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns
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samsoes
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by samsoes »

Danimals543 wrote: Tue Dec 08, 2020 1:21 am Currently 23, making $100k a year, I calculated that I would be able to max out Roth IRA, 401k, and save an extra $600 a month even if I have a car loan (and I included my current fun spending into my expenses). I feel like on the one hand $50,000 over 5 years can be a lot of money in the end, but also I don’t want to just hoard money. If I think like “oh I could have invested that money instead of spending it” I would never have fun and just live on ramen noodles. Or is there other things I should consider? I value saving but I also don’t want to die with a lot of money and haven’t had enjoyed it.
What are your living arrangements?
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Danimals543
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Danimals543 »

samsoes wrote: Tue Dec 08, 2020 6:11 am
Danimals543 wrote: Tue Dec 08, 2020 1:21 am Currently 23, making $100k a year, I calculated that I would be able to max out Roth IRA, 401k, and save an extra $600 a month even if I have a car loan (and I included my current fun spending into my expenses). I feel like on the one hand $50,000 over 5 years can be a lot of money in the end, but also I don’t want to just hoard money. If I think like “oh I could have invested that money instead of spending it” I would never have fun and just live on ramen noodles. Or is there other things I should consider? I value saving but I also don’t want to die with a lot of money and haven’t had enjoyed it.
What are your living arrangements?
I live in an apartment. I rent it.
awval999
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by awval999 »

OP - Just lease it. You've made it quite clear that you are going to get one. Leasing will lessen the damage done.
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Danimals543
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Danimals543 »

awval999 wrote: Tue Dec 08, 2020 6:16 am OP - Just lease it. You've made it quite clear that you are going to get one. Leasing will lessen the damage done.
I’ve considered leasing a Tesla but Tesla has horrible lease incentives. 1) You cannot buy the car at the end of the lease. You have to return it no matter what and 2) their leases are expensive relative to the cost of the car.

I would rather sell the car after financing it for 3 years versus throwing away ~20k. At least financing gives me equity plus Tesla has one of the lowest depreciation rates.
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Wanderingwheelz »

Danimals543 wrote: Tue Dec 08, 2020 1:21 am Currently 23, making $100k a year, I calculated that I would be able to max out Roth IRA, 401k, and save an extra $600 a month even if I have a car loan (and I included my current fun spending into my expenses). I feel like on the one hand $50,000 over 5 years can be a lot of money in the end, but also I don’t want to just hoard money. If I think like “oh I could have invested that money instead of spending it” I would never have fun and just live on ramen noodles. Or is there other things I should consider? I value saving but I also don’t want to die with a lot of money and haven’t had enjoyed it.
You don’t have a Tesla now. Have you been eating ramen noodles and generally not been having any fun?

Once you have a Tesla, do you expect to be eating higher cost foods and find more ways to have fun?

I’ve found that owning expensive cars (One was over 6 figures) doesn’t cause me to eat better or have higher quantities of fun. YMMV. Good luck.
3 Fund Portfolio. 70%/30% AA. No mortgage. Simple.
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Wanderingwheelz »

HomerJ wrote: Tue Dec 08, 2020 1:52 am Don't get a luxury car until you can pay cash for it.
Jay Z said something to the effect of, and I’m paraphrasing, “You can afford something if you can buy it twice.”

If I was 23 “making $100,000” those are words I’d commit to memory.
3 Fund Portfolio. 70%/30% AA. No mortgage. Simple.
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by chipperd »

It's your money, do what you like after considering that purchasing a new car is often either an emotional based decision, or one made b/c one can afford the new vehicle comfortably, without a loan.
This is due to the fact that any new car will depreciate greatly the moment it is driven off the lot and continues to depreciate day after day, month after month and year after year. Doesn't matter if you own the car ten days or ten years, it will be worth less than you paid for it when you sell it.
Perhaps look up how much a used (I have no idea how far you can go back on this, 3 years?) tesla goes for now vs what it costs new.
If you can do the above with an open mind, and can afford the car without a loan, then go for it and let us know how it rides.
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
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Danimals543
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Danimals543 »

Wanderingwheelz wrote: Tue Dec 08, 2020 6:36 am
HomerJ wrote: Tue Dec 08, 2020 1:52 am Don't get a luxury car until you can pay cash for it.
Jay Z said something to the effect of, and I’m paraphrasing, “You can afford something if you can buy it twice.”

If I was 23 “making $100,000” those are words I’d commit to memory.
Darn, looks like I’m never going to buy a house 😭
Wanderingwheelz
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Wanderingwheelz »

Danimals543 wrote: Tue Dec 08, 2020 6:45 am
Wanderingwheelz wrote: Tue Dec 08, 2020 6:36 am
HomerJ wrote: Tue Dec 08, 2020 1:52 am Don't get a luxury car until you can pay cash for it.
Jay Z said something to the effect of, and I’m paraphrasing, “You can afford something if you can buy it twice.”

If I was 23 “making $100,000” those are words I’d commit to memory.
Darn, looks like I’m never going to buy a house 😭
Don’t count yourself out. I’m not even 50 and I can buy three, almost four, of my houses w/o dipping into retirement accounts. And, I have no mortgage so I can invest the free cash to grow my base so I can buy an even nicer home someday if that’s what I want to do. That’s why avoiding a 2.5% loan in a depreciating asset is usually a good idea. At 23 you want to quickly get in the habit of being an interest collector, not payer.

By the way, there are people on this forum that can afford to buy far more than 4 of their houses w/o needing to tap tax-deferred money. I’m probably below average here, so in no way am I boasting.

What you need is time to compound, and at 23 you’ve got tons of it.
Last edited by Wanderingwheelz on Tue Dec 08, 2020 6:58 am, edited 1 time in total.
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White Oak
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by White Oak »

I think you should be considering this in terms of the fraction of your net worth, rather than or in addition to the fraction of your income.
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by snailderby »

Danimals543 wrote: Tue Dec 08, 2020 6:45 am
Wanderingwheelz wrote: Tue Dec 08, 2020 6:36 am
HomerJ wrote: Tue Dec 08, 2020 1:52 am Don't get a luxury car until you can pay cash for it.
Jay Z said something to the effect of, and I’m paraphrasing, “You can afford something if you can buy it twice.”

If I was 23 “making $100,000” those are words I’d commit to memory.
Darn, looks like I’m never going to buy a house 😭
A house is different because it's a potentially appreciating asset.

It sounds like you can afford a Tesla now. But consider this: If you had invested $50,000 in the stock market 45 years ago, you would have around $7 million now, even if you didn't add another cent for 45 years. The point is, at your age, assuming the same rate of return, $1 saved now is worth a lot more than $1 later. How many years earlier can you reach full financial independence if you don't buy the Tesla now?

P.S. Welcome to the forum!
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Danimals543
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by Danimals543 »

snailderby wrote: Tue Dec 08, 2020 6:58 am
Danimals543 wrote: Tue Dec 08, 2020 6:45 am
Wanderingwheelz wrote: Tue Dec 08, 2020 6:36 am
HomerJ wrote: Tue Dec 08, 2020 1:52 am Don't get a luxury car until you can pay cash for it.
Jay Z said something to the effect of, and I’m paraphrasing, “You can afford something if you can buy it twice.”

If I was 23 “making $100,000” those are words I’d commit to memory.
Darn, looks like I’m never going to buy a house 😭
A house is different because it's a potentially appreciating asset.

It sounds like you can afford a Tesla now. But consider this: If you had invested $50,000 in the stock market 45 years ago, you would have around $7 million now, even if you didn't add another cent for 45 years. The point is, at your age, assuming the same rate of return, $1 saved now is worth a lot more than $1 later. How many years earlier can you reach full financial independence if you don't buy the Tesla now?

P.S. Welcome to the forum!
True, I’m considering just getting like a $20-$25k car instead.
jumppilot
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by jumppilot »

goblue100 wrote: Tue Dec 08, 2020 6:06 am I was 23 once. I bought a Chevy Camaro. I want to say it cost about a years salary at the time, maybe a year and a half. I enjoyed the car, but it only lasted me about 8 years before it smoked like chimney. What I will tell you is the new wears off really fast and in the end it will just end up being a vehicle to get you from point A to point B.
+1

I was going to tell the OP (before I read his later replies) to “buy the car, you’re only 23 once, you’ll be the envy of your friends” to help him learn what I did at 25 when I bought a sports car.

3 months, and one mid-west winter later, I sold it at a huge loss to buy a used 4WD SUV that was absolutely more appropriate for my actual needs (driving and financial). Only recently sold that SUV after years of trouble-free ownership.

That lesson taught me a lot about the value of frugality. I could buy that car 30 times over today.
Last edited by jumppilot on Tue Dec 08, 2020 7:22 am, edited 1 time in total.
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by jumppilot »

Danimals543 wrote: Tue Dec 08, 2020 7:10 am
snailderby wrote: Tue Dec 08, 2020 6:58 am
Danimals543 wrote: Tue Dec 08, 2020 6:45 am
Wanderingwheelz wrote: Tue Dec 08, 2020 6:36 am
HomerJ wrote: Tue Dec 08, 2020 1:52 am Don't get a luxury car until you can pay cash for it.
Jay Z said something to the effect of, and I’m paraphrasing, “You can afford something if you can buy it twice.”

If I was 23 “making $100,000” those are words I’d commit to memory.
Darn, looks like I’m never going to buy a house 😭
A house is different because it's a potentially appreciating asset.

It sounds like you can afford a Tesla now. But consider this: If you had invested $50,000 in the stock market 45 years ago, you would have around $7 million now, even if you didn't add another cent for 45 years. The point is, at your age, assuming the same rate of return, $1 saved now is worth a lot more than $1 later. How many years earlier can you reach full financial independence if you don't buy the Tesla now?

P.S. Welcome to the forum!
True, I’m considering just getting like a $20-$25k car instead.
To make you feel better, you don’t have to wait 45 years to get a Tesla. Just give it a bit so you can actually afford it. It’ll drive so much smoother when you know you bought it legit.

I bought a $5,000 watch as a promotion gift, which I paid cash. So you can still have fun, but don’t be afraid to delay a little bit.
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climber2020
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Re: What should a 23 year old consider before purchasing a Tesla?

Post by climber2020 »

Go ahead and buy it.

If you don’t mind, come back here in 10 years and let us know if it was a good decision or not; that information would be very helpful for the people who will be in their mid-20s in 2030.
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