At what point can I buy an expensive car?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Topic Author
ajg189
Posts: 41
Joined: Tue Mar 26, 2019 3:11 pm

At what point can I buy an expensive car?

Post by ajg189 »

Hi Everyone,

I know this is not necessarily a classic thing many bogleheads would approve of, but I am a car nut. I love sports cars. I have had a few over the years but ultimately sold them for something more practical as we started a family or to put toward more important financial goals.

Anyway, my wife and I have spent the last 8 or so years after grad school building our lives together. We dedicated our energy to paying off student loans and starting a family and all that comes with it (house, daycare, bigger car, etc).

It finally feels as though we have turned the corner. Our incomes have increased, student loans paid off, fully max retirement accounts, fund 529s, and have some investments built up.

I am looking for some advice as to rules of thumb for when it is okay to make a big frivolous purchase on a “toy.” I really have no idea how to know what is reasonable. To me, it is a matter of trying to be sensible but also balancing that with enjoying my passion. I would appreciate the advice of the community to know how you think about this, be it a car or boat, watch/jewelry or second house, etc.
KlangFool
Posts: 32478
Joined: Sat Oct 11, 2008 12:35 pm

Re: At what point can I buy an expensive car?

Post by KlangFool »

OP,

May be not the answer that you are looking for.

A) I save 1 year of expense every year. Then, I spend the rest.

B) Aka, I save and spend the same amount: 60K per year.

C) In my system, I can spend money and buy anything as long as I save 1 year of expense that year. I can spend the rest.

D) I spent 8K on an electric cargo bike.

E) Do you save enough?

F) Then, you can spend the rest.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
SnowBog
Posts: 4906
Joined: Fri Dec 21, 2018 10:21 pm

Re: At what point can I buy an expensive car?

Post by SnowBog »

Ultimately, retirement is a function of expenses. The lower the expenses, the less you have to save, and the more of your income you save the less time it takes to save.

The opposite is true, higher expenses means you have less left to save and thus need to save longer.

So for my two cents, the first step is figuring out things like when you want to retire, how much you want to spend in retirement, and if you are on track to meet those goals.

If you are behind (aka haven't saved enough and/or not saving enough going forward), you have a conflict. You can't have your "toy" and hit your retirement goals - you'll have to adjust.

Conversely, if you are ahead, you have options. You can potentially spend more on your "toy" and still hit your retirement goals.

It's all about priorities and progress.
User avatar
JamesG
Posts: 70
Joined: Mon Feb 25, 2013 1:32 am

Re: At what point can I buy an expensive car?

Post by JamesG »

Hello ajg189,

I have also wondered about this from time-to-time.

In another boglehead post (here:viewtopic.php?p=7753023#p7753023), I conjectured that if you are happy to turn over your car at the national average rate (about once every twelve years) and spend about the national average of your consumption budget on motor vehicle depreciation (about 4% per annum) then a car purchase cost equal to just under 60% of your annual consumption budget is consistent with these criteria.

To apply this rule, you will have already had to work out what is your sustainable life-time annual consumption budget.

Happy car hunting!
He who has a garden and a library wants for nothing. Cicero.
SnowBog
Posts: 4906
Joined: Fri Dec 21, 2018 10:21 pm

Re: At what point can I buy an expensive car?

Post by SnowBog »

KlangFool wrote: Sat Jun 08, 2024 8:49 pm A) I save 1 year of expense every year. Then, I spend the rest.

B) Aka, I save and spend the same amount: 60K per year.
To put this into context, with a 50% savings rate KlangFool would be on track to retire in 17 years if they started with $0. Now KlangFool would probably advise that you can't plan on uninterrupted work for as long as you want... So maybe put that to 18 or 19 years as a buffer of you have an unexpected loss of income.

Image

https://www.mrmoneymustache.com/2012/01 ... etirement/

Again, it's all about your progress and priorities. If you are saving enough to hit your retirement goals, then you have options on what you do with the rest of your money.
User avatar
Sandtrap
Posts: 19996
Joined: Sat Nov 26, 2016 5:32 pm
Location: Hawaii No Ka Oi - white sandy beaches, N. Arizona 1 mile high.

Re: At what point can I buy an expensive car?

Post by Sandtrap »

ajg189 wrote: Sat Jun 08, 2024 8:40 pm Hi Everyone,

I know this is not necessarily a classic thing many bogleheads would approve of, but I am a car nut. I love sports cars. I have had a few over the years but ultimately sold them for something more practical as we started a family or to put toward more important financial goals.

Anyway, my wife and I have spent the last 8 or so years after grad school building our lives together. We dedicated our energy to paying off student loans and starting a family and all that comes with it (house, daycare, bigger car, etc).

It finally feels as though we have turned the corner. Our incomes have increased, student loans paid off, fully max retirement accounts, fund 529s, and have some investments built up.

I am looking for some advice as to rules of thumb for when it is okay to make a big frivolous purchase on a “toy.” I really have no idea how to know what is reasonable. To me, it is a matter of trying to be sensible but also balancing that with enjoying my passion. I would appreciate the advice of the community to know how you think about this, be it a car or boat, watch/jewelry or second house, etc.
some questions to explore:

what is the lasting reward of materialistically expensive and frivolous ?

Are your passions expensive...relative to your income stream and net worth?

Is this socio-economic or cultural, or trending?

Would this fit into the forum wiki: investing behavior pitfalls?

At this early accumulation and life stage, would you risk long term gains by imparting a pseudo spendy sequence of returns risk?

What if you lost your income stream tomorrow?

j🌺
Wiki Bogleheads Wiki: Everything You Need to Know
Topic Author
ajg189
Posts: 41
Joined: Tue Mar 26, 2019 3:11 pm

Re: At what point can I buy an expensive car?

Post by ajg189 »

This is some really helpful advice! Unfortunately, unlike Klangfool we are not saving 50% of our income but I did really appreciate that chart of savings rate vs. years to retirement.

When it comes to calculating %saved, how do I think about 401k versus taxable saving?

If for example you make $100k, save 10% to tax deferred retirement accounts and save $10k annually in cash/brokerage, is the total % saved 20% or less given that pre tax savings is “cheaper” today than post tax savings.
Topic Author
ajg189
Posts: 41
Joined: Tue Mar 26, 2019 3:11 pm

Re: At what point can I buy an expensive car?

Post by ajg189 »

Sandtrap wrote: Sat Jun 08, 2024 8:58 pm some questions to explore:

what is the lasting reward of materialistically expensive and frivolous ?
I view it more as something that brings me joy each time I use it. It’s a hobby/passion for me more than it is a materialistic item.

Are your passions expensive...relative to your income stream and net worth?
Yes, it is expensive. Not sure how to determine what is a lot relative to income and net worth. The car would probably be 10-15% of our household annual income and 5-7% of current net worth.

Is this socio-economic or cultural, or trending?
Not in my case, I wanted this before I never knew what any of these things meant.
Would this fit into the forum wiki: investing behavior pitfalls?

At this early accumulation and life stage, would you risk long term gains by imparting a pseudo spendy sequence of returns risk?
I think you definitely would, though the same could be said about any non-necessity right?

What if you lost your income stream tomorrow?
I’m certainly not in a position to retire, but being that we are a dual income household and have some liquid savings we would be able to manage until the next opportunity arose.

j🌺
aristotelian
Posts: 12613
Joined: Wed Jan 11, 2017 7:05 pm

Re: At what point can I buy an expensive car?

Post by aristotelian »

Personally, for me a car is a foolish thing to waste money on at any income and any net worth. Of course many people feel differently. Just depends whether a fancy car is something you would actually value more than earlier retirement, other luxuries, or charity.

For what it's worth, our gross HHI is $200k with $2M saved. Our most recent car was a 2016 Mazda CX5 purchased last year for $15k. Before that we purchased a new 2018 Nissan Leaf for $20k after tax credits. We also got a 0% loan which we paid back with 2020-24 dollars, so the real price in 2018 dollars was something like $17k. I don't ever see myself spending more than $25k on a car, and generally prefer used cars in the $10-15k range.
User avatar
snackdog
Posts: 3309
Joined: Wed Nov 12, 2014 3:57 am
Location: PNW

Re: At what point can I buy an expensive car?

Post by snackdog »

As long as the car is fully depreciated or appreciating in value and costs less than 5% of your gross annual income it is probably ok.
BH Consumer FAQ: | Car? Used Toyota, Lexus or Miata. | House? 20% down and 3x salary. | Vacation house? No. | Umbrella? $1 million. | Goods? Costco.
JBTX
Posts: 11543
Joined: Wed Jul 26, 2017 12:46 pm

Re: At what point can I buy an expensive car?

Post by JBTX »

It’s a subjective question.

For me, I’d consider a more expensive car

- I had accumulated enough for retirement
- I could pay cash and still not dip into longer term savings
- I could still max out any retirement account opportunities.

I’m 60 and I probably meet those three criteria but still am not comfortable doing that however. Cars are not that important to me.

You don’t say your age but if you are 30-35, multiply the cost of the car by approximately 4. That’s the approximate amount of retirement savings (including growth) in real inflation adjust dollars you may be giving up. For example a $50k car, $50k at 5% real return over 30 years will double approximately twice, or 4X total, so you may have $200k less of retirement savings. If a $100k car then $400k foregone retirement savings. Would you work and defer retirement an extra year or two to have the experience of a nice car now? ( I wouldn’t).
Last edited by JBTX on Sat Jun 08, 2024 9:41 pm, edited 1 time in total.
rockstar
Posts: 6999
Joined: Mon Feb 03, 2020 5:51 pm

Re: At what point can I buy an expensive car?

Post by rockstar »

I’d buy one in your 30s when you can enjoy it. Then I’d go back to regular cars in your 40s when your vision will start going. And nothing scares me more than a 65+ year old in an exotic. Maybe teenage drivers or Waymo.

Somethings are better at certain ages.
sailaway
Posts: 8636
Joined: Fri May 12, 2017 1:11 pm

Re: At what point can I buy an expensive car?

Post by sailaway »

Where will you keep the car? How much more will insurance be? Will you be driving more aka will your fuel costs go up? Will you want to be constantly upgrading? Will you have to pay a babysitter to use the car? Carrying costs are a big part of your decision for this kind of toy.

You should be able to pay cash and be able to incorporate ongoing expenses without anyone else in the family making sacrifices if they don't share the hobby.
AspirationalBH
Posts: 63
Joined: Sat Oct 01, 2022 12:08 am

Re: At what point can I buy an expensive car?

Post by AspirationalBH »

Off the top my head,

After you've paid off credit cards
After you've paid off student loans
After you've created a multi-tiered emergency fund
After 529 contributions
After you've paid off a the current car
After you've maximized 401k/403b contributions (or self-employment IRAs)
After you have a car less than 5 years old
After you start building a slush fund in your taxable account

OK, it sounds like you've already done all this. You have enough now, you just need a strategy.

I'd start a fun car fund by contributing monthly to a different account (cf KlangFool's advice above). I.e., pay yourself with a car payment while you start your search for a desirable car. It may take years to find the car you want at the right time. I was shopping for a Honda S2000 for a few years but never bought one, but in that time I saved enough money to buy another car with cash. Can you get away with buying a used RS6 Avant as a family car?

If you buy used, you'll save on depreciation. If you choose to have 2 used cars for yourself, then you can regularly exchange out the older/more expensive one.

Garage space and insurance are the other factors. I own two cars right now and wince at insurance costs, but I tell myself to keep it lower than my charitable contributions to keep my priorities in order. I know this is mental justification but it's useful to me.

Have fun!
cmr79
Posts: 1501
Joined: Mon Dec 02, 2013 3:25 pm

Re: At what point can I buy an expensive car?

Post by cmr79 »

OP, if you've made projections based on your current savings and spending rates and thus have an idea about when you will be FI, add the potential cost of an expensive car this year into that and see how the FI date changes. If you intend to work beyond FI for other reasons, buying the car might not really change anything...you are on track to have more money than you need. If you are hoping to retire as soon as you hit FI, then the purchase of an expensive car this year will push that date of early retirement back...only you can determine whether working longer (however long that might be) is worth it for the added enjoyment you will get from the vehicle.

We purchased a nicer car last year based on this kind of calculus. We will probably buy another ever move expensive vehicle in the next year or two. We could be FI in the next few years if we kept a bare bones budget, but both my spouse and I intend to continue working for many more years, so we have to start working at increasing our consumption on things we enjoy.
Topic Author
ajg189
Posts: 41
Joined: Tue Mar 26, 2019 3:11 pm

Re: At what point can I buy an expensive car?

Post by ajg189 »

An rs6 avant would be a dream but I honestly think I prefer daily driving an EV and having a gas car for fun. I’m too spoiled by being able to charge at home (we also have a solar roof that came with the house) to want to go back to getting gas 1-2x per week.
SnowBog
Posts: 4906
Joined: Fri Dec 21, 2018 10:21 pm

Re: At what point can I buy an expensive car?

Post by SnowBog »

ajg189 wrote: Sat Jun 08, 2024 9:03 pm This is some really helpful advice! Unfortunately, unlike Klangfool we are not saving 50% of our income but I did really appreciate that chart of savings rate vs. years to retirement.

When it comes to calculating %saved, how do I think about 401k versus taxable saving?

If for example you make $100k, save 10% to tax deferred retirement accounts and save $10k annually in cash/brokerage, is the total % saved 20% or less given that pre tax savings is “cheaper” today than post tax savings.
"All models are wrong, some models are useful."

IMHO don't attempt to get to "precise" with this view. Think of it more as "directionally correct" versus "an exact formula".

Over the next 10-20+ years, lots will change... You might end up with better than expected returns, wage growth, savings rate growth, and be in much better shape than you thought you'd be. Or you could be unfortunate and get poor returns, get caught with higher expenses than expected ("toy" or no "toy"), and end up being behind where you should be.

That said, I think most people use "gross" (pre-tax) percentage as they are simpler and avoid the intricacies of our progressive tax system. Many people also factor in employer matches.

As for pre-tax being "cheaper", that depends on your current and retirement tax-rates. If they happen to be the same, than pre-tax or after-tax contributions work or exactly the same. If your retirement tax rate is expected to be higher, you'd favor Roth, and if lower you'd favor pre-tax. But then you have to factor in things like "early retirement" and "Roth conversions"... So again, think "big picture" not "math formula".

If you are planning to retire in say 31 years, don't have meaningful savings built up yet, then you should be targeting 28%+ savings rate. If you aren't saving that much yet, then per my original post you have a conflict. You may not be able to meet your retirement goals and have your "toy", you'll need to make adjustments. If you are saving more than that, and would still be saving more than that with your "toy" (and it's extra expenses), then you have "options" to make things work.

With "options" you can have an informed discussion as a family (spouse minimally). Maybe your spouse has other priorities they feel are more important than your "toy". Maybe they want their own "toy". Maybe they want something else like a vacation, improved schools, etc. Some people can afford to buy many things they may want, but not everything they want. You have to make choices...
AspirationalBH
Posts: 63
Joined: Sat Oct 01, 2022 12:08 am

Re: At what point can I buy an expensive car?

Post by AspirationalBH »

ajg189 wrote: Sat Jun 08, 2024 9:51 pm An rs6 avant would be a dream but I honestly think I prefer daily driving an EV and having a gas car for fun. I’m too spoiled by being able to charge at home (we also have a solar roof that came with the house) to want to go back to getting gas 1-2x per week.
Understood. I have an EV as a daily driver and kept my ICE manual transmission VW for fun. I'd like to exchange the VW for a Porsche with a non-turbo flat 6 with manual transmission, but can't really justify it as I don't track my cars (and I'm a little cheap).
EddyB
Posts: 2457
Joined: Fri May 24, 2013 3:43 pm

Re: At what point can I buy an expensive car?

Post by EddyB »

KlangFool wrote: Sat Jun 08, 2024 8:49 pm OP,

May be not the answer that you are looking for.

A) I save 1 year of expense every year. Then, I spend the rest.

B) Aka, I save and spend the same amount: 60K per year.

C) In my system, I can spend money and buy anything as long as I save 1 year of expense that year. I can spend the rest.

D) I spent 8K on an electric cargo bike.

E) Do you save enough?

F) Then, you can spend the rest.

KlangFool
If you spend “the rest,” isn’t that necessarily then part of “expense”?

E.g., if OP wants a $100,000 car and will otherwise spend $100,000 that year for a $200,000 total, under your rule he should have $400,000 in after-tax income to support it?

In other words, are you saying you spend half of after-tax income?
KlangFool
Posts: 32478
Joined: Sat Oct 11, 2008 12:35 pm

Re: At what point can I buy an expensive car?

Post by KlangFool »

EddyB wrote: Sat Jun 08, 2024 10:41 pm
KlangFool wrote: Sat Jun 08, 2024 8:49 pm OP,

May be not the answer that you are looking for.

A) I save 1 year of expense every year. Then, I spend the rest.

B) Aka, I save and spend the same amount: 60K per year.

C) In my system, I can spend money and buy anything as long as I save 1 year of expense that year. I can spend the rest.

D) I spent 8K on an electric cargo bike.

E) Do you save enough?

F) Then, you can spend the rest.

KlangFool
If you spend “the rest,” isn’t that necessarily then part of “expense”?

E.g., if OP wants a $100,000 car and will otherwise spend $100,000 that year for a $200,000 total, under your rule he should have $400,000 in after-tax income to support it?

In other words, are you saying you spend half of after-tax income?
EddyB,

1) "E.g., if OP wants a $100,000 car and will otherwise spend $100,000 that year for a $200,000 total, under your rule he should have $400,000 in after-tax income to support it?"

Or, OP can spread this 100K out over 2 years and use the discretionary portion of his expense to pay for it,


2) "In other words, are you saying you spend half of after-tax income?"

You can look at it this way. Not exactly correct but close enough.

KlangFool

P.S.: OP made about 300+K in 2021.

viewtopic.php?p=5930993#p5930993

"Combined income: $322k base, 15% bonus (didn’t change much due to no promotions at work and Covid keeping bonuses flat-i believe this will go up by 50-100k in the next year)"

So, OP can definitely pay for the car from the annual expense if he is willing to cut spending elsewhere.
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
carminered2019
Posts: 1997
Joined: Fri Jun 21, 2019 7:06 pm

Re: At what point can I buy an expensive car?

Post by carminered2019 »

Smart to buy an expensive car or toys after you are debt free and after you have reached FI number. I paid cash for a 185K car and 150K boat after I reached my retirement number. My next toy will be 700K+ but I have to reach certain number in my portfolio first.

Know your priorities and there's no such thing is rules of thump.
Last edited by carminered2019 on Sun Jun 09, 2024 12:27 am, edited 1 time in total.
EddyB
Posts: 2457
Joined: Fri May 24, 2013 3:43 pm

Re: At what point can I buy an expensive car?

Post by EddyB »

KlangFool wrote: Sat Jun 08, 2024 10:47 pm
EddyB wrote: Sat Jun 08, 2024 10:41 pm
KlangFool wrote: Sat Jun 08, 2024 8:49 pm OP,

May be not the answer that you are looking for.

A) I save 1 year of expense every year. Then, I spend the rest.

B) Aka, I save and spend the same amount: 60K per year.

C) In my system, I can spend money and buy anything as long as I save 1 year of expense that year. I can spend the rest.

D) I spent 8K on an electric cargo bike.

E) Do you save enough?

F) Then, you can spend the rest.

KlangFool
If you spend “the rest,” isn’t that necessarily then part of “expense”?

E.g., if OP wants a $100,000 car and will otherwise spend $100,000 that year for a $200,000 total, under your rule he should have $400,000 in after-tax income to support it?

In other words, are you saying you spend half of after-tax income?
EddyB,

1) "E.g., if OP wants a $100,000 car and will otherwise spend $100,000 that year for a $200,000 total, under your rule he should have $400,000 in after-tax income to support it?"

Or, OP can spread this 100K out over 2 years and use the discretionary portion of his expense to pay for it,


2) "In other words, are you saying you spend half of after-tax income?"

You can look at it this way. Not exactly correct but close enough.

KlangFool

P.S.: OP made about 300+K in 2021.

viewtopic.php?p=5930993#p5930993

"Combined income: $322k base, 15% bonus (didn’t change much due to no promotions at work and Covid keeping bonuses flat-i believe this will go up by 50-100k in the next year)"

So, OP can definitely pay for the car from the annual expense if he is willing to cut spending elsewhere.
But I thought he said he’s only saving 28%. People can make their own decisions, of course, but to me that says he’s on a fine track, but doesn’t call out for lifestyle creep.

My personal answer is that until my portfolio could support my existing spending level, I wasn’t going to fool myself into using income for “one time” indulgences.
Last edited by EddyB on Sun Jun 09, 2024 12:25 am, edited 1 time in total.
gotoparks
Posts: 1344
Joined: Sat Jan 28, 2023 9:19 am

Re: At what point can I buy an expensive car?

Post by gotoparks »

I'm not a car person and drive a Honda Accord. I think it is up to you and your wife to decide how to spend your money without causing resentment with each other. I once had a boss who would buy cars from newspaper ads and turn around and sell them. He did this as a hobby, and I think he made money from it, but I never asked because I was not interested. He knew what to look for and I remember he would buy more expensive cars. If you pick the right type of car you might be able to keep it for a while and not lose too much when selling or even make money. Collectors do this with watches. I like watches but am not willing to spend that much on them so resale value is non existent for me.
Thesaints
Posts: 5317
Joined: Tue Jun 20, 2017 12:25 am

Re: At what point can I buy an expensive car?

Post by Thesaints »

Buy it used and you’ll be able to afford it a lot sooner
BruDude
Posts: 4264
Joined: Wed Dec 29, 2010 11:28 pm
Location: Las Vegas

Re: At what point can I buy an expensive car?

Post by BruDude »

Rule of thumb is useless because the cost of the car is a function of what you buy it for and what you sell it for. If you buy a $200k 911 and sell it a year later for $200k, is that worse than buying a $100k BMW that’s worth $65k a year later?

Your rule of thumb should be - buy the right Porsche and drive it for free or close to it.

Also for what it’s worth, I’ve spent what most BH would consider an extremely unhealthy amount of money on cars because it’s my hobby, I don’t buy expensive clothes or vacations, etc. I “worked my way up” the chain of cars. Have had 7 911s, 3 Ferrari FFs and a 458 Spider, an Aston Martin Vanquish, a Rolls Royce Wraith, a Macan GTS, Cayenne Turbo, a Panamera Turbo S, a couple e92 M3s, an S4, etc.

Altogether I’ve had the chance to drive these amazing cars at a net cost of $0 because I’ve made money on most of them and only took a small depreciation hit on some others. I always research the hell out of any major purchase and know the markets inside and out. Spec is everything, condition and service history are important, don’t buy anything highly modded, and make sure you know the potential issues the cars you’re looking at may have.
Last edited by BruDude on Sun Jun 09, 2024 2:51 am, edited 2 times in total.
vfinx
Posts: 743
Joined: Thu Apr 19, 2018 9:35 pm

Re: At what point can I buy an expensive car?

Post by vfinx »

Annual cost of possession <= 0.5% of liquid net worth. This must include depreciation, financing, repairs, maintenance, insurance, registration and fuel.

Still less than the cost of a crappy AUM-based financial advisor.
schwank
Posts: 104
Joined: Sat Jul 18, 2015 1:14 pm

Re: At what point can I buy an expensive car?

Post by schwank »

I'm a bad example here, my least BH trait, as I bought my first Pcar (a 1987 944) at 29 and built it into a racecar. Since then I have bought and sold many, and currently own 4 sports cars, 2 of which are racecars, and a total fleet of 7 cars and a 24' car hauler trailer. I bought all of these before I was at FIRE status, I still am not but on path im a few years at around 53yo. If I waited I would never be able to do it the same way.

I built a house with a large garage and lift to work on them. None of these are necessities of life but rather they define a life well lived for me. I have met so many amazing people, driven in long endurance races 8-25 hours, and am in Europe to attend Le Mans 24hr as I type this.

Yes it has cost me money. And I am quite ok with that. I love BH but sometimes the posts are so extreme I wonder if people have any fun beyond coupon clipping before they retire.

OP, find something that makes you happy and enjoy it in good health. It doesn't have to be a GT3. There are many affordable sports cars from Miatas to used 911s, Caymans, and Boxsters. And dont let anyone tell you need more, a Cayman is more than enough for most drivers. My 2018 Cayman S with a couple mods will smoke a 1st gen GT4 for $50K less money. I consistently hit 142mph at a track day 2 weeks ago and passed many 'more capable' cars. And its enough to send you to jail in seconds on a public road. I sold stock to buy it, and have regretted it exactly 0 times.

When it comes to generational legacy, my child will be one of very few in her cohort that will be able to drive a manual gearbox. And she loves to ride in the Boxster with the top down. Now that's a solid return on investment!
kleiner
Posts: 383
Joined: Tue Jun 02, 2020 8:45 am

Re: At what point can I buy an expensive car?

Post by kleiner »

AspirationalBH wrote: Sat Jun 08, 2024 9:44 pm Off the top my head,

After you've paid off credit cards
After you've paid off student loans
After you've created a multi-tiered emergency fund
After 529 contributions
After you've paid off a the current car
After you've maximized 401k/403b contributions (or self-employment IRAs)
After you have a car less than 5 years old
After you start building a slush fund in your taxable account
I like this list and this brings to mind a more general kind of question about when you can afford luxuries. In my case my preferred luxury is not cars but rather traveling in comfort: I really enjoy traveling at the front of the plane and staying in nice hotels :happy

My criteria for this were very similar to this list and I reached that point about eight years ago:
- House paid for
- Kids college money set aside
- 7 years of expenses set aside in cash or equivalent
- Under 2% withdrawal rate forecast

As your wealth grows, I think its a good idea for everyone to come up with their own criteria for guilt-free luxury spending
User avatar
mrmass
Posts: 1638
Joined: Thu Jul 26, 2018 6:35 pm
Location: MA

Re: At what point can I buy an expensive car?

Post by mrmass »

OP how would you feel if your spouse declares that they are a watch person or a fountain pen person and wants to start spending money on that?

Are you the only one that gets to YOLO?
jebmke
Posts: 26839
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: At what point can I buy an expensive car?

Post by jebmke »

Our rules were that any discretionary type spending like this were fair game as long as we had met output other financial goals. So, we had a savings and investment plan. As long as that was met, and anll the normal bills were paid on time, any residual was up for grabs. The mortgage was the only allowable debt.
When you discover that you are riding a dead horse, the best strategy is to dismount.
ThankYouJack
Posts: 5979
Joined: Wed Oct 08, 2014 7:27 pm

Re: At what point can I buy an expensive car?

Post by ThankYouJack »

If it's your passion and you have the money for it, go for it. No need to get approval on here with some of the ultra-conservative saving rates / rules of thumb. It could severely delay and limit spending on your passion and even "saver's" remorse.
User avatar
TomatoTomahto
Posts: 17578
Joined: Mon Apr 11, 2011 1:48 pm

Re: At what point can I buy an expensive car?

Post by TomatoTomahto »

jebmke wrote: Sun Jun 09, 2024 6:05 am Our rules were that any discretionary type spending like this were fair game as long as we had met output other financial goals. So, we had a savings and investment plan. As long as that was met, and anll the normal bills were paid on time, any residual was up for grabs. The mortgage was the only allowable debt.
We didn’t formalize it, but that’s what we did. We were frugal in some things, but travel, education, and occasionally cars were fair game. It all worked out.

Tbh, we focused on earning more rather than spending less. A lot of BHs seemed to have missed that memo.
I get the FI part but not the RE part of FIRE.
User avatar
dogagility
Posts: 3370
Joined: Fri Feb 24, 2017 5:41 am
Location: Del Boca Vista - Phase 3

Re: At what point can I buy an expensive car?

Post by dogagility »

ajg189 wrote: Sat Jun 08, 2024 8:40 pm I am looking for some advice as to rules of thumb for when it is okay to make a big frivolous purchase on a “toy.” I really have no idea how to know what is reasonable. To me, it is a matter of trying to be sensible but also balancing that with enjoying my passion.
The answer is very personal with no 'rules of thumb', but here are some thoughts.

The most important advice is buy when your spouse is also in agreement.

Financially, I'd suggest purchasing when you've saved enough to buy the car with cash... after continuing to max out funding of your other goals (retirement; college; etc)
Make sure you check out my list of certifications. The list is short, and there aren't any. - Eric 0. from SMA
User avatar
Watty
Posts: 29295
Joined: Wed Oct 10, 2007 3:55 pm

Re: At what point can I buy an expensive car?

Post by Watty »

Two huge factors is how you define "expensive" and if the car will be a daily driver or if it will be an extra car which will mainly just be kept in a garage.

It varies greatly but many people would consider $35K a reasonable price to pay for a daily driver car which you will be able to keep for something like 10 years. If by expensive car you mean a $50K daily driver instead of a $35K car and you plan on driving it 10 years that is only a $15K splurge unless it also has high maintenance costs. An example of this might be if you buy a higher end Lexus instead of a less expensive Toyota version of the same car. Buying a higher end daily driver very well could be a mistake but you can recover from a $15K mistake so that would not be a huge deal.

If instead you are talking about buying a $50K+ extra car that will mainly be in your garage and you will also have a daily driver that is a lot different situation.

The answer to the "Can I buy an expensive car?" varies but I would suggest you consider these questions first.

1) Can you easily pay cash for the car? A good general rule is to always pay cash for your toys and still have an adequate emergency fund. If you do not want it enough to write a big check then you do not want badly to enough to buy it. Sometimes getting a car loan is unavoidable but if you need a car loan then buy a relatively modest car.

2) If you have kids do you have enough college savings to pay for them to go to a state university?

3) Are you done having kids? If not then you could need expensive fertility treatments or you could have a special needs kid so it may be too soon to buy an expensive car.

4) Can you afford for your spouse to spend a similar amount on some splurge which he or she might want?

5) If you decide to splurge and spend $X on a something is a car the thing you and your spouse will enjoy the most. There are variations on a saying, "You can afford anything you want, but not everything you want."

6) Will you have an appropriate place to drive a specialty car? By this I mean that if you buy a performance car or some heavy duty off road 4x4 then it makes no sense to mainly drive it in commuter traffic. If you get something like a BMW or Porsche and the only time you can get your "Zoom Zoom" fix is weaving in and out of traffic that is dangerous not only to you but to other people too.

If you can answer yes to all those questions then it is OK to consider buying an expensive car. For many people being able to afford to spend money on things like expensive cars is the main point of being a Boglehead.

Also keep an open mind for less expensive option which while not as good as a high end car might have a lot of the same features. For example for a sports car a Miata might work, Instead of a 4x4 an Outback might work, or instead of a luxury care a high trim level Toyota might push a lot of the same buttons.

Leasing a car is usually not a good financial choice but it would be good to consider leasing your first higher end car since after trying it out for a few years you can turn it in at the end of the lease if you find that it does not meet your expectations.
Last edited by Watty on Sun Jun 09, 2024 6:47 am, edited 3 times in total.
Marq1
Posts: 87
Joined: Sun Feb 11, 2024 1:24 am

Re: At what point can I buy an expensive car?

Post by Marq1 »

Personally, for me a car is a foolish thing to waste money on at any income and any net worth.
Absolutely, a car is not a status symbol as many believe, when anybody can lease!

Its a tool, gets from point a to point b and for me the cheapest is best.

Haven't bought a new car since 1984, all cars are used but in mint condition, most expensive to date. $22k and my net worth is $5.5 million so I could buy whatever I want but don't!
Topic Author
ajg189
Posts: 41
Joined: Tue Mar 26, 2019 3:11 pm

Re: At what point can I buy an expensive car?

Post by ajg189 »

TomatoTomahto wrote: Sun Jun 09, 2024 6:17 am
jebmke wrote: Sun Jun 09, 2024 6:05 am Our rules were that any discretionary type spending like this were fair game as long as we had met output other financial goals. So, we had a savings and investment plan. As long as that was met, and anll the normal bills were paid on time, any residual was up for grabs. The mortgage was the only allowable debt.
We didn’t formalize it, but that’s what we did. We were frugal in some things, but travel, education, and occasionally cars were fair game. It all worked out.

Tbh, we focused on earning more rather than spending less. A lot of BHs seemed to have missed that memo.
This is pretty much spot on to what we do also. Set goals, ensure those are met, and then we are able to have some flexibility with the rest.

And for the car lovers on here, yes it would likely be a Porsche. I had a couple cheaper ones before kids but would like a more recent 911 or cayman gts.

I think based on what I’m reading in here, the answer is “not quite yet, but relatively soon.”

I appreciate all of the advice from everyone. This has really helped me to have some frameworks in determining the right time.
Olemiss540
Posts: 2210
Joined: Fri Aug 18, 2017 8:46 pm

Re: At what point can I buy an expensive car?

Post by Olemiss540 »

ajg189 wrote: Sun Jun 09, 2024 6:46 am
TomatoTomahto wrote: Sun Jun 09, 2024 6:17 am
jebmke wrote: Sun Jun 09, 2024 6:05 am Our rules were that any discretionary type spending like this were fair game as long as we had met output other financial goals. So, we had a savings and investment plan. As long as that was met, and anll the normal bills were paid on time, any residual was up for grabs. The mortgage was the only allowable debt.
We didn’t formalize it, but that’s what we did. We were frugal in some things, but travel, education, and occasionally cars were fair game. It all worked out.

Tbh, we focused on earning more rather than spending less. A lot of BHs seemed to have missed that memo.
This is pretty much spot on to what we do also. Set goals, ensure those are met, and then we are able to have some flexibility with the rest.

And for the car lovers on here, yes it would likely be a Porsche. I had a couple cheaper ones before kids but would like a more recent 911 or cayman gts.

I think based on what I’m reading in here, the answer is “not quite yet, but relatively soon.”

I appreciate all of the advice from everyone. This has really helped me to have some frameworks in determining the right time.
If you are hitting your savings goals (I always track percent saved every year) and you have the cash to drop, and willing to drop that cash on a car, go for it.

Many love it, I ended up selling all my nicer Pcars because the roads around me are boring and they barely got driven. Much prefer abusing cheaper stuff on a race track than expensive stuff on the street.

Always lusted which would inevitably lead to buying, but once it was in the garage became too big of a waste of resources due to lack of use. And not the type that likes the attention from others.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
smitcat
Posts: 13602
Joined: Mon Nov 07, 2016 9:51 am

Re: At what point can I buy an expensive car?

Post by smitcat »

TomatoTomahto wrote: Sun Jun 09, 2024 6:17 am
jebmke wrote: Sun Jun 09, 2024 6:05 am Our rules were that any discretionary type spending like this were fair game as long as we had met output other financial goals. So, we had a savings and investment plan. As long as that was met, and anll the normal bills were paid on time, any residual was up for grabs. The mortgage was the only allowable debt.
We didn’t formalize it, but that’s what we did. We were frugal in some things, but travel, education, and occasionally cars were fair game. It all worked out.

Tbh, we focused on earning more rather than spending less. A lot of BHs seemed to have missed that memo.
"Tbh, we focused on earning more rather than spending less. A lot of BHs seemed to have missed that memo."
+1 - There are two sides to the end goal and we most often see savings only here.
User avatar
HMSVictory
Posts: 1757
Joined: Sun Nov 01, 2020 6:02 am
Location: Lower Gun Deck

Re: At what point can I buy an expensive car?

Post by HMSVictory »

I'll take the other side of the trade on this one. I have a hobby I spend a lot of money on that makes no sense that I enjoy as well.

If you can meet the following criteria you should get the car:

- House and everything paid off (zero debt), substantial positive cash flow each month
- Paying cash for the car, if you are even thinking about payments its a hard NO
- Investments are currently at 20-25x income (I would waive this one if your income is so high that you will arrive here in 3-5 years)

These are high hurdles to meet but if you can meet them then yes, you can indulge in a Porsche or whatever nice car you are into.

Also you have to remember there are scales of "fun" cars. A $10k Mazda Miata can be a lot of fun you don't have to get a 911 Turbo S.
Stay the course!
User avatar
Sandtrap
Posts: 19996
Joined: Sat Nov 26, 2016 5:32 pm
Location: Hawaii No Ka Oi - white sandy beaches, N. Arizona 1 mile high.

Re: At what point can I buy an expensive car?

Post by Sandtrap »

TomatoTomahto wrote: Sun Jun 09, 2024 6:17 am
jebmke wrote: Sun Jun 09, 2024 6:05 am Our rules were that any discretionary type spending like this were fair game as long as we had met output other financial goals. So, we had a savings and investment plan. As long as that was met, and anll the normal bills were paid on time, any residual was up for grabs. The mortgage was the only allowable debt.
We didn’t formalize it, but that’s what we did. We were frugal in some things, but travel, education, and occasionally cars were fair game. It all worked out.

Tbh, we focused on earning more rather than spending less. A lot of BHs seemed to have missed that memo.
+1
In our case, things happened for the good, exponentially, when we did this....while remaining frugal.

Along the way...I did get a $4000 used Miata in beautiful condition. Though I rarely had time to drive it, it was a pride and joy to own for several years.

j :D
Wiki Bogleheads Wiki: Everything You Need to Know
smitcat
Posts: 13602
Joined: Mon Nov 07, 2016 9:51 am

Re: At what point can I buy an expensive car?

Post by smitcat »

HMSVictory wrote: Sun Jun 09, 2024 7:29 am I'll take the other side of the trade on this one. I have a hobby I spend a lot of money on that makes no sense that I enjoy as well.

If you can meet the following criteria you should get the car:

- House and everything paid off (zero debt), substantial positive cash flow each month
- Paying cash for the car, if you are even thinking about payments its a hard NO
- Investments are currently at 20-25x income (I would waive this one if your income is so high that you will arrive here in 3-5 years)

These are high hurdles to meet but if you can meet them then yes, you can indulge in a Porsche or whatever nice car you are into.

Also you have to remember there are scales of "fun" cars. A $10k Mazda Miata can be a lot of fun you don't have to get a 911 Turbo S.

"I'll take the other side of the trade on this one. I have a hobby I spend a lot of money on that makes no sense that I enjoy as well."
I agree with you - except that it does make sense to spend funds on things that you enjoy and/or find valuable. That is the only purpose of money.
Outer Marker
Posts: 4539
Joined: Sun Mar 08, 2009 8:01 am

Re: At what point can I buy an expensive car?

Post by Outer Marker »

Debt free, $1M in investable assets, able to pay cash (without dipping below the thresshold), and maxing out all tax advantaged accounts plus $10K each in Ibonds annually . ..
Admiral
Posts: 5092
Joined: Mon Oct 27, 2014 12:35 pm

Re: At what point can I buy an expensive car?

Post by Admiral »

The average price paid for a new car is nearly $50k.

All cars are now expensive. So it looks like you don't have a choice!

Anyway there is no "correct" answer.
Harmanic
Posts: 1228
Joined: Mon Apr 04, 2022 10:19 am

Re: At what point can I buy an expensive car?

Post by Harmanic »

Outer Marker wrote: Sun Jun 09, 2024 8:02 am Debt free, $1M in investable assets, able to pay cash (without dipping below the thresshold), and maxing out all tax advantaged accounts plus $10K each in Ibonds annually . ..
I started buying expensive German cars when I could pay cash for them.
The question isn't at what age I want to retire, it's at what income. | - George Foreman
HeavyChevy
Posts: 547
Joined: Sun Oct 31, 2021 7:07 am
Location: Below the Mac bridge (Troll)

Re: At what point can I buy an expensive car?

Post by HeavyChevy »

Once you start living BH principles at a relatively young age, you are likely to remain on a solid path even allowing for significant splurges.

I don't know your finances, but suspect that the car you are considering falls within your means. You can't compare your own individual circumstances with those of a disparate community of households that could spend between 40K and 350K annually. Quite a range.

Generally BH would encourage one to live below one's means. Some are so successful at that one priority that they spend years complaining of too-high taxes (too much money) after they retire.

Use your own common sense and lead your own life consistent with family harmony. Best of luck. (we paid as much for a boat (cash) as our house 15 years earlier, never looked back)
"It's not the best move, but it is a move." - GMHikaru
Jack FFR1846
Posts: 18832
Joined: Tue Dec 31, 2013 6:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: At what point can I buy an expensive car?

Post by Jack FFR1846 »

I'll just convey information.

First, the car itself is an important consideration. Think of depreciation of the car. For a new 911 without much of any options, it's not going to depreciate steeply, but it's not going to go up in price like a low number year GT-3 would. Do your research on cars that don't depreciate a lot. This will likely head into the used area because some of the best sports cars are no longer offered.

Some examples:
Lotus Elise, Exige or Evora. Buy a good, low mileage one now and not only are you going to get a car that was made in lower numbers than any recent year 911 or Cayman, the powertrain is Toyota on all of these, so parts and maintenance is cheap and parts easy to find. Some of the non-powertrain is also from other high numbers, cheaper cars. For example, the Elise front brake calipers are Subaru STi rear calipers. The forum LotusTalk is excellent and as I've said, whatever stupidity Lotus put into their cars, LotusTalk has identified and provided low cost fixes.

Some things to watch out with Porsche. They have started to head into Ferrari territory with respect to who they sell to. Go in looking for a 911 GT-3 and the only way a dealer will sell you a new one is by paying $100k over MSRP and by you agreeing to give them first right of refusal when you want to sell. The Cayman GTS-4.0 is the lowest number Porsche made. I've seen far more GT-4's used and new for sale than GT-3s.

Can a fun car be used as a daily, too. While I did use my Elise for a month when we had a couple cars down and being repaired, there are some that might be usable. I'm thinking along the lines of a Z4/Supra, M2, Mustang GT, Camaro.

And to your question, I don't think there is a rule of thumb. I'm sitting here having driven a 41k mile 17 Rubicon unlimited and considering replacing my 14 Wrangler unlimited sport with it. It would be about a $10k upgrade and gives me lockers for offroading, all of my offroading mods on my 14 can directly transfer over and the Rubicon ups towing capacity from 2000 pounds (3.21 axles in the 14) to 3500 in the Rubicon. I just have a hard time spending money. I'm retired and we have 58 times spending saved.
Bogle: Smart Beta is stupid
User avatar
TinyHouse
Posts: 448
Joined: Mon May 30, 2022 9:05 pm

Re: At what point can I buy an expensive car?

Post by TinyHouse »

Keep in mind that quality goods have been holding their value, so if it’s something that will be maintained properly, it’s not out of reach or out of the ordinary. I personally would avoid unreliable and items with poor resale value. Insurance, storage, maintenance, etc, these things add up
tibbitts
Posts: 24488
Joined: Tue Feb 27, 2007 5:50 pm

Re: At what point can I buy an expensive car?

Post by tibbitts »

Question for the OP: are you assuming your spouse will spend an equal amount on a "toy", so are you multiplying the "toy" cost by two?
jebmke
Posts: 26839
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: At what point can I buy an expensive car?

Post by jebmke »

tibbitts wrote: Sun Jun 09, 2024 9:29 am Question for the OP: are you assuming your spouse will spend an equal amount on a "toy", so are you multiplying the "toy" cost by two?
or could be opposite. My wife bought a car in 2018 and is ready to get a new one. Mine is a 2008 RAV4 which she is frantically trying to get me to give up.
When you discover that you are riding a dead horse, the best strategy is to dismount.
YeahBuddy
Posts: 2693
Joined: Tue Oct 31, 2017 12:55 pm

Re: At what point can I buy an expensive car?

Post by YeahBuddy »

My rule of thumb is I buy what i can afford without having to decrease investments or get into a lot of high interest debt to afford. One exception is home upgrades, I have a HELOC for that which I’m OK with current interest rates. If you have a fully funded EF, max your retirement accounts, no debt besides house, and have extra spending money, spend it !
Light weight baby!
Post Reply