G-Class Loan Payment Strategy

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WestCoastLiving1
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G-Class Loan Payment Strategy

Post by WestCoastLiving1 »

I recently purchased a Mercedes G-Class for roughly $133,000 total including taxes, fees, extended warranty, etc.

I took a loan for almost 8% from Mercedes to purchase the vehicle. After receiving the amortization schedule for the car loan, I calculated that I would owe $28,000 in interest over the life of the loan.

I decided to pay off $27,000 of the $133,000 loan which brought my total interest owed to $18,000 over the life of the loan.

I was wondering if this was a good move and if there is anything else I can do that would be beneficial.

My current situation is $140,000 in passive annual income after taxes.

Separately, I also have over 2.8MM in investments that fluctuates with the markets. Last year I was up several hundred thousand on that and I believe I am up this year so far as well.

I am in my mid 30s, single (but dating), no children, no mortgage, no student loans, no high interest credit card debt, or anything of that nature
runner3081
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Re: G-Class Loan Payment Strategy

Post by runner3081 »

Truthfully, you should have paid in cash for it all with that rate.

LOL, oh yeah, looked at your other posts. You are that guy :)

Cheers, enjoy the new highly depreciating toy!
Random Poster
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Re: G-Class Loan Payment Strategy

Post by Random Poster »

WestCoastLiving1 wrote: Sat Feb 01, 2025 6:50 pm
….and if there is anything else I can do that would be beneficial.
Yeah, there is.

Sell the car.
Most experiences are better imagined.
sunnyatcmu
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Re: G-Class Loan Payment Strategy

Post by sunnyatcmu »

How much the monthly insurance on it? I am exploring buying a G580, fully electric version. Thanks!
agilecoder
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Re: G-Class Loan Payment Strategy

Post by agilecoder »

guud gawd 8% from MB, did you shop around with other lenders or was this some special offer thru OEM?
ScubaHogg
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Re: G-Class Loan Payment Strategy

Post by ScubaHogg »

At 8% I’d strongly considering liquidating some investments to pay it off
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White Coat Investor
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Re: G-Class Loan Payment Strategy

Post by White Coat Investor »

WestCoastLiving1 wrote: Sat Feb 01, 2025 6:50 pm I recently purchased a Mercedes G-Class for roughly $133,000 total including taxes, fees, extended warranty, etc.

I took a loan for almost 8% from Mercedes to purchase the vehicle. After receiving the amortization schedule for the car loan, I calculated that I would owe $28,000 in interest over the life of the loan.

I decided to pay off $27,000 of the $133,000 loan which brought my total interest owed to $18,000 over the life of the loan.

I was wondering if this was a good move and if there is anything else I can do that would be beneficial.

My current situation is $140,000 in passive annual income after taxes.

Separately, I also have over 2.8MM in investments that fluctuates with the markets. Last year I was up several hundred thousand on that and I believe I am up this year so far as well.

I am in my mid 30s, single (but dating), no children, no mortgage, no student loans, no high interest credit card debt, or anything of that nature
8% for a car? Wow. Not sure I'd buy a $133K car if I only had $3 million and only $140K a year in passive income and I certainly wouldn't buy it on credit. Who needs high interest credit card debt when you have an 8% car loan. No, none of this is a good move (not the car, nor the loan) but I guess if we can't talk you out of either, then paying down the loan is better than not paying down the loan.

What are your financial goals besides driving a Mercedes?
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ETK517
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Re: G-Class Loan Payment Strategy

Post by ETK517 »

You absolutely can afford to buy a car that represents ~0.5% of your liquid net worth. That probably puts you in the 95th percentile of car buyers. But you should pay it off in full by liquidating some investments. If you are not willing to do that, you don't want the car enough and should get something nice for what you're willing to pay in cash. You are going to get carped at a lot because cars are triggering for BHs but with ~$3m liquid in your mid-thirties you are way ahead of where even most BHs who will lecture you on this were at your age, let alone gen pop. But if you want to grow this $3m, you will need to make big purchases like this a very rare exception rather than the rule.
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Re: G-Class Loan Payment Strategy

Post by bubbadog »

ETK517 wrote: Sun Feb 02, 2025 8:54 am You absolutely can afford to buy a car that represents ~0.5% of your liquid net worth. That probably puts you in the 95th percentile of car buyers. But you should pay it off in full by liquidating some investments. If you are not willing to do that, you don't want the car enough and should get something nice for what you're willing to pay in cash. You are going to get carped at a lot because cars are triggering for BHs but with ~$3m liquid in your mid-thirties you are way ahead of where even most BHs who will lecture you on this were at your age, let alone gen pop. But if you want to grow this $3m, you will need to make big purchases like this a very rare exception rather than the rule.

133,000/2,800,000 = 0.0475 or 4.75% not 0.5%
folkher0
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Re: G-Class Loan Payment Strategy

Post by folkher0 »

Did you decide to pay $10,000 a month in rent from your previous posts? I'm assuming you didn't also buy the Lexus and Tesla from your older thread. Or did you buy them and then sell them?

To answer your question, if you want to avoid paying interest, just liquidate some investments and pay off the loan completely.

After all, you only take home $140,000 a year. That doesn't go very far given the expenses you are already committed to.

In any case, your math doesn't add up for me. But I'm not you. Good luck.
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Topic Author
WestCoastLiving1
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Re: G-Class Loan Payment Strategy

Post by WestCoastLiving1 »

folkher0 wrote: Sun Feb 02, 2025 10:39 am Did you decide to pay $10,000 a month in rent from your previous posts? I'm assuming you didn't also buy the Lexus and Tesla from your older thread. Or did you buy them and then sell them?

To answer your question, if you want to avoid paying interest, just liquidate some investments and pay off the loan completely.

After all, you only take home $140,000 a year. That doesn't go very far given the expenses you are already committed to.

In any case, your math doesn't add up for me. But I'm not you. Good luck.
Yes I did end up getting a really nice place for some time. I also got a Lexus and Mercedes. Still have the Lexus paid for but traded in the Mercedes for the G-Class.

Last year I averaged more than $50,000 per month in passive income between investments + my ~$11,500 per month I get after taxes in passive income.

That is over $600,000 just last year! Remember, the G-Class is only $133,000 total.

Regarding the loan, should I just write a check and be done with it?

Thanks!
folkher0
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Re: G-Class Loan Payment Strategy

Post by folkher0 »

WestCoastLiving1 wrote: Sun Feb 02, 2025 10:53 am
Regarding the loan, should I just write a check and be done with it?

Thanks!
Yes. If you don't want to pay interest, then write a check and pay off the loan. 8% is a very high rate, and without knowing your investments, it may be difficult to achieve that income in the future. If it bothers you to write a check that big, and you can afford the monthlies, then don't.

Again, I'm not you, and would do things differently. For reference, my income is higher than yours, and my expenses are much lower. But then I have a spouse and kids and a job and a a mortgage etc and am thinking more about using our income to fund my family's lifestyle in 20 years, not so much today. So consider my advice with that grain of salt.
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Topic Author
WestCoastLiving1
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Re: G-Class Loan Payment Strategy

Post by WestCoastLiving1 »

folkher0 wrote: Sun Feb 02, 2025 11:07 am
WestCoastLiving1 wrote: Sun Feb 02, 2025 10:53 am

Yes. If you don't want to pay interest, then write a check and pay off the loan. 8% is a very high rate, and without knowing your investments, it may be difficult to achieve that income in the future. If it bothers you to write a check that big, and you can afford the monthlies, then don't.

Again, I'm not you, and would do things differently. For reference, my income is higher than yours, and my expenses are much lower. But then I have a spouse and kids and a job and a a mortgage etc and am thinking more about using our income to fund my family's lifestyle in 20 years, not so much today. So consider my advice with that grain of salt.
Very interesting! I like getting other perspectives. I do not have any real responsibilities or serious financial obligations (such as a mortgage). My primary and biggest expenditures are discretionary. Mainly restaurants, hotels, apartment, tickets to events, cars, etc. But there's been months where I did not have much expenses at all except the basics like health insurance because I was moving to a new city and just trying to find my way.
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Re: G-Class Loan Payment Strategy

Post by fyre4ce »

I need to know more about your financial situation to best advise.

Where did the $2.8M come from? What is the $2.8M invested in? What is the mix of pre-tax/Roth/taxable?

You say you have $140,000/year of “passive income” - is that returns from the $2.8M of assets (eg. rental property profit, stock dividends) or something else (eg. royalties)?

Do you have any earned income? How do you spend your time?

My first reaction is that you bought too much car, especially because you say here you also have a paid-off Lexus. Why do you need two luxury cars? Many folks on this forum have far more income and assets than you and drive far less expensive cars. That’s part of how they got that wealthy.

The decision to pay off the loan should be based mostly on the after-tax rate of return. Calculating the total interest paid is a red herring. An 8% guaranteed after-tax return is way better than any investments you can find. Without knowing more: sell the Mercedes and make do driving the Lexus. If that’s not acceptable, liquidate some investments and pay off the loan.
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TomatoTomahto
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Re: G-Class Loan Payment Strategy

Post by TomatoTomahto »

runner3081 wrote: Sat Feb 01, 2025 6:54 pm LOL, oh yeah, looked at your other posts. You are that guy :)
He’s also the guy who doesn’t listen to advice here. I think he just wins bar bets on how many posts he can elicit on BH. 😁
I get the FI part but not the RE part of FIRE.
dukeblue219
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Re: G-Class Loan Payment Strategy

Post by dukeblue219 »

WestCoastLiving1 wrote: Sat Feb 01, 2025 6:50 pm I am in my mid 30s, single (but dating)
Are you buying the $133k Mercedes, the Tesla, the other cars, and all the designers goods you've been posting about in order to impress a partner? Because that is going to work out terribly in the long run ....
AB609
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Re: G-Class Loan Payment Strategy

Post by AB609 »

If you are pulling in $50K per month, you can pay the thing off in 6 months or less out of cash flow. I don't see the point in your post. Nobody around here is going to endorse carrying an 8% car loan in your situation.
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WestCoastLiving1
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Re: G-Class Loan Payment Strategy

Post by WestCoastLiving1 »

fyre4ce wrote: Sun Feb 02, 2025 2:59 pm I need to know more about your financial situation to best advise.

Where did the $2.8M come from? What is the $2.8M invested in? What is the mix of pre-tax/Roth/taxable?

You say you have $140,000/year of “passive income” - is that returns from the $2.8M of assets (eg. rental property profit, stock dividends) or something else (eg. royalties)?

Do you have any earned income? How do you spend your time?

My first reaction is that you bought too much car, especially because you say here you also have a paid-off Lexus. Why do you need two luxury cars? Many folks on this forum have far more income and assets than you and drive far less expensive cars. That’s part of how they got that wealthy.

The decision to pay off the loan should be based mostly on the after-tax rate of return. Calculating the total interest paid is a red herring. An 8% guaranteed after-tax return is way better than any investments you can find. Without knowing more: sell the Mercedes and make do driving the Lexus. If that’s not acceptable, liquidate some investments and pay off the loan.

No the $140,000 after taxes is separate.

I could put the 2.8MM all in cash and earn interest at what? 4%?

So that would be roughly $20,000 per month total.

The G-Class is under $3,000 per month so that leaves me with over $17,000 per month.

Last year was a good year for me because my investments did well and I was up over $600,000.

Truthfully I spend my time mostly just having fun and most of my expenses are discretionary (hotels, restaurants, event tickets, etc). Again I don't have any real responsibilities like children or serious debt obligations like student loans.

Anyway, I'm not questioning whether or not I can afford it as I am enjoying it daily and paying for it already without issue.

I just wanted to know if I should pay it off? Re-finance at a lower interest rate? If so, what's the best way to go about re-financing? Should I just pay off some more but keep some of the loan? I already paid off 27K of the loan.

Thanks
folkher0
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Re: G-Class Loan Payment Strategy

Post by folkher0 »

WestCoastLiving1 wrote: Sun Feb 02, 2025 4:22 pm
fyre4ce wrote: Sun Feb 02, 2025 2:59 pm

No the $140,000 after taxes is separate.

I could put the 2.8MM all in cash and earn interest at what? 4%?

So that would be roughly $20,000 per month total.

The G-Class is under $3,000 per month so that leaves me with over $17,000 per month.

Last year was a good year for me because my investments did well and I was up over $600,0””
If you were to put it in cash you could earn 4%. For now, at least.

But is that what you are doing? When you say “I could” I interpret that to mean “I choose to do something else.” I hope you understand that if your money is in the market, you are not guaranteed that 4%. You don’t have $20,000 a month. Thats just a number in an account that goes up and down. Last year it went up. You are not even guaranteed your principal. Are you counting that $20,000 a month as if you were getting 4% guaranteed but in reality holding riskier assets?

And you shouldn’t be considering your investment returns as part of your income, unless you are committed to living off of those returns, whether they are high or low.

Unless I misinterpret, you are not guaranteed to make $600,000 this year. You may actually lose quite a bit of money. What is your plan if the stock market has a bad year?

Anyway. Like I said above. If you want to keep the car, and you don’t want to pay interest, just write a check. You sound like you have plenty of resources and few responsibilities.
A fanatic is one who can’t change his mind and won’t change the subject.
Topic Author
WestCoastLiving1
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Re: G-Class Loan Payment Strategy

Post by WestCoastLiving1 »

folkher0 wrote: Sun Feb 02, 2025 4:43 pm
WestCoastLiving1 wrote: Sun Feb 02, 2025 4:22 pm


No the $140,000 after taxes is separate.

I could put the 2.8MM all in cash and earn interest at what? 4%?

So that would be roughly $20,000 per month total.

The G-Class is under $3,000 per month so that leaves me with over $17,000 per month.

Last year was a good year for me because my investments did well and I was up over $600,0””
If you were to put it in cash you could earn 4%. For now, at least.

But is that what you are doing? When you say “I could” I interpret that to mean “I choose to do something else.” I hope you understand that if your money is in the market, you are not guaranteed that 4%. You don’t have $20,000 a month. Thats just a number in an account that goes up and down. Last year it went up. You are not even guaranteed your principal. Are you counting that $20,000 a month as if you were getting 4% guaranteed but in reality holding riskier assets?

And you shouldn’t be considering your investment returns as part of your income, unless you are committed to living off of those returns, whether they are high or low.

Unless I misinterpret, you are not guaranteed to make $600,000 this year. You may actually lose quite a bit of money. What is your plan if the stock market has a bad year?

Anyway. Like I said above. If you want to keep the car, and you don’t want to pay interest, just write a check. You sound like you have plenty of resources and few responsibilities.
It was over $50,000 per month average last year including my investments. I'm saying if I had it all in cash then maybe $20,000 per month? Anyway I don't need 50k a month or 20k I need less than $3000 per month to pay for the G-Class and the $11,500 I get in passive income monthly after taxes covers it. My investments have gone down in value before but over time it has gone up so far. I've had periods of time where I've spent a lot and periods of time where I didn't spend much and it's been fine thus far. I don't keep strict tabs on how much I make or how much I spend because it fluctuates, but I do keep a general idea and monitor everything.

I still don't know what the best path forward is for the loan. I did pay off a big chunk as I mentioned. The interest left doesn't seem that bad. Maybe I'll just pay monthly for now and then pay off another chunk in time maybe 6mos from now or so. I have 4 years left on the loan after paying off 27K. I'll likely pay it off well before then.
fyre4ce
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Re: G-Class Loan Payment Strategy

Post by fyre4ce »

Someone else pointed out this poster has only posted three other threads here:

Opinions on paying 10K a month in rent

Opinions on buying both a Tesla and a Lexus

How much can I afford to spend on designer items?

In both other threads, OP has (1) asked for opinions about luxury purchases he's contemplating, (2) not asked many or any specific questions, (3) seemingly confused needs from wants, and (4) been intentionally vague about the details of his financial picture, particularly his "passive income" that is fueling his lifestyle. Here, he at least asked a specific question ("What should I do with the 8% car loan?") and got some good answers ("Pay it off"). But the other issues seem to still be unresolved.

Unless OP has anything additional to add or ask, a mod might choose to close the thread.

One possible "lesson learned" for the broader community is that OP's lifestyle (this post is about the most detail he's provided) is likely created and/or enabled by a trust fund. Ballpark, the amount would be ~$9M (=~$180k pre-tax @ 3% WR plus $2.8M), easily within the range of a typical Boglehead. If anyone here is considering leaving that range of money to their kids, they should consider whether they would be okay with this outcome.
Last edited by fyre4ce on Sun Feb 02, 2025 7:18 pm, edited 2 times in total.
bubbadog
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Re: G-Class Loan Payment Strategy

Post by bubbadog »

WestCoastLiving1 wrote: Sun Feb 02, 2025 4:22 pm
fyre4ce wrote: Sun Feb 02, 2025 2:59 pm I need to know more about your financial situation to best advise.

Where did the $2.8M come from? What is the $2.8M invested in? What is the mix of pre-tax/Roth/taxable?

You say you have $140,000/year of “passive income” - is that returns from the $2.8M of assets (eg. rental property profit, stock dividends) or something else (eg. royalties)?

Do you have any earned income? How do you spend your time?

My first reaction is that you bought too much car, especially because you say here you also have a paid-off Lexus. Why do you need two luxury cars? Many folks on this forum have far more income and assets than you and drive far less expensive cars. That’s part of how they got that wealthy.

The decision to pay off the loan should be based mostly on the after-tax rate of return. Calculating the total interest paid is a red herring. An 8% guaranteed after-tax return is way better than any investments you can find. Without knowing more: sell the Mercedes and make do driving the Lexus. If that’s not acceptable, liquidate some investments and pay off the loan.

No the $140,000 after taxes is separate.

I could put the 2.8MM all in cash and earn interest at what? 4%?

So that would be roughly $20,000 per month total.

The G-Class is under $3,000 per month so that leaves me with over $17,000 per month.

Last year was a good year for me because my investments did well and I was up over $600,000.

Truthfully I spend my time mostly just having fun and most of my expenses are discretionary (hotels, restaurants, event tickets, etc). Again I don't have any real responsibilities like children or serious debt obligations like student loans.

Anyway, I'm not questioning whether or not I can afford it as I am enjoying it daily and paying for it already without issue.

I just wanted to know if I should pay it off? Re-finance at a lower interest rate? If so, what's the best way to go about re-financing? Should I just pay off some more but keep some of the loan? I already paid off 27K of the loan.

Thanks
$2,800,000 x 4 % = $112,000 or $9,333/per month

not roughly $20,000/per month

Just serving as the self appointed internet math police.

I would recommend paying off the loan.

Best of luck with your decision.

I'll see myself out now.
Topic Author
WestCoastLiving1
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Re: G-Class Loan Payment Strategy

Post by WestCoastLiving1 »

bubbadog wrote: Sun Feb 02, 2025 6:12 pm
WestCoastLiving1 wrote: Sun Feb 02, 2025 4:22 pm


No the $140,000 after taxes is separate.

I could put the 2.8MM all in cash and earn interest at what? 4%?

So that would be roughly $20,000 per month total.

The G-Class is under $3,000 per month so that leaves me with over $17,000 per month.

Last year was a good year for me because my investments did well and I was up over $600,000.

Truthfully I spend my time mostly just having fun and most of my expenses are discretionary (hotels, restaurants, event tickets, etc). Again I don't have any real responsibilities like children or serious debt obligations like student loans.

Anyway, I'm not questioning whether or not I can afford it as I am enjoying it daily and paying for it already without issue.

I just wanted to know if I should pay it off? Re-finance at a lower interest rate? If so, what's the best way to go about re-financing? Should I just pay off some more but keep some of the loan? I already paid off 27K of the loan.

Thanks
$2,800,000 x 4 % = $112,000 or $9,333/per month

not roughly $20,000/per month

Just serving as the self appointed internet math police.

I would recommend paying off the loan.

Best of luck with your decision.

I'll see myself out now.
That is incorrect. 112 + 141 = 253K/yr
bubbadog
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Re: G-Class Loan Payment Strategy

Post by bubbadog »

WestCoastLiving1 wrote: Sun Feb 02, 2025 6:17 pm
bubbadog wrote: Sun Feb 02, 2025 6:12 pm

$2,800,000 x 4 % = $112,000 or $9,333/per month

not roughly $20,000/per month

Just serving as the self appointed internet math police.

I would recommend paying off the loan.

Best of luck with your decision.

I'll see myself out now.
That is incorrect. 112 + 141 = 253K/yr
Okay. I misunderstood your post. My apologies.
Topic Author
WestCoastLiving1
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Re: G-Class Loan Payment Strategy

Post by WestCoastLiving1 »

fyre4ce wrote: Sun Feb 02, 2025 6:01 pm Someone else pointed out this poster has only posted two other threads here:

Opinions on paying 10K a month in rent

Opinions on buying both a Tesla and a Lexus

In both other threads, OP has (1) asked for opinions about luxury purchases he's contemplating, (2) not asked many or any specific questions, (3) seemingly confused needs from wants, and (4) been intentionally vague about the details of his financial picture, particularly his "passive income" that is fueling his lifestyle. Here, he at least asked a specific question ("What should I do with the 8% car loan?") and got some good answers ("Pay it off"). But the other issues seem to still be unresolved.

Unless OP has anything additional to add or ask, a mod might choose to close the thread.

One possible "lesson learned" for the broader community is that OP's lifestyle (this post is about the most detail he's provided) is likely created and/or enabled by a trust fund. Ballpark, the amount would be ~$9M (=~$180k pre-tax @ 3% WR plus $2.8M), easily within the range of a typical Boglehead. If anyone here is considering leaving that range of money to their kids, they should consider whether they would be okay with this outcome.
I suppose that is one angle to look at net worth? 140K per year after taxes you suggest would be around 180K pre-tax. At a 3% withdrawal that's roughly 6MM plus roughly 3MM outside of that for a total of 9MM.

So why would a 133K car be unaffordable?
NYCaviator
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Re: G-Class Loan Payment Strategy

Post by NYCaviator »

White Coat Investor wrote: Sun Feb 02, 2025 8:36 am What are your financial goals besides driving a Mercedes?
OP has started several threads to ask if they afford things, but it appears their goal is to buy a $1,000 wallet, a Gucci duffel bag, a Rolex, a $120k Tesla, $10k a month in rent, and now this Mercedes.
Last edited by NYCaviator on Sun Feb 02, 2025 7:02 pm, edited 1 time in total.
adamthesmythe
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Re: G-Class Loan Payment Strategy

Post by adamthesmythe »

This thread has only amusement value.

Almost all of us here approach our financial lives in a very different way, and cannot imagine ever being in OP's situation. As a result we have no useful advice to give, at least no advice that is likely to be acted upon.
fyre4ce
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Re: G-Class Loan Payment Strategy

Post by fyre4ce »

WestCoastLiving1 wrote: Sun Feb 02, 2025 6:22 pm
fyre4ce wrote: Sun Feb 02, 2025 6:01 pm Someone else pointed out this poster has only posted two other threads here:

Opinions on paying 10K a month in rent

Opinions on buying both a Tesla and a Lexus

In both other threads, OP has (1) asked for opinions about luxury purchases he's contemplating, (2) not asked many or any specific questions, (3) seemingly confused needs from wants, and (4) been intentionally vague about the details of his financial picture, particularly his "passive income" that is fueling his lifestyle. Here, he at least asked a specific question ("What should I do with the 8% car loan?") and got some good answers ("Pay it off"). But the other issues seem to still be unresolved.

Unless OP has anything additional to add or ask, a mod might choose to close the thread.

One possible "lesson learned" for the broader community is that OP's lifestyle (this post is about the most detail he's provided) is likely created and/or enabled by a trust fund. Ballpark, the amount would be ~$9M (=~$180k pre-tax @ 3% WR plus $2.8M), easily within the range of a typical Boglehead. If anyone here is considering leaving that range of money to their kids, they should consider whether they would be okay with this outcome.
I suppose that is one angle to look at net worth? 140K per year after taxes you suggest would be around 180K pre-tax. At a 3% withdrawal that's roughly 6MM plus roughly 3MM outside of that for a total of 9MM.

So why would a 133K car be unaffordable?
Since you asked - my standard for car value is 25% of household income in total value of household cars. With your income of $180k pre-tax plus 3% of 2.8M = $264k, that would say you should have cars worth ~$66k. You already have a Lexus worth roughly that amount, so that would tell me you should be okay with the Lexus and not have bought the Mercedes. Are you in NYC? The necessity for having a car there is low.

In the big picture, you seem to be "living large" mostly on your passive income. The wisdom of that partly depends on the source of that passive income, which you have not shared. Could the passive income be reduced or eliminated? Could it increase? My bigger concern is potential things that could happen in the future. What if you decide you don't want to rent for the rest of your life? If you want to stay in NYC, any apartment that comes close to meeting your standard will cost millions. You could get married and need more space. Want to send the kids to private school or college, etc. It seems you lack a longer-term financial plan, and that is causing many to wonder if you're over-spending on luxuries today.
fyre4ce
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Re: G-Class Loan Payment Strategy

Post by fyre4ce »

WestCoastLiving1 wrote: Sun Feb 02, 2025 4:22 pm I just wanted to know if I should pay it off? Re-finance at a lower interest rate? If so, what's the best way to go about re-financing? Should I just pay off some more but keep some of the loan? I already paid off 27K of the loan.
Thanks
Pay it off. You're very unlikely to be able to refinance it at a low enough rate to make it worth keeping. The after-tax return for risk-free investments is around 3%, and even if you could get a refinance below that the arbitrage would not be worth the hassle of keeping it.

You could read more here if inclined: Paying down loans versus investing
Topic Author
WestCoastLiving1
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Joined: Sun May 08, 2022 3:53 pm

Re: G-Class Loan Payment Strategy

Post by WestCoastLiving1 »

fyre4ce wrote: Sun Feb 02, 2025 7:09 pm
WestCoastLiving1 wrote: Sun Feb 02, 2025 6:22 pm

I suppose that is one angle to look at net worth? 140K per year after taxes you suggest would be around 180K pre-tax. At a 3% withdrawal that's roughly 6MM plus roughly 3MM outside of that for a total of 9MM.

So why would a 133K car be unaffordable?
Since you asked - my standard for car value is 25% of household income in total value of household cars. With your income of $180k pre-tax plus 3% of 2.8M = $264k, that would say you should have cars worth ~$66k. You already have a Lexus worth roughly that amount, so that would tell me you should be okay with the Lexus and not have bought the Mercedes. Are you in NYC? The necessity for having a car there is low.

In the big picture, you seem to be "living large" mostly on your passive income. The wisdom of that partly depends on the source of that passive income, which you have not shared. Could the passive income be reduced or eliminated? Could it increase? My bigger concern is potential things that could happen in the future. What if you decide you don't want to rent for the rest of your life? If you want to stay in NYC, any apartment that comes close to meeting your standard will cost millions. You could get married and need more space. Want to send the kids to private school or college, etc. It seems you lack a longer-term financial plan, and that is causing many to wonder if you're over-spending on luxuries today.
Yeah, sure, I live large and in the future everything falls apart and I go broke. Understood. But it goes both ways. Years pass, I grow old, amass a massive net worth, and regret never having lived life to the fullest, enjoyed G Wagens and designer goods when I was young because I got scared after reading some posts online about potentially going broke.

Nobody knows exactly what will happen in the future and losing it all is just as bad as never having lived IMO.
Topic Author
WestCoastLiving1
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Re: G-Class Loan Payment Strategy

Post by WestCoastLiving1 »

fyre4ce wrote: Sun Feb 02, 2025 7:13 pm
WestCoastLiving1 wrote: Sun Feb 02, 2025 4:22 pm I just wanted to know if I should pay it off? Re-finance at a lower interest rate? If so, what's the best way to go about re-financing? Should I just pay off some more but keep some of the loan? I already paid off 27K of the loan.
Thanks
Pay it off. You're very unlikely to be able to refinance it at a low enough rate to make it worth keeping. The after-tax return for risk-free investments is around 3%, and even if you could get a refinance below that the arbitrage would not be worth the hassle of keeping it.

You could read more here if inclined: Paying down loans versus investing
If I paid it off, I would not mind my current financial position. It would basically mean roughly 2.7MM + the 140k, and of course the G-Class. I will read the article link sent as well.

Thanks all for your posts.
fyre4ce
Posts: 2846
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Re: G-Class Loan Payment Strategy

Post by fyre4ce »

WestCoastLiving1 wrote: Sun Feb 02, 2025 8:58 pm
fyre4ce wrote: Sun Feb 02, 2025 7:09 pm Since you asked - my standard for car value is 25% of household income in total value of household cars. With your income of $180k pre-tax plus 3% of 2.8M = $264k, that would say you should have cars worth ~$66k. You already have a Lexus worth roughly that amount, so that would tell me you should be okay with the Lexus and not have bought the Mercedes. Are you in NYC? The necessity for having a car there is low.

In the big picture, you seem to be "living large" mostly on your passive income. The wisdom of that partly depends on the source of that passive income, which you have not shared. Could the passive income be reduced or eliminated? Could it increase? My bigger concern is potential things that could happen in the future. What if you decide you don't want to rent for the rest of your life? If you want to stay in NYC, any apartment that comes close to meeting your standard will cost millions. You could get married and need more space. Want to send the kids to private school or college, etc. It seems you lack a longer-term financial plan, and that is causing many to wonder if you're over-spending on luxuries today.
Yeah, sure, I live large and in the future everything falls apart and I go broke. Understood. But it goes both ways. Years pass, I grow old, amass a massive net worth, and regret never having lived life to the fullest, enjoyed G Wagens and designer goods when I was young because I got scared after reading some posts online about potentially going broke.

Nobody knows exactly what will happen in the future and losing it all is just as bad as never having lived IMO.
You need to find a balance between spending today and saving for the future. It would be equally foolish to live like a pauper today and defer all your spending til you're 90 as it would to blow all your money on luxury consumption and save nothing for the future. There's a range of reasonable balances to strike. Lots of people on this board, many of whom have much more income and assets than you, have told you that you're spending too much today. Without a long-term plan, or a way to address the risk of the "passive income" drying up, I think buying a $130k second car, $12k Rolex watch, $3k Gucci duffel bag is too spendy. Several people have likewise pointed out that your spending seems geared toward advertising your wealth to others. This has a couple problems. First, it's less likely to lead to lasting happiness, as there will always be folks who have more money than you. Second, it puts you on a hedonic treadmill, where increasing levels of consumption are required to maintain the same "good feeling". Other folks here who have G-class and similar cars have reported that they're a thrill for the first few weeks and then become just a car. This car is twice as expensive as your last purchase. Will your next car need to be even more expensive? These are the risks with the path you seem to be on.

It's your money and you can spend it however you like. I wish you good luck and happiness.
London
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Re: G-Class Loan Payment Strategy

Post by London »

I think you can refinance for somewhere around 6%, even at big name banks.

I have a somewhat different take than most here. Taking a loan when you have the money to pay cash is different than taking the loan with nothing. By that, I mean that you’re currently earning 4% on savings and paying 8% on the loan for a net 4%. That’s very different than someone who isn’t earning the interest on holdings. You are effectively paying 4% for liquidity, rather than 8% for the asset.
NYCaviator
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Location: NYC

Re: G-Class Loan Payment Strategy

Post by NYCaviator »

WestCoastLiving1 wrote: Sun Feb 02, 2025 8:58 pm Yeah, sure, I live large and in the future everything falls apart and I go broke. Understood. But it goes both ways. Years pass, I grow old, amass a massive net worth, and regret never having lived life to the fullest, enjoyed G Wagens and designer goods when I was young because I got scared after reading some posts online about potentially going broke.
It sounds like your mind is made up, so why do you keep creating posts to ask if you can afford things?
hoofaman
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Re: G-Class Loan Payment Strategy

Post by hoofaman »

Are you working or retired? Doesn't seem like the nest egg is going to last very long at this rate
HooCares
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Re: G-Class Loan Payment Strategy

Post by HooCares »

Please post pics! I’d also like to see a steering wheel photo with a wrist-check. Congrats on the awesome vehicle. Any consideration of a convertible to go along with the G-Class? Since you like Lexus I think something like the LC 500 Convertible would pair well.
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White Coat Investor
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Re: G-Class Loan Payment Strategy

Post by White Coat Investor »

NYCaviator wrote: Sun Feb 02, 2025 6:59 pm
White Coat Investor wrote: Sun Feb 02, 2025 8:36 am What are your financial goals besides driving a Mercedes?
OP has started several threads to ask if they afford things, but it appears their goal is to buy a $1,000 wallet, a Gucci duffel bag, a Rolex, a $120k Tesla, $10k a month in rent, and now this Mercedes.
We should congratulate him on reaching his goals. As he gets more, we'll work with him on those as well. In the end, the reason we're forgoing spending now to invest is to be able to spend (or give) even more later.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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