Can I afford this luxury car?

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Go Blue 99
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Can I afford this luxury car?

Post by Go Blue 99 » Tue Jul 10, 2012 9:40 am

My wife and I are hoping to have our first baby in the next 12-18 months, and would like to buy a new SUV to coincide with the baby’s arrival. Cars are a hobby for me- I subscribe to car magazines and read various car message boards. I’m the go-to person in my social circle for new car buying advice, because I love doing research and discussing the topic.

But up to this point, I’ve never splurged on a car. Right now we own 2 paid-off small sedans- a 5 yr old Toyota and a 8 yr old Mazda. But I’ll admit I’m very intrigued with the idea of buying a luxury make that will cost $45k (looking at the new Infiniti JX or similar). We would plan to drive this car for at least 10 years, and want to have a total of 2 kids.

However, I’m still trying to determine if buying an expensive car like this would be an ill-advised financial decision. I know the common Boglehead advice is to pay cash for a used Toyota or Honda and run it into the ground. If it helps, we do plan on running our current Toyota into the ground.

We have saved $20k as a car down payment, and should get $5k for the Mazda trade-in. We would finance the rest under a 48 or 60 month loan (hopefully through PenFed at 1.99%). We gross about $131k, and contribute 15% to retirement. Our emergency fund is at 12 months, and we also have another $10k saved for start-up baby expenses. After mortgage and all other expenses, we have about $2k leftover a month. In the future, most of that that $2k will pay for baby-related stuff (daycare, diapers, etc). Currently, it is going into savings or into our travel fund (trying to travel as much as possible before baby arrives). We wouldn’t buy the car until 2013, so yes there is time to save up more cash for a bigger down payment.

Do you think I can safely afford this luxury vehicle? Or do you think I am going to regret it if I make the purchase?

The Wizard
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Re: Can I afford this luxury car?

Post by The Wizard » Tue Jul 10, 2012 9:43 am

The boglehead ideal is to save up and pay CASH for each new vehicle, tho I've not completely done that myself yet.
If you need more space for the baby car-seat and so forth, OK, but I don't see that in your post. I might be inclined to put things off a year if your two vehicles you have now are going well...
Last edited by The Wizard on Tue Jul 10, 2012 9:46 am, edited 1 time in total.
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gkaplan
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Re: Can I afford this luxury car?

Post by gkaplan » Tue Jul 10, 2012 9:45 am

Why would you want to buy this car?
Gordon

TRC
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Re: Can I afford this luxury car?

Post by TRC » Tue Jul 10, 2012 9:52 am

Personally I wouldn't do it unless I could pay cash and had the rest of my financial house in order. But coming from a guy who has bought two luxury cars new (BMW 335XI and Acura TL SH AWD), I can tell you that the "newness" of the car eventually wears off. After a while, it just becomes a vehicle that gets you from point A to point B.

Also, not sure where you live and if you have to pay Excise Tax annually. I just got the bill for my TL and it's $900 for this year...ouch!

mlipps
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Re: Can I afford this luxury car?

Post by mlipps » Tue Jul 10, 2012 9:53 am

If it were me, I would wait. You're going to buy a luxury car and then haul infants/toddlers around in it? Your beautiful interior is going to be pretty messy pretty quickly I'd expect. Plus, the kids are so young they'll be comfortable in something cheaper. On the other hand, when they get into teen years, you might find they appreciate a cushier back seat for longer rides and will be old enough to not get it (too) messy. Just my two cents.

But affordability wise, it sounds like you can swing it pretty comfortably. $2k/month is more than enough for 2 kids I would think. I would consider maybe waiting until before the 2nd is born; a sedan will probably suit you fine w/just one car seat, but the SUV space will be nice with two.

notsobright
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Re: Can I afford this luxury car?

Post by notsobright » Tue Jul 10, 2012 9:55 am

My suggestion is going to a retirement calculator, such as this one

http://www.calcxml.com/do/ret02

and comparing how much you have to save per year to reach your retirement goals if you purchase the luxury car vs not.

If you're ok with that difference and you're comfortable with your situation, then go for it :)

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bottlecap
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Re: Can I afford this luxury car?

Post by bottlecap » Tue Jul 10, 2012 9:58 am

You don't mention what the payments are, but with $2,000 in gravy every month, it seems like you can swing it. Whether you can afford it is another question that can only be answered considering all of your goals.

I have some food for thought, though:

1. Have the baby first. Until then, you definitely don't need a new car (or at least you don't indicate it's a need) and you'll be able to see what your expenses will be and whether a "luxury" vehicle is still a priority.

2. Will the vehicle suit your needs after two kids?

3. As a general rule, if you have to finance a planned vehicle purchase (ie. not an emergency breakdown situation), my feeling is a) you can't really afford it or b) you're buying it too soon. It's more conservative than most, but I've only had one car payment in my life and I can't imagine why anyone would choose to be voluntarily subject to one again unless there was an emergency or if one of those notions applied.

4. Don't tell yourself you'll drive the car for at least 10 years when you haven't driven the current one for 10 years yet. This is merely a rationale to justify the purchase!

Good luck,

JT

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Re: Can I afford this luxury car?

Post by cheesepep » Tue Jul 10, 2012 9:59 am

I believed edmunds.com is doing a long term test on that exact vehicle so check their website for details.

sscritic
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Re: Can I afford this luxury car?

Post by sscritic » Tue Jul 10, 2012 10:03 am

Spend some time with one child. You will find that one child takes up a full seat with the child seat, the baby bag, the toys, the shoes on the floor, etc. When it is time for the second child, you will find yourself thinking about a Honda Odyssey, not an SUV. Both my children went minivan when push came to shove (if you can say that about child birth).

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momar
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Re: Can I afford this luxury car?

Post by momar » Tue Jul 10, 2012 10:04 am

15% for retirement is good, but not good enough to justify buying a 45k luxury vehicle.
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Re: Can I afford this luxury car?

Post by sscritic » Tue Jul 10, 2012 10:10 am

more on the minivan. If this car is going to last 10 years or more, you also have to think about the hockey bags, baseball equipment, etc. Are there any dogs in the future? You don't see an SUV as being small now, but just wait.

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Re: Can I afford this luxury car?

Post by texasdiver » Tue Jul 10, 2012 10:13 am

As a parent of 3 I can tell you that you will regret it.

Kids and their equipment will trash your car.

Car seats and infant seats wear on the upholstery. You have to cinch them down really tight to properly install them
Diapers will leak, bottles will get spilled and endless amounts of crumbs will find its way onto the seats and carpeting. On the plus side, leather is easier to clean than cloth. However leather is more easily damaged by car seats. I remember one drive from PA to TX with the youngest toddler suffering from diarrhea. I stopped at Walmart and bought a half dozen waterproof crib liners to put on the seat under her carseat and to put on the carseat between her and the seat. Stuff still leaked and made a mess everywhere. Diapers are weird. They will hold a lot of pee and poop but can't handle diarrhea.
Once your kids get a bit older you'll find crayon marks, stickers, and other traces of their presence all over the back, especially if you do longer drives with them
Strollers can take up a huge amount of space in the trunk...make sure you can carry one.

Eventually you just totally give up and write off trying to maintain the car in pristine condition. Or you will make your kids and your wife crazy. I'm currently driving a 10 year old Sienna with 210,000 miles and won't even think about replacing it until the youngest kid is at least in high school 5 years from now unless mechanical failures force me to do so.
Last edited by texasdiver on Tue Jul 10, 2012 10:17 am, edited 1 time in total.

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Re: Can I afford this luxury car?

Post by Petrocelli » Tue Jul 10, 2012 10:14 am

If it makes you happy, buy the car. You can't take it with you.
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The Wizard
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Re: Can I afford this luxury car?

Post by The Wizard » Tue Jul 10, 2012 10:18 am

Petrocelli wrote:If it makes you happy, buy the car. You can't take it with you.
Wait. He can't take the CAR with him if he croaks? Or he can't take the $$$ that went to buy it?
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prudent
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Re: Can I afford this luxury car?

Post by prudent » Tue Jul 10, 2012 10:19 am

I agree with the sentiments that an SUV is not the best choice for hauling around two kids and all their stuff. I also think that a luxury vehicle might not be ideal for a gearhead dad + baby or two. Can you tolerate your dream car constantly full of crumbs + puke + everything else that a baby/toddler emits? It ain't gonna be pretty.

That said, it appears it's not an issue of being able to afford the PAYMENTS. You should look at how upside down you will be throughout the duration of the 4 or 5 year loan. Will there be no loss of income once the child arrives?

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Re: Can I afford this luxury car?

Post by Random Poster » Tue Jul 10, 2012 10:28 am

notsobright wrote:My suggestion is going to a retirement calculator, such as this one

http://www.calcxml.com/do/ret02

and comparing how much you have to save per year to reach your retirement goals if you purchase the luxury car vs not.

If you're ok with that difference and you're comfortable with your situation, then go for it :)
That calclator seems awfully optimistic in its projections, and won't allow for an input of over 40 years in the box for "years of retirement income needed."

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Re: Can I afford this luxury car?

Post by sscritic » Tue Jul 10, 2012 10:28 am

$45k is not luxury, unless you consider Volkwagen and Honda as luxury brands (MSRP):

2012 Volkswagen Routan SEL Premium 4dr Minivan $44,280
2012 Honda Odyssey Touring Elite 4dr Minivan $43,825

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matjen
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Re: Can I afford this luxury car?

Post by matjen » Tue Jul 10, 2012 10:32 am

I agree that buying a nice SUV with 2 kids in the near future is probably not optimal because 1) kids trash cars, and 2) SUVs aren't as good at carrying kids and their stuff around as most people think.

Buy a used Odyssey and a used Miata for you. Problem solved!!!
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Re: Can I afford this luxury car?

Post by The Wizard » Tue Jul 10, 2012 10:34 am

sscritic wrote:$45k is not luxury, unless you consider Volkwagen and Honda as luxury brands (MSRP):

2012 Volkswagen Routan SEL Premium 4dr Minivan $44,280
2012 Honda Odyssey Touring Elite 4dr Minivan $43,825
He was talking the Infiniti JX in the OP, $40,650 base MSRP.
http://www.edmunds.com/infiniti/jx/2013/
But they have some packages to luxurify it and get the price up to $45K...
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Leif
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Re: Can I afford this luxury car?

Post by Leif » Tue Jul 10, 2012 10:39 am

Of course bogleheads are, in general, going to advise against it. I to would advise against it since I've always paid cash, except my first car which my parents bought for me (as you might guess, they paid cash).

Unlike most here, I think, I've always bought new. I know it does not make financial sense, but it is a luxury I afford myself, since I can pay cash. If I don't have enough cash I wait.

However, I am considering breaking my own rule. I would like to get an expensive sports car, which I've wanted since a teenager. If I do I may buy it on lease, since I would only own it a couple of years. However, I could easily pay cash for the car, so that is the difference.

Dave76
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Re: Can I afford this luxury car?

Post by Dave76 » Tue Jul 10, 2012 10:43 am

:|

Why would he need a minivan for 2 kids? Today's minivans are not even 'mini' vans. Compare a 1984 Dodge Caravan and a 2012 Caravan. Besides, he's probably young (30s) and doesn't want to drive a minivan. I know I wouldn't...

OP -- Look at a 2011 Volvo V50.

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Re: Can I afford this luxury car?

Post by NoVa Lurker » Tue Jul 10, 2012 10:50 am

prudent wrote:I agree with the sentiments that an SUV is not the best choice for hauling around two kids and all their stuff. I also think that a luxury vehicle might not be ideal for a gearhead dad + baby or two. Can you tolerate your dream car constantly full of crumbs + puke + everything else that a baby/toddler emits? It ain't gonna be pretty.

That said, it appears it's not an issue of being able to afford the PAYMENTS. You should look at how upside down you will be throughout the duration of the 4 or 5 year loan. Will there be no loss of income once the child arrives?
Agree with this, and the other posters who pointed out that the Infiniti JX actually might feel small once you have a couple of kids. It's not a luxury car if you can't fit two car seats plus an adult in the backseat. Or if you can't even fit a double BOB stroller in the back.

For example, we have good friends who were childless in 2009, but they planned to have two kids. They had a baby in 2010 - awesome. Near the end of 2011, they got pregnant again - twins! Now they have three kids under the age of two. Their gorgeous Lexus LX sits in the driveway, because they recently bought a used white Toyota Sienna minivan to drive everywhere.....

An another example, I drive a Prius, and it fits two car seats just fine in the backseat, when it needs to. A sedan with a big trunk might actually be better than an SUV, for two kids, down the line.

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Taylor Larimore
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The $345,000 car.

Post by Taylor Larimore » Tue Jul 10, 2012 10:52 am

Go Blue:
I’m very intrigued with the idea of buying a luxury make that will cost $45k (looking at the new Infiniti JX or similar).
Look at Edmonds True Cost to Own:

An Infinity M56 Sedan is priced at $44,433 and has a 5-year Cost to Own of $69,719.
A Toyota Corolla (my car) is priced at $18,314 and has a 5-year Cost to Own of $34,723.

The 5-year difference in cost is projected to be $34,996 or $6,999 a year.

Investing $6,999 a year for 20 years at 8% becomes $345,000.

Which would you rather have in 20 years: A flashy car or $345,000 more in your portfolio?

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

Dave76
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Re: Can I afford this luxury car?

Post by Dave76 » Tue Jul 10, 2012 10:52 am

NoVa Lurker wrote: A sedan with a big trunk might actually be better than an SUV, for two kids, down the line.

Mercury Grand Marquis

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Re: Can I afford this luxury car?

Post by psteinx » Tue Jul 10, 2012 10:53 am

Some thoughts:

1) I don't really consider myself a Boglehead.

2) That said, I'm not crazy about the idea that a certain set of views primarily focusing on how one should invest one's portfolio (generally in a low cost way) is automatically translated by some to the need to buy the cheapest consumer products.

3) THAT said, I'm not a fan of folks paying a high percentage of their income for vehicles, when cheaper alternatives exist.

4) You're talking about paying $45K for just ONE vehicle in a two vehicle household with a total gross income of $131K. Presumably the net is significantly lower.

5) If your wife is working now, I would not assume that she will continue to work, even if that is the current plan. If she does, so be it, but don't spend yourself into a corner where she HAS to work or you face financial duress.

6) With kids will come a lot of other expenses.

7) As others have said, an SUV is not necessarily ideal for hauling kids and gear around. I also agree with the sentiment that kids will tend to mean an unclean vehicle, and if your ego is very tied up in a very expensive prestige vehicle, that could be problematic.

8) I disagree with the sentiment that buying a used Honda or Toyota is generally the most efficient way to handle transportation needs. I haven't shopped for a used Toyonda, but IIUC, the late model used ones are barely cheaper than new. I think the way to go is a NEW Honda or Toyota, or a USED model that depreciates fast (but find one in good condition) - probably something American made.

9) If you're a "car guy", why not a fun, cheap, used car now (a Miata or whatever), and then a practical family vehicle sometime after the first baby arrives (and you get a better feel for your needs).

10) If you're a "car guy", and you have a little bit of time on your hands, you should be able to buy and sell used vehicles private party through Craigslist or whatever fairly easily and cheaply. So, buy an interesting fun car, sell your current car, drive the fun car for a year or two or whatever, then sell it and get something more practical. I don't think you need to feel overly guilty about swapping vehicles around every few years, if you're doing cash, private-party transactions on used vehicles.

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Re: Can I afford this luxury car?

Post by sscritic » Tue Jul 10, 2012 10:54 am

Dave76 wrote: Why would he need a minivan for 2 kids? Today's minivans are not even 'mini' vans. Compare a 1984 Dodge Caravan and a 2012 Caravan. Besides, he's probably young (30s) and doesn't want to drive a minivan. I know I wouldn't...
Do you have two kids? Once you do, your preconceived notions of whether you would drive a minivan may just go out the window (wide open going 70 mph). I know both my kids (both in their 30s) changed their tunes once the second kid arrived.

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Re: Can I afford this luxury car?

Post by Dave76 » Tue Jul 10, 2012 10:57 am

sscritic wrote:
Dave76 wrote: Why would he need a minivan for 2 kids? Today's minivans are not even 'mini' vans. Compare a 1984 Dodge Caravan and a 2012 Caravan. Besides, he's probably young (30s) and doesn't want to drive a minivan. I know I wouldn't...
Do you have two kids? Once you do, your preconceived notions of whether you would drive a minivan may just go out the window (wide open going 70 mph). I know both my kids (both in their 30s) changed their tunes once the second kid arrived.
It's just a major kick in the pants. And is space really an issue? My brother and I rode around in a Dodge Dart and a Ford Escort wagon. I think it's a waste for 2 kids. It's also more space to keep clean! Why go to extremes?

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Re: Can I afford this luxury car?

Post by texasdiver » Tue Jul 10, 2012 11:03 am

If I were a car guy and had the space, what I would do is get the practical kiddie hauler for daily use. Then I would invest in some sort of vintage auto that catches my fancy like a 1964 Mustang Convertible that I could fuss over and drive on weekends and loan to the kid on prom night.

chuppi
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Re: Can I afford this luxury car?

Post by chuppi » Tue Jul 10, 2012 11:10 am

I have a 4 month old and just one luxury sedan for the family. I commute with bike and train. You cannot take the babies out much when they are young and a small car is fine.
With the new federal requirement, cars after 2016 should get better gas mileage. Something to consider.
I have to get a second car soon and will settle for outback 2014. Wish I could wait.

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BigD53
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Re: Can I afford this luxury car?

Post by BigD53 » Tue Jul 10, 2012 11:20 am

Save yourself the stress, frustration, expense, and heartaches. Don't have any kids!

Problem solved.

Now you can get yourself a new Corvette, and really have some fun! :D

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Re: Can I afford this luxury car?

Post by ThatGuy » Tue Jul 10, 2012 11:25 am

sscritic wrote:Do you have two kids? Once you do, your preconceived notions of whether you would drive a minivan may just go out the window (wide open going 70 mph). I know both my kids (both in their 30s) changed their tunes once the second kid arrived.
I think Americans tend to think they need more car than they really do. I recently made a 10 hour drive with ThatGal and ThatToddler in a subcompact hatchback... And then back afterwards :D

You only need a Soccer Mom-UV or Mommy-Van if you suck at packing.

Likewise, most pick-ups in my area get used as trucks about 2 days out of the year...
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Re: Can I afford this luxury car?

Post by livesoft » Tue Jul 10, 2012 11:29 am

Go Blue, you don't even have a 10-year old car now. Wait until one of your current cars is at least 10 years old, then come back and ask.

Tell us about the cars that your neighbors drive.

Oh, full disclosure: I drive a luxury SUV, have two kids, and the car is over 10 years old.
Last edited by livesoft on Tue Jul 10, 2012 11:32 am, edited 2 times in total.
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Re: The $345,000 car.

Post by Random Poster » Tue Jul 10, 2012 11:30 am

jenny345 wrote:
Taylor Larimore wrote:Go Blue:
I’m very intrigued with the idea of buying a luxury make that will cost $45k (looking at the new Infiniti JX or similar).
Let's look at Edmonds "True Cost to Own":

An Infinity M56 Sedan is priced at $44,433 and has a 5-year Cost to Own of $69,719.
A Toyota Corolla (my car) is priced at $18,314 and has a 5-year Cost to Own of $34,723.

The 5-year difference in cost is projected to be $34,996 or $6,999 a year.

Investing $6,999 a year for 20 years at 8% becomes $345,000.

Which would you rather have in 20 years: A flashy car or $345,000 more in your portfolio?

Best wishes.
Taylor
I would add to Taylor's post that $345K could fund 7 years of early retirement or simply 7 years of not having to work for a living, at a middle class lifestyle standard. Not buying the car would also mean not having to be in debt or worry about how you are going to make the payments if you lost your job.

Seven years is like 364 extra weeks of vacation living a middle class life. In twenty years you can either have spent your money on a depreciating asset now worth zero or look forward to 364 weeks of extra vacation. Your choice.
All true, but what if you die after the first week of your 364-week long vacation?

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Re: Can I afford this luxury car?

Post by livesoft » Tue Jul 10, 2012 11:34 am

Another thing: The day your (retirement) portfolio goes up by $45,000 in one day is the day that you can afford a $45,000 car.
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Re: Can I afford this luxury car?

Post by NorCalDad » Tue Jul 10, 2012 11:45 am

Go Blue, you can afford this car by most families' standards, but not by Boglehead standards. You have a large e-fund, but I'd like to see more than 15% go toward retirement if you have $2k/month to spare.

I agree with all the parents who say your kids will beat up your car. I also think you should wait until you have a kid to determine if this is something you need. And while the car itself is expensive, gas and insurance will also be more expensive than what you pay now.

At the very least, I'd say you should wait until you have a kid and use that 12-18 months to save up enough additional cash so you can avoid a car loan. If at that point you are still inclined to drop $45k on a new car, fine. But it might be harder for you to part with money you spent months saving.

Admittedly, I have a bias against spending much money on cars, and my wife and I are an anomaly since we still drive old beaters two years after having a kid. Most people I know ended up getting a new car once they had kids. It's almost become a rite of passage in America.

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Re: Can I afford this luxury car?

Post by sscritic » Tue Jul 10, 2012 11:55 am

livesoft wrote:Another thing: The day your (retirement) portfolio goes up by $45,000 in one day is the day that you can afford a $45,000 car.
Is that a RGD?

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Re: The $345,000 car.

Post by sscritic » Tue Jul 10, 2012 11:57 am

Taylor Larimore wrote: The 5-year difference in cost is projected to be $34,996 or $6,999 a year.

Investing $6,999 a year for 20 years at 8% becomes $345,000.
Five years is not twenty years. The difference is fifteen years.

NMK1
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Re: Can I afford this luxury car?

Post by NMK1 » Tue Jul 10, 2012 12:00 pm

I don't see the point in spending money on a new car and even less of a point in a "luxury" car. There are too many great cars and SUVs out there that spending the extra money doesn’t make sense unless the money is burning a hole in your pocket. As someone with a young child I can tell you that you have no idea how much they cost until you live though it.

I think you will regret it after 6 months when you have a 60 month/$20K loan. Why not look at a 3-4 year Toyota Highlander/4 Runner or a Subaru? Both great SUVs that are reliable and a little more practical. I prefer to spend just a little more and get a more reliable vehicle. You just have to find a happy medium, but I think most people are penny wise and pound foolish when they buy too old of a car.

You can probably pay cash for either of them and keep that ~$350/month loan you are looking to spend on the little one once it arrives or really anything else.
Last edited by NMK1 on Tue Jul 10, 2012 12:09 pm, edited 1 time in total.

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Re: Can I afford this luxury car?

Post by FrugalInvestor » Tue Jul 10, 2012 12:08 pm

As far as I'm concerned you can afford a luxury car when you can comfortably pay cash for it.

By the way, I too am an automobile enthusiast. I have owned a couple of 'luxury' vehicles and can assure you that dreaming about owning one is much more exciting than actually owning it, especially when you think about selling or trading it and the substantial depreciation is staring you in the face. Also, you'll find that operating/service costs are substantially higher. Premium car brands are marketed to those who are willing to spend more throughout the ownership cycle and the manufacturers/dealers make sure to take advantage of that fact. Insurance is likely to be higher as well.

When I owned a Lexus I saved a bundle by having it serviced at the Toyota dealer. The mechanicals of the vehicle were nearly identical to a Toyota yet dealer service prices were about double!

Save your money (literally) and enjoy the anticipation of someday owning a luxury vehicle when the money doesn't matter nearly as much. In the meantime, enjoy your young family which is what really matters.
IGNORE the noise! | Our life is frittered away by detail... simplify, simplify. - Henry David Thoreau

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Re: Can I afford this luxury car?

Post by Grt2bOutdoors » Tue Jul 10, 2012 12:11 pm

You can purchase a new $30K SUV/other vehicle that will be just as safe as your upscale vehicle choice.

Here are the Pro's of doing this:
1) When your child gets sick and blesses the vehicle (oh, yes, this has happened out of the blue in the new car) by throwing up, you can just think to yourself - "at least it wasn't a luxury car".

2) Your depreciation will be less.

3) You can take the $15K saved and open two new ROTH's for you and your wife, plus open a spanking brand-new 529 plan for your child. Undertaking these options, will reduce the likelihood of you posting in the future with a "Am I saving enough for retirement" or Will I be able to help my child with college expenses" posts. :wink:

3a) Plan on taking a loan? - Imagine if you paid cash and put the difference into that 529 plan? Your child will be ever so grateful! Doesn't hurt to win brownie points from the wife. :wink:

4) Usually, the lower the cost of the vehicle, the lower the cost of the maintainance. Just ask my relative who bought a new shiny Mercedes, only to find out the OEM brake pads set him back over $400 :oops: (just for brake pads, not rotors!).

5) Like pouring money into a tank and watching it burn up? Higher priced SUV's usually defined as "luxury" demand higher priced octane - watch the nickels disappear each time you put the pump nozzle into the tank. Let me know where you live region-wise, I may want to invest in the local integrated oil company to get some "free nickels". Same with the motor oil - "luxury" usually uses synthetic motor oil - the difference is usually about $3 a quart. $15 bucks more to the oil company, 1.2 shares less each of Total International Stock Index (30% off - last I looked).

6) Why pay 1.99% when you can buy an I-bond and collect 2.2% - it's like making an instant 4.2% and keeping the money in your pocket instead of someone elses - "no risk, too!".

Thanks for listening! No charge for the laughs. :moneybag
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
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Re: Can I afford this luxury car?

Post by Grt2bOutdoors » Tue Jul 10, 2012 12:14 pm

NMK1 wrote:I don't see the point in spending money on a new car and even less of a point in a "luxury" car. There are too many great cars and SUVs out there that spending the extra money doesn’t make sense unless the money is burning a hole in your pocket. As someone with a young child I can tell you that you have no idea how much they cost until you live though it.

I think you will regret it after 6 months when you have a 60 month/$20K loan. Why not look at a 3-4 year Toyota Highlander/4 Runner or a Subaru? Both great SUVs that are reliable and a little more practical. I prefer to spend just a little more and get a more reliable vehicle. You just have to find a happy medium, but I think most people are penny wise and pound foolish when they buy too old of a car.

You can probably pay cash for either of them and keep that ~$350/month loan you are looking to spend on the little one once it arrives or really anything else.

+1 on the Outback - if family size is 2 + 2 - after that, it starts to get tight in the back seat. Other than that, it's a great vehicle and can be yours for about 28K, if you skip the leather seats and stick with the important things like "all weather package" - if you are in the snow-belt and anti-glare mirrors for those who live in places with unconsiderate drivers.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Random Poster
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Re: The $345,000 car.

Post by Random Poster » Tue Jul 10, 2012 12:16 pm

jenny345 wrote:Or what if you die of a heart attack at 60 and never got to experience retirement? I am going to a funeral this week. Life can be shorter than we expect.
Well, that is my point.
jenny345 wrote:If putting your money into a status oriented, depreciating consumer item is more important to you than earlier financial independence, then the car would be the right choice for your personal values.
That's a pretty loaded and slanted statement.

The same point could have been made, and in a much more neutral way, by writing: "If putting your money into particular mode of transportation at a specified price point is more important to you than working slightly longer, then the car would be the right choice for your personal values."

But, to your comment specifically, I'm genuinely curious what doesn't count as a "consumer item" and, given a certain timeframe, isn't a "depreciating" one.

Grt2bOutdoors
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Re: Can I afford this luxury car?

Post by Grt2bOutdoors » Tue Jul 10, 2012 12:17 pm

livesoft wrote:Another thing: The day your (retirement) portfolio goes up by $45,000 in one day is the day that you can afford a $45,000 car.
The day that happens, I'm going to hang up the spurs. Right now, it's not happening.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

NMK1
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Re: Can I afford this luxury car?

Post by NMK1 » Tue Jul 10, 2012 12:25 pm

GRT2BOUTDOORS wrote:You can purchase a new $30K SUV/other vehicle that will be just as safe as your upscale vehicle choice.

Here are the Pro's of doing this:
1) When your child gets sick and blesses the vehicle (oh, yes, this has happened out of the blue in the new car) by throwing up, you can just think to yourself - "at least it wasn't a luxury car".

2) Your depreciation will be less.

3) You can take the $15K saved and open two new ROTH's for you and your wife, plus open a spanking brand-new 529 plan for your child. Undertaking these options, will reduce the likelihood of you posting in the future with a "Am I saving enough for retirement" or Will I be able to help my child with college expenses" posts. :wink:

3a) Plan on taking a loan? - Imagine if you paid cash and put the difference into that 529 plan? Your child will be ever so grateful! Doesn't hurt to win brownie points from the wife. :wink:

4) Usually, the lower the cost of the vehicle, the lower the cost of the maintainance. Just ask my relative who bought a new shiny Mercedes, only to find out the OEM brake pads set him back over $400 :oops: (just for brake pads, not rotors!).

5) Like pouring money into a tank and watching it burn up? Higher priced SUV's usually defined as "luxury" demand higher priced octane - watch the nickels disappear each time you put the pump nozzle into the tank. Let me know where you live region-wise, I may want to invest in the local integrated oil company to get some "free nickels". Same with the motor oil - "luxury" usually uses synthetic motor oil - the difference is usually about $3 a quart. $15 bucks more to the oil company, 1.2 shares less each of Total International Stock Index (30% off - last I looked).

6) Why pay 1.99% when you can buy an I-bond and collect 2.2% - it's like making an instant 4.2% and keeping the money in your pocket instead of someone elses - "no risk, too!".

Thanks for listening! No charge for the laughs. :moneybag
Good way to think about the situation using the 529 example. We would love an extra $350 to put in our 529 plan. You can buy a reliable used SUV or even a solid new SUV in cash that will suit your needs and fund JRs college at the same time with the difference from not buying luxury. Brownie Points with the Mrs. is just icing on the cake (unless of course she is insisting on luxury :oops: ).

Taylor's cost of ownership compared to investing in a retirement account should smack you square in the face.

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fuermcs
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Re: Can I afford this luxury car?

Post by fuermcs » Tue Jul 10, 2012 12:26 pm

Separate from the rest of the discussion, if you can get 1.99%, do the loan. I could have paid cash for my current car, but I got a 1.90% rate, so why? That's lesser than or equal to the rate of inflation. I'd rather get investment income. As a unintended side bonus, it looks nice on my credit history as I have no mortgage.

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Watty
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Re: Can I afford this luxury car?

Post by Watty » Tue Jul 10, 2012 12:27 pm

My wife and I..........If it helps, we do plan on running our current Toyota into the ground.
We would be you. Don't kid yourself.

Cars are a hobby for me- I subscribe to car magazines and read various car message boards.
I you want a hobby car then buy a $2,000 project car.

We have saved $20k as a car down payment, and should get $5k for the Mazda trade-in. We would finance the rest under a 48 or 60 month loan (hopefully through PenFed at 1.99%). We gross about $131k, and contribute 15% to retirement. Our emergency fund is at 12 months, and we also have another $10k saved for start-up baby expenses. After mortgage and all other expenses, we have about $2k leftover a month.
Out of that $2,000 you will also need to pay;

college savings

savings to pay cash buy a replacement car for whoever does not drive the SUV.

and about $600,000 for two kids according to this.

http://blogs.wsj.com/economics/2012/06/ ... g-college/


If you want to splurge now then I agree with trying to do some travel before you have kids, but the time for the fancy car is likely when the kids move out on their own. Young kids will trash a fancy car, older kids will want to drive it.

epilnk
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Re: Can I afford this luxury car?

Post by epilnk » Tue Jul 10, 2012 12:40 pm

Go Blue 99 wrote:Do you think I can safely afford this luxury vehicle? Or do you think I am going to regret it if I make the purchase?
Can I say yes to both questions? It's not an either/or.

I'm going to agree with the others who suggest you will most likely prefer a different vehicle once you start parenting. I've always hated the "just wait, you'll see" line of advice from experienced parents. But it is hard to explain the way parenthood shuffles the mental deck. So I do think it's better to wait for that event to occur unless you're at imminent risk of car failure.

And don't fall into the trap of believing that you need to have some ideal car to raise children - you don't need a minivan (though they are undeniably nice to have); a sedan, hatchback, or an SUV works just fine. A sedan will do just as well as an SUV, especially for the first child, so there's no need to buy something now in preparation. Even with two children, a good quality, lightweight double stroller that folds down small with one hand is a better investment than a larger car. When you're wrangling two toddlers, or an infant and a toddler, the ease of stroller handling is a much more significant impact on your quality of life than the size of the transport vehicle.

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Ranger
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Re: Can I afford this luxury car?

Post by Ranger » Tue Jul 10, 2012 12:43 pm

Have you researched JX?

Here is the NYT review
http://www.nytimes.com/2012/06/10/autom ... wanted=all

One of their money quote "I can’t recall a more off-putting, sleepwalking driving experience in a luxury crossover"

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JupiterJones
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Re: Can I afford this luxury car?

Post by JupiterJones » Tue Jul 10, 2012 12:48 pm

Go Blue 99 wrote: We would finance the rest under a 48 or 60 month loan

[...]

Do you think I can safely afford this luxury vehicle?
If you have to borrow money to buy it, then, by definition, you cannot afford it. (That is, if you could afford it, you wouldn't require someone to step in and loan you money in order to buy it.)

Your actual question is more like "Can I afford to buy part of this car? And can I also afford to make monthly payments over many years to the bank that owes the rest of the car, until I eventually owe all of it, barring any unforseen circumstances?"

The answer to which is probably yes, for what it's worth.

But personally, that set-up doesn't sound attractive to me at all, so I'd just wait and save up for a few years to pay cash if it were me. As a general rule, I don't borrow money for luxury items and "toys", and this qualifies as both.

I get that you're a "car person", but I wouldn't consider that a good enough excuse. I'm a "musical instrument person" and a "vacation person", and yet I save up and pay cash for those. Delayed gratification--one of the bummer parts about being an adult. Brother, I sympathize! :P

JJ
Stay on target...

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SurfCityBill
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Re: Can I afford this luxury car?

Post by SurfCityBill » Tue Jul 10, 2012 12:51 pm

Personally I'd buy a 2 year old certified Honda Pilot or similar. If you don't need silly bells and whistles like rear seat DVD players, wood grain dashboards, etc, you're just about there with the $20k "downpayment". Much better value in my opinion.

-B

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