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Honestly I feel like if this question is being asked here a car like that shouldn't be getting purchased. A person that can truly afford a depreciating asset like that should have so much extra $ they don't really need to even think twice about the purchase.
I'm a firm believer that your assets should pay for your liabilities. You should have your retirement plan in place and be meeting it, the extra $ you have that you invest should be what covers liabilities. So if you want a car that is going to cost you $12,000 a year you should have enough investments OUTSIDE of retirement, that average $12,000 in gains a year to cover that liability.
But I want to be rich and retire early, so my school of thinking is not for everyone.
I think net worth should be the PRIMARY stipulation for affordability. What else should it be?
Am I missing something here?
It is really pretty simple -- a CAR is always going to suck money out of you! The question is how much of that "suck" has the potential to mess-up the rest of your life.
Edge case, let's say the OP has no job, no real ongoing income from a passive source, and is young enough to need whatever "wealth" they have now to last till they die. The $50k they'd blow on this car might not be seem like a big deal if they have a few million in net worth, but if their current cost of living is well under $50k they are effectively MORE THAN DOUBLING their negative cash flow for this year. Performance cars are also well know for going through more gas (it'll be premium) than run-of-mill cars, wear out tires faster, have high insurance, even need more frequent maintenance (that even if the dealer covers it, STILL takes time out of the OP's life...)...
If the OP wants to play the "$50k over five years equals $10k a year" game that autodealers also try to use to get naive dolts to overspend, they are welcome to fall into that trap, but the fact is getting a used car that is probably 1/5 the price so their CASH FLOW is similarly reduced dramatically, if they NEED a car... Used 2012 Honda Civic Coupe Pricing & Features | Edmunds
If the OP decides "but I want this EXPERIENCE" I would argue that the $8k difference would likely be better spent on TRAVEL of other 'pure entertainment" that is not going to be a continual drain with the ongoing expenses detailed above...
If the OP is the kind of person that has ZERO debt, religiously maxes out their 401K, has built-up a SOLID cushion of a year's income in a completely liquid emergency savings fund, has the CASH to buy this car without going into debt, and STILL has growing income to put MORE into savings every year THAT is how they should evaluate their desire to "treat themselves" to this car that might turn out to be a costly lesson ...
Completely agree. OP, this is the advice you need^^
If I had zero debt and my retirement plan was ahead of schedule I'd be willing to spend about 10% of whatever money I have left over each month on a car I suppose. So after all my bills, expenses, retirement investments are behind me if I still have $4,000 left over I'd be willing to put $400 of that toward a nice car. Then the remaining $ would go toward additional investments so I can get to the point where my money is working for me and I can retire early.
To each their own.. The only true way to know if you can afford something is by building a budget and seeing what would happen if you added that item. Some people may be willing to put the minimum toward retirement, the maximum toward their car, and have nothing left over. I like putting the maximum toward retirement, minimum toward my car, and still have plenty left over.
It is really pretty simple -- a CAR is always going to suck money out of you! The question is how much of that "suck" has the potential to mess-up the rest of your life.
Edge case, let's say the OP has no job, no real ongoing income from a passive source, and is young enough to need whatever "wealth" they have now to last till they die. The $50k they'd blow on this car might not be seem like a big deal if they have a few million in net worth, but if their current cost of living is well under $50k they are effectively MORE THAN DOUBLING their negative cash flow for this year. Performance cars are also well know for going through more gas (it'll be premium) than run-of-mill cars, wear out tires faster, have high insurance, even need more frequent maintenance (that even if the dealer covers it, STILL takes time out of the OP's life...)...
If the OP wants to play the "$50k over five years equals $10k a year" game that autodealers also try to use to get naive dolts to overspend, they are welcome to fall into that trap, but the fact is getting a used car that is probably 1/5 the price so their CASH FLOW is similarly reduced dramatically, if they NEED a car... Used 2012 Honda Civic Coupe Pricing & Features | Edmunds
If the OP decides "but I want this EXPERIENCE" I would argue that the $8k difference would likely be better spent on TRAVEL of other 'pure entertainment" that is not going to be a continual drain with the ongoing expenses detailed above...
Yep, me too and that is a very logical way of looking at it but not how most people who buy flash cars operate.
Wow!
All High net worth individuals like in their tiny shacks, count their money before going to sleep.
And take the bus to work everyday.
Car and home are two capital expenses that you consume everyday. Feeling good about those things? There is no shame in that.
One of the traits of rich people is not putting resources into any asset that loses money. All of the truly rich people I know drive older Chevy's, and pickup trucks. Another trait of rich people is to not attract attention by wearing expensive watches or jewelry.
Lets look at this way. If you bought it and you went racing tomorrow and totaled it on the track and the insurance wouldn't cover it. Would it matter? I mean you would be heartbroken for a while but would it affect your future negatively?
"Yes it would hurt me"...pass and maybe buy a used M3
"No it wouldn't affect my financial future"...write the check and have fun.
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Cash flow!!!!
