Feeling a little foolish and weird for spending $150k on a car
12-10-2017, 06:47 PM
#301
Three Wheelin'
12-12-2017, 11:27 AM
#302
Burning Brakes
My wife just bought an X5 BMW.....could have paid cash but could not turn down .9 not 9 but .9% loan rate. After 10 years I just got rid of my 997 with almost 100k miles. Iam in the process of buying a 991. I may be able to afford a new convertible but I have a hard time paying that kind of money when I can get a nearly new one with 20k miles on it for a lot less. I hate taking that depreciation and that is where I personally have a difficult time giving my money away.
Maybe if I had 10s of millions of dollars that I did not know how to spend....it would be another story. But for now, I am happy saving a ton of money on a great used car and save on the depreciation.
Funny...this is almost one of those questions about how many MPG does your car make.....if you have to ask maybe you should not be buying the RR or Lambo.
IMHO.
Abe
Maybe if I had 10s of millions of dollars that I did not know how to spend....it would be another story. But for now, I am happy saving a ton of money on a great used car and save on the depreciation.
Funny...this is almost one of those questions about how many MPG does your car make.....if you have to ask maybe you should not be buying the RR or Lambo.
IMHO.
Abe
12-12-2017, 11:40 AM
#303
Burning Brakes
I was going to brush off EMT1's blanket statement and murphyslaw1978's endorsement of the same, but on second thought, I believe it's an issue worth addressing.
Net worth is simply not a good metric for judging this sort of decision, and there are several different use cases that need to considered separately.
If you're buying a car to use, not a toy, it's an ongoing expense, like buying a house. Like buying a house, most people buying cars are buying something that's more than their cash on hand. Maybe not more than their net worth, taking into account things like house equity or 401(k) funds, but more than they their accessible net worth.
That's not intrinsically a foolish decision, any more than buying a house is. It's a matter of income and expenses. When I bought a used Honda Civic in 1988 for $4000, I didn't have $4000 in hand, but I did have enough income to meet the payments and save money at the same time. In the meantime I had a car for work and everyday tasks. It wasn't absolutely necessary, but it was definitely worth the monthly expense.
When I bought my Toyota Supra Turbo in 1998, that was less of a clear cut case. I didn't need that much car, but I was spending a couple of hours commuting every day, and the idea of having a really fun car to do it was appealing. I only had about $20k in savings, so again I had to take out a loan since the car was $38k, but I did have the income to cover the expense comfortably. The loan was 13% of our take-home pay, but our savings rate was still about 25% after the loan. "Foolish" would have been cutting the savings rate to zero, or going negative - which some people do.
Compared to that, the GTS I'm buying (next week, presumably) is a much smaller purchase - in terms of both cost vs. net worth and cost vs. income.
Once your income gets above a certain point, things change. You can, of course, let all your expenses balloon as your income rises, but you don't have to. We live pretty comfortably on about 25% of our take-home household income, including things like trips abroad every year or two. It really starts making more sense to talk about dollar amounts, because talking about percentages once you're past that point assumes you don't have your other expenses under control.
Net worth only really enters into it once you're depending on investments for income, rather than a salary. Which, admittedly, is where I am, at least partially. My wife is still drawing a salary, but 70% of our income is from investments. Actually rather much more than that this year, but I'm talking about a rough estimate based on my returns for the last 17 years.
Budgeting in retirement is tricky, since you have to take into account things like market downturns. Generally speaking, the Safe Withdrawal Rate is 4%, not the 9%-10% I usually average, because you need a buffer to survive an outright crash. It helps considerably in my case that my wife wants to continue in her job for a while, and that our normal expenses are less than her take-home salary.
Nor can you just look at the cost of the car, since that doesn't take into account how often you change cars, and the incremental expense for the change. My record in that department has been... not good recently, since this is my 2nd new car in 3 years. Incidentally, this ties into my intended topic for this thread, since I don't like reconciling that against what I considered "normal" until recently, which was keeping a car for 16 years.
How much does a GTS really cost? Not $150k unless you buy one every year and throw it away. My incremental cost this time is $80k, but my C4S wasn't a $156k MSRP car. First year depreciation will be something like $40k-$50k, and rather less the second year.
Right now, we can sustain that kind of outlay every year and still save money, but only because my wife is still bringing in a salary. Even though it's significantly less than our investment income, it's a much more stable source of income.
It would be a big, big chunk of our discretionary spending, but that fact alone wouldn't make it foolish. That's the thing about discretionary spending: it's discretionary. If you want to spend money from income on toys, that's your decision. It's when you start dipping into savings rather than spending income that it's a problem.
There's just no smart rule you can make about "percentage of liquid net worth on a toy" in retirement, because you have to specify a lot of clarifying conditions. Keeping a car for 16 years is a lot less expensive than keeping one for 5 years or (mea culpa) 18 months.
Net worth is simply not a good metric for judging this sort of decision, and there are several different use cases that need to considered separately.
If you're buying a car to use, not a toy, it's an ongoing expense, like buying a house. Like buying a house, most people buying cars are buying something that's more than their cash on hand. Maybe not more than their net worth, taking into account things like house equity or 401(k) funds, but more than they their accessible net worth.
That's not intrinsically a foolish decision, any more than buying a house is. It's a matter of income and expenses. When I bought a used Honda Civic in 1988 for $4000, I didn't have $4000 in hand, but I did have enough income to meet the payments and save money at the same time. In the meantime I had a car for work and everyday tasks. It wasn't absolutely necessary, but it was definitely worth the monthly expense.
When I bought my Toyota Supra Turbo in 1998, that was less of a clear cut case. I didn't need that much car, but I was spending a couple of hours commuting every day, and the idea of having a really fun car to do it was appealing. I only had about $20k in savings, so again I had to take out a loan since the car was $38k, but I did have the income to cover the expense comfortably. The loan was 13% of our take-home pay, but our savings rate was still about 25% after the loan. "Foolish" would have been cutting the savings rate to zero, or going negative - which some people do.
Compared to that, the GTS I'm buying (next week, presumably) is a much smaller purchase - in terms of both cost vs. net worth and cost vs. income.
Once your income gets above a certain point, things change. You can, of course, let all your expenses balloon as your income rises, but you don't have to. We live pretty comfortably on about 25% of our take-home household income, including things like trips abroad every year or two. It really starts making more sense to talk about dollar amounts, because talking about percentages once you're past that point assumes you don't have your other expenses under control.
Net worth only really enters into it once you're depending on investments for income, rather than a salary. Which, admittedly, is where I am, at least partially. My wife is still drawing a salary, but 70% of our income is from investments. Actually rather much more than that this year, but I'm talking about a rough estimate based on my returns for the last 17 years.
Budgeting in retirement is tricky, since you have to take into account things like market downturns. Generally speaking, the Safe Withdrawal Rate is 4%, not the 9%-10% I usually average, because you need a buffer to survive an outright crash. It helps considerably in my case that my wife wants to continue in her job for a while, and that our normal expenses are less than her take-home salary.
Nor can you just look at the cost of the car, since that doesn't take into account how often you change cars, and the incremental expense for the change. My record in that department has been... not good recently, since this is my 2nd new car in 3 years. Incidentally, this ties into my intended topic for this thread, since I don't like reconciling that against what I considered "normal" until recently, which was keeping a car for 16 years.
How much does a GTS really cost? Not $150k unless you buy one every year and throw it away. My incremental cost this time is $80k, but my C4S wasn't a $156k MSRP car. First year depreciation will be something like $40k-$50k, and rather less the second year.
Right now, we can sustain that kind of outlay every year and still save money, but only because my wife is still bringing in a salary. Even though it's significantly less than our investment income, it's a much more stable source of income.
It would be a big, big chunk of our discretionary spending, but that fact alone wouldn't make it foolish. That's the thing about discretionary spending: it's discretionary. If you want to spend money from income on toys, that's your decision. It's when you start dipping into savings rather than spending income that it's a problem.
There's just no smart rule you can make about "percentage of liquid net worth on a toy" in retirement, because you have to specify a lot of clarifying conditions. Keeping a car for 16 years is a lot less expensive than keeping one for 5 years or (mea culpa) 18 months.
12-12-2017, 08:29 PM
#305
Nordschleife Master
when your book it out - i will buy it!
YES!
I find this advice completely without basis. My retirement salary was infinitely less than $210k. Yet, I have purchased six Porsches new since 1974. I even paid cash for the last four. I also have an estate that is worth far more than most of my fellow college professors. That is because I invested wisely, owned wisely,sold wisely and purchased wisely. I also performed wisely in my discipline. I tried to time my purchases of Porsches wisely. My only misstep was the1995 993 that I picked up in Stuttgart and owned for 18 years and reluctantly sold for a new 991 in 2013 . I have owned new Porsches for as little as 15 or 24 months. My mantra has always been: IF I CANNOT AFFORD TO PAY CASH FOR IT, DO NOT BUY IT. At this date this is serving us well. My family will be left well and I have negotiated for my undergraduate institution to receive about $2M when I step off the curb.The bottom line is that I have accomplished my goals: my family is well taken care of, I have left a significant amount to an academic institution that made me successful and I have owned several Porsches and traveled the world and I have contributed to society. What more can you ask of your life?
12-12-2017, 09:09 PM
#307
12-12-2017, 09:32 PM
#309
12-14-2017, 04:20 PM
#312
The car looks fantastic, congrats.
12-14-2017, 04:22 PM
#313
Beautiful 
Congrats! Have fun!
Congrats! Have fun!
12-14-2017, 05:18 PM
#315
Rennlist Member
Curious - now how do you feel Gus?
BTW, I’m starting to wonder if this body style isn’t one of the best looking 911s to date?
BTW, I’m starting to wonder if this body style isn’t one of the best looking 911s to date?