Can I buy this car?

[legobikes]

I'm just going to put the numbers up first:

Peds, late 30s, 5 years out of residency, married, two kids.
Income ~210k (I was at 250k FT then I decided to go to 0.8FT starting last month but also 4% yearly increase)
Save the maximum 39k yearly pretax, 60k yearly posttax (but I want to raid savings for the subject of this post)


Loans:
Student loans -380k (PSLF in ~5 years)
House worth ~440k, owe 260k just did a no-cost refinance @2.25%


Savings:
140k in pretax
75k IRA
13k posttax invested
72k cash



Alright. I want to buy a car. We have a 2013 Highlander bought used 4 years ago for 20k as a kid-hauler, that's mom's car. I drive a 2002 Lexus LX470 with 230k miles, which guzzles gas at the rate of 13 mpg. I bought this SUV 1.5 years ago for 6.5k, to replace a 2005 Accord that was totalled and for which I received 5.5k. I love it. Huge windows, kids in the backseat can see everything on the road. Great ride. I specifically bought it as a beater, and even though it'll always be reasonably reliable because it is built to last 25 years with basic maintenance, I just feel bad moving 5500 lbs of truck, even if I don't drive a lot (about 7,000 miles per year).

So the main reason I want a new car is mpg, yet the car I've ended up wanting... doesn't have the greatest mpg.

I started off intending to spend 15k for a used Accord or an Acura wagon, had a hard time finding the wagon and kept coming back to the fact that Honda's cars are always noisy. Then I wanted to spend 10k for a 2003-2006 Lexus. Now I want the newer version of the same car, a 2012 Lexus LS with 80k miles. I've wanted this car for a long time, not because I'm way into cars, but because it's known for being ultra-quiet. It helps that it's reliable, has the best stock sound system in any car ever, and it has some zoom. Also, no infotainment. Those are the checkboxes.

It's rated 18/24 mpg, and it's gonna cost me 23k OTD on Carmax. I'm probably going to spend another 2k for the extended warranty, which I never do, because there's a couple of very expensive things that can go wrong on these cars. OTHER than that it's dead reliable with a top 10 rating on dashboard-light.com. Actually I've already ordered it, but I'm having second thoughts which is typical for me with any big purchase. My wife says go for it, since it's good to have a reliable low-mileage car (and she likes that it doesn't look like the old-man-car that I was thinking about buying). I figure 25k is not that far off from the 15-18k I'd spend on an Accord. I know for many of you this is chump change, but given my finances, I need some outside perspective. Also I thought this was a good time to take stock of our financial situation since I ignore it the rest of the time.

I plan on keeping the SUV but it will get a lot less use and if I need to I can always sell it for at least 6k. I haven't priced the insurance on having three cars yet but whatever it ends up being, I don't think it will be significant enough to move the needle one way or the other.

[Tim]

No “need” for three cars
No “need” for an update.
Looks like you have raided the post tax before.
No contingency fund for PSLF.
Went part time.
Rationalize however you wish. You tell me. Do you think there might be a pattern here?

Spending on “wants” raiding “savings” when you “like” the existing vehicle and it fits your needs?
Old man car and gas mileage for $27k because you want the warranty?
You can do it if you want. Certainly don’t need to and probably just spending because it’s available.
You say you are saving $100k per year on $250k comp (now $210)? The assets don’t show that and doubtful going forward. Numbers aren’t making sense.

[JBME]

I agree with Tim-you're behind on your savings. You kept the house very reasonable but the savings amounts you listed as 5-years post residency are pretty low. Why do you have a balance in your IRA? can't you move that over to your 401k?

[Random1]

You have $640,000 worth of debt , I would not buy anything unless you need it. If the old car works, you don’t need it. If you want a Lexus , but cant afford it , buy a Toyota it is like the same thing. If you are worried about the noise, buy a $1 pair of ear plugs

[WorkingToFish]

My vote is no - if your initial goal was to get a car with better gas mileage, why would you get a car with only 18/24mpg? My parents' Chevy suburban, albeit a newer model, does better than that. Get a used mid-sized SUV. We have a Mazda CX-5 that gets over 30mpg easily.

Even better, keep the current LX470 - the body styles on these cars is timeless. I have always thought they are very sharp. Does it make you feel better that someone else is going to be using it to guzzle gas if you sell it? Because unless you decide to scrap it altogether, it's still going to be putting emissions into the world one way or another, whether you are driving it or someone else. The argument for the price to fill it up also falls apart I would imagine, if you did the calculations over the next 10+ years compared to paying 25k+ for a new car with marginally better gas economy.

Also, how old are your kids? Your back will not appreciate going from putting your two car-seat riding kids in an elevated SUV compared to a much lower sedan. My wife drives the CX-5 and it's a breeze putting the kids in their carseats. My 2006 Acura TL sedan, on the other hand, is a PITA compared to hers. Disregard if your kids are older.

[Lordosis]

You said 60k post tax but what did you invest that money into? You only listed 13k saved. Did you miss a zero? Or add an extra?

[CordMcNally]

You can afford it but I agree on being behind on retirement savings. Did you just start being able to save $60k post tax this year? I'm also a little confused on the reasoning. You say:

I specifically bought it as a beater, and even though it'll always be reasonably reliable because it is built to last 25 years with basic maintenance, I just feel bad moving 5500 lbs of truck, even if I don't drive a lot.

But then you want to get a newer and different vehicle even though you say you don't drive much. It's ok to just say you want a different vehicle.

[Nysoz]

I'm going to agree and disagree with others. Your savings should be higher with what you're saying, but overall kinda on track.

5 years out you're saving the recommended 20% towards retirement. Hopefully maxing 401k and (hopefully backdoor roth) IRA.

You say you're also saving 60k post tax yearly. Your cash/invested numbers don't support this, also pretty hard to do on a 210k salary with kids.

You definitely don't need 3 cars and it sounds like your driving situation doesn't really require an upgrade. The kinda red herring in your post is big student loans but planning on PSLF. If PSLF goes through it improves your financial situation greatly, but until then it's hanging over your head. Also, is there a huge difference between a lexus and a toyota of the same trim level? Briefly looking you can save around $10k for the same year, or even get newer by 4 years and still save $5k or so.

But if you're dead set on getting this car, you can 'afford' it but it will set any financial plans back a bit. Also consider waiting until PSLF goes through before getting a 'luxury purchase' car you want that you don't really need.

[Peds]

It's rated 18/24 mpg, and it's gonna cost me 23k OTD on Carmax. I'm probably going to spend another 2k for the extended warranty [...] Actually I've already ordered it, but I'm having second thoughts which is typical for me with any big purchase.

i mean, still terrible environmental wise if that was your primary motivation.

and you already did it so.....carry on.

[fatlittlepig]

Ur bankrupt, went part time, bought 2 cars in past 5 yrs and want to buy another?

[Kamban]

No.

Unless this Lexus is giving trouble, why are you making it a 3rd car. It will sit there unused and you will still pay taxes, insurance and other DMV fees on it.

There is hardly any environmental savings between 13 mpg and 18 mpg vehicle that is only driven 7000 miles each year.

As others have pointed out, your income is at the lower end for physicians, you went 0.8 FTE and your savings total don't jell with what you say you put in each year. Until you get the PSLF done with and shore up that savings, another used new car is really not needed.

[jbmitt]

I presume you’ve paid CarMax the fee to move the car from a different location but can still back out on the actual purchase?

You can afford the car, but everything in life is about trade offs. As a reference, my wife is also 5 years out of training (admittedly a slightly better but not significantly better paying specialty), her loans are down to $75k from $220k, our total savings/retirement/cash is 3x yours, our home equity is 40k less and I haven’t worked in nearly 3 years.

I’d encourage you to consider delayed gratification. It can be hard, but it’s also way too easy to get caught up in the cycle for new iPhones, cars, fancy vacations.

I disagree with the idea of buying a car for better gas mileage or to improve your footprint. The extra money in gas is negligible compared to a completely additional car.

[wawot1]

If a significant part of your motivation for wanting a car with better mpg is the carbon footprint rather than the actual cost of the gasoline you're buying- worth pointing out that a huge part of a car's carbon footprint is it's manufacture. Pulling the ore out of the ground to make the iron to make the steel, manufacturing the plastic, shipping the parts around the world to the factory, etc.

If that's a big part of your motivation, almost always the better environmental move to squeeze more years out of an older car with worse gas mileage than to buy a more efficient but newly manufactured car.

[Hank]

If a significant part of your motivation for wanting a car with better mpg is the carbon footprint rather than the actual cost of the gasoline you're buying- worth pointing out that a huge part of a car's carbon footprint is it's manufacture. Pulling the ore out of the ground to make the iron to make the steel, manufacturing the plastic, shipping the parts around the world to the factory, etc.

If that's a big part of your motivation, almost always the better environmental move to squeeze more years out of an older car with worse gas mileage than to buy a more efficient but newly manufactured car.

But Cash for Clunkers?

[wawot1]

But Cash for Clunkers?

But thinking about all of the cars that exist in the world.... SOMEONE is buying a new car and selling the old one that you are now buying on the used lot/craigslist/whatever. When you buy a used car, the previous owner is buying a new ride. So, yes, I still think buying a "new" used car, let alone a 3rd car, even if it is used and has better gas mileage, is not helping the carbon footprint