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Figuring out a good car budget

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  • Figuring out a good car budget

    Hi everyone. I’m in the process of buying my first car and wanted to work out an appropriate budget.

    I read the blog post and understand I should get the cheapest reliable used car I can find but it also said to buy a car you plan to drive for 5-10 years. Personally, I love cars and dreamt of having a nice one since I was a kid and for that, I’m thinking of getting something nicer that I will genuinely like and want to keep for at least 5-10 years.

    Currently in my second year as an attending. Double income household with combined 320K per year income pre-tax. No children or house. I have 290k in med school loans, currently have 5 years left of PSLF program which I’m on. Lived very frugally and been saving for years and have enough to safely buy the car in cash up front. This will be my only car.

    Planning to buy 1-3 years old used or a dealer loaner to get some discount but used car prices seem close to new prices right now. Knowing that is 50k (tax and fees included) too high? Should I aim lower?

    Appreciate any advice.


  • #2
    Are you saving 20%+ of your income? Do you have an emergency fund? Do you have appropriate insurance?Do you have any debt other than the student loans for which you’re planning to get PSLF?

    50k isn’t outlandish. If you can pay cash, have your other ducks in a row and like that car, I’d go for it.

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    • #3
      How much car?

      One $50,000 new car would be worth $380,000 in missed returns in 30 years.

      So do you want your nice car now or $380,000 later?

      Comment


      • #4
        I was in a similar situation. Went for the car and haven’t regretted it at all. Life’s about balance. I was frugal in other areas, saved far more than 20% for retirement, and was debt free. No kids if that makes a difference.

        If you’ve got your savings rate in order and cars add happiness or value to your life, then 50k isn’t terrible. If you’re planning on an expensive house or vacations then I would look for a cheaper car. Just order your priorities.

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        • #5
          Originally posted by VentAlarm View Post
          Are you saving 20%+ of your income? Do you have an emergency fund? Do you have appropriate insurance?Do you have any debt other than the student loans for which you’re planning to get PSLF?

          50k isn’t outlandish. If you can pay cash, have your other ducks in a row and like that car, I’d go for it.
          Yes, saving about 40% right now, have an emergency fund that will remain untouched, no other debt, we’ve maximized retirement accounts and have car insurance and maintenance factored into the yearly budget.

          Comment


          • #6
            Originally posted by Random1 View Post
            How much car?

            One $50,000 new car would be worth $380,000 in missed returns in 30 years.

            So do you want your nice car now or $380,000 later?
            From what I’ve found even a standard Toyota or Honda from the years I’m looking at are 30-35k. So really, it’s probably 15k extra that I’m spending. And I know if I settle on the car I buy I will end up wanting trade or sell it and upgrade within 5 years anyways.
            I had hoped to hold off in the car a few more years and get something nicer down the line but I have to get a car to get around where I live right now. I wouldn’t buy a car at all if I didn’t need one. But since I have to get one, I would rather spend a few extra thousand on something nice. I don’t go on vacations or eat out much and generally save in other ways but this is one of those things that would actually mean a lot to me to have.

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            • #7
              Originally posted by Fugue View Post
              I was in a similar situation. Went for the car and haven’t regretted it at all. Life’s about balance. I was frugal in other areas, saved far more than 20% for retirement, and was debt free. No kids if that makes a difference.

              If you’ve got your savings rate in order and cars add happiness or value to your life, then 50k isn’t terrible. If you’re planning on an expensive house or vacations then I would look for a cheaper car. Just order your priorities.
              Thanks, that’s good advice. I don’t travel or take vacations, usually it’s staycations at home and fortunately we’ve been able to get our other savings in order up until now. Really looking for a good middle ground where I can get something that makes me happy but still be responsible.

              Comment


              • #8
                at your stage of the game i would spend far less money and invest the difference.
                remember that no one ever really takes a step back in cars
                it's not just about the 20-30k it's about the behavior.
                for reference i am 40, 10 years out, worth a lot, and my car now is the first car i've ever owned that was over $25k
                the longer you can delay this stuff the better you are.

                Comment


                • #9
                  Originally posted by MPMD View Post
                  at your stage of the game i would spend far less money and invest the difference.
                  remember that no one ever really takes a step back in cars
                  it's not just about the 20-30k it's about the behavior.
                  for reference i am 40, 10 years out, worth a lot, and my car now is the first car i've ever owned that was over $25k
                  the longer you can delay this stuff the better you are.
                  So would you say it’s better to get a 25k-30k car now. and a nicer 50-60k car in 5 years? Or get a 50k car and keep that for 10-12 years?

                  I held off a car until now but my living situation has me in a place where I need one to get to work and get around. And I have fortunately been able to put away money for investments, putting the maximum for retirement accounts, stocks and emergency funds.

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                  • #10
                    So would you say it’s better to get a 25k-30k car now. and a nicer 50-60k car in 5 years? Or get a 50k car and keep that for 10-12 years?

                    You can buy a 10k car now and drive it for a 100,000 miles and it will still be good in 10 years. The real decision is whether or not you want a "nicer" car now for more materialistic reasons. And there is nothing wrong with the purchase , if you can easily afford it. I think the idea that a nicer car will be better is an illusion. You may get better performance, more features, or may be more fun, but probably not more reliable

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                    • #11
                      I’m impressed you can even find a used car for $50k these days.

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                      • #12
                        Originally posted by MPMD View Post
                        at your stage of the game i would spend far less money and invest the difference.
                        remember that no one ever really takes a step back in cars
                        it's not just about the 20-30k it's about the behavior.
                        for reference i am 40, 10 years out, worth a lot, and my car now is the first car i've ever owned that was over $25k
                        the longer you can delay this stuff the better you are.
                        Seriously? He’s saving >40%.

                        Comment


                        • #13
                          I personally would buy a new mid range with the leather package. They are night and day nicer than old used cars and should scratch the car itch for awhile.

                          My experience is that people that buy fancy/expensive cars always want to upgrade them, way sooner than 10 years.

                          You can do it, but I personally would wait until your loans are done, and then use that as a present to buy something awesome.

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                          • #14
                            Originally posted by zeppelinpage4 View Post

                            Yes, saving about 40% right now, have an emergency fund that will remain untouched, no other debt, we’ve maximized retirement accounts and have car insurance and maintenance factored into the yearly budget.
                            I think by insurance the poster meant having life and disability squared away.

                            Comment


                            • #15
                              There is only one answer. Buy a Tesla:-)

                              You are on PSLF. You have EF. You save 40% of 320K. You have no kids. You rent. You hope to keep the cars for 10+ years.

                              Buy a nice new car and run it to the ground. I personally have not found much savings between an used 1-3 year old desirable cars ( Japanese) and new car.

                              Unless you find a <1% car loan, pay cash.

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