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Would you? Making $400k/yr and buying a $200k car

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  • Would you? Making $400k/yr and buying a $200k car

    Curious to see what you all would say to this doc.

    I saw a post on reddit where he/she makes about 30-35k/mo pretax and is asking advice on if he can afford to finance a $200k car (a Porsche 911 Turbo S: https://www.porsche.com/usa/models/9...s/911-turbo-s/)

    The majority of the response is yes. If you take in 35k/mo, what's a 2-3k car payment??

    Curious to see what fellow WCIer would say to this fellow:

    Hello everyone. Looking for advice on if it would be fiscally practical to purchase a new/gently used 911 Turbo S. Or perhaps another similarly classed car. Only requirement is that it is an appropriate daily driver. Doesn’t need to seat more than 2, but having the option is nice.
    I’m a physician, early 30s, single, and do not own a home (waiting out the housing craze at the moment). I have about 50k in student loans under 0% pause, otherwise ready to refi around 3%.
    Pretax earnings is about 30k-35k/month before monthly expenses.
    Current driver is an M240i. Looking to upgrade to a new daily.
    SOURCE: https://old.reddit.com/r/whatcarshou..._s_or_similar/

  • #2
    Can they afford it? Yes. Fiscally practical? Hardly. It would be a terrible idea at this stage of their financial life.

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    • #3
      No, even though the “math works.”

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      • #4
        I mean I did something similar right out of training, but not as pricey, and I didn't regret it at all.

        Also, if the car is the only large expense he will have and he is a car fanatic, then yea he can afford it. He said he has 18k/month discretionary income.

        Putting 18k/month into VTI vs putting 15k/month into VTI but having a sports car that makes you happy and can enjoy at a young age seems like a no brainer tbh.

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        • #5
          Originally posted by xraygoggles View Post
          I mean I did something similar right out of training, but not as pricey, and I didn't regret it at all.

          Also, if the car is the only large expense he will have and he is a car fanatic, then yea he can afford it. He said he has 18k/month discretionary income.

          Putting 18k/month into VTI vs putting 15k/month into VTI but having a sports car that makes you happy and can enjoy at a young age seems like a no brainer tbh.
          That’s if they’re investing that money. I feel like they aren’t since they call it disposable income and don’t say they’re investing it. I bet they probably have a lot of ‘stuff’. I’m not saying they can’t get themselves into good financial shape but buying a $200k that early into their career on a $400k isn’t what I would consider a common move for a financially successful physician. They also don’t mention what they have saved for retirement.

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          • #6
            he/she lol

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            • #7
              Do these cars lose a lot of value over time? I have no idea obviously with my 08 corolla and all but I'm guessing they could resell it down the road if need be? I'd be curious how much they are saving overall. We spend 50k/ yr on a nanny so I understand on spending on not necessary things that you still value ( that others may not).

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              • #8
                I haven’t been on bogleheads in a while, but I do remember whenever questions about cars came up, Taylor would always do the math of $X invested over 30 years or so would make you millions of dollars, clearly showing that it was a waste of money to buy expensive cars. Obviously it’s not that clear cut, but I can’t fathom spending $200k on a car.

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                • #9
                  IPS done? Goals set and markers met?

                  Spend extra on whatever you want. To each their own. Fancy car, fancy boat, lux vacation; 2nd home, private schooling, personal chef, spacex ride ---

                  Key are appropriate retirement plans made and met. Rest -- carpe diem.

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                  • #10
                    Originally posted by wideopenspaces View Post
                    Do these cars lose a lot of value over time? I have no idea obviously with my 08 corolla and all but I'm guessing they could resell it down the road if need be? I'd be curious how much they are saving overall. We spend 50k/ yr on a nanny so I understand on spending on not necessary things that you still value ( that others may not).
                    The higher end Porches do tend to hold some value. When looking it up, it appears to hold value as of now but now isn't exactly representative of history.

                    But I'm another vote for save 20% and spend the rest on whatever you want. People can't imagine spending $200k on a car, others can't imagine spending $50k on a vacation, working for 30 years, $2M+ on housing, heck the ongoing costs of having a kid.

                    But yes, the large cost of the car early in the career will be significant later towards retirement. $200k up front at 7% interest over 20/30 years is $774k/1.5M.

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                    • #11
                      i don't think it's helpful to look at things like this with the mindset of "well if he's a car guy then maybe it's worth it."

                      if you make 400k and you want a 200k car then your hobbies/interests are too expensive, full stop.

                      a fun purchase of 10% of what he thinking of spending is still quite a bit when you are young and still have debt.

                      this is a bad idea.

                      also i would worry that the kind person who feels entitled to a $200k car in their 30s might not have the mindset that's going to be required to undo the damage later in life.

                      30s: i want this 200k car, yolo
                      70s: why am i still working? i'm so tired, i hate this.

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                      • #12
                        Gross-taxes-20% retirement =spending
                        Sure he/she can afford it currently. The question is dropping 50% of gross in a car (cash or loan simply spreads cash flow) is that going to provide value to the buyer? I doubt it even after three years. Save for 3 years and see if he/she still wants to drop the cash on a car. My guess is a house, partner or kid or something else will be more important. My suggestion would be a 3 year lease with a purchase option. Expensive, but exit options for making a “mistake”. This one impo is a big one. But, it’s a choice of the best of poor options. Poor choice allocating income, but limit the damage.
                        It will be more than $2-$3k per month.

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                        • #13
                          I think he can pretty clearly make the payments work, but I think the post gives us a glimpse into what most of society outside of our little WCI bubble here believe. Years ago while I was still in training, I mentioned to my wife the idea of saving extra towards retirement and possibly retiring early. She was dumbfounded and had never even considered it a possibility, a bit of an "Aha!" moment for her. I suspect OP is of this mindset, and working until his 60's is the only consideration. The replies in the thread reaffirm that we are certainly in the minority in our financial mindset

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                          • #14
                            I see a familiar name over on that Reddit thread trying to spout off common sense and a level-headed approach. Nysoz , don't you know that Reddit is no place for that kind of talk?

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                            • #15
                              Last Sunday I took my daughter and wife for a Mother’s Day brunch. After, dd insisted on a few “open house” visits.
                              On Tuesday about 7am I received my “assignment”. Run the numbers on a property we had seen. This would be a $1m mortgage!
                              A single female with a dog does not need a 4br townhouse no matter the neighborhood or curb appeal.
                              Behavioral finance and human behavior on wants are polar opposites. Thank goodness they had accepted an offer minutes before we arrived for our “powwow”. That was close.
                              No sense of macro timing was saved by no sense about micro timing.
                              What caused the delay was a rough estimate of the cost of putting in a cocktail pool!

                              Peer pressure and everyone is doing it seems to be the emotional driver. “Just say no” is ineffective. At least she has accepted the 20% retirement and mortgage rules of thumb.
                              Thank you WCI community for that.

                              I actually feel sorry for this generation. Some painful financial lessons are ahead. They can probably afford them but will pay a high tuition.

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