How much do I have to make to afford my dream car?

[eddified]

The car in question is around 65-75k, lets assume a payment of 1300 for 60Mo and 200 for insurance, 1500 total.

Car in question: CTS-V 16-19’ under 10k miles, (retains value phenomenally)

How much money would I have to make to afford responsibly? I’ve seen sources say cars shouldn’t exceed 10-15% of your monthly income, or no more than 35% of your annual pretax income.

By those numbers I should at least be making 200k a year. But what they don’t account is expenses, because one might make 200k but is living paycheck to paycheck. So how much money after paying bills should one have to afford this?

Right now Im saving 5k monthly after expenses.

House, 1500 mortgage.

Income, 8000 after tax.

Net worth, not including house ~ 100kish

HYSA, 50k @ 4.5%

No kids, 25(m), LCOL

 

[jenny404]

@eddified

By those numbers I should at least be making 200k a year.

Then you best start saving up money to put a hefty down payment.

 

[meeksoul]

@eddified

Right now Im saving 5k monthly after expenses.

Just save up for a year and pay cash.

 

[eddified]

@meeksoul When you put it that way, I don’t think this car is worth 1 year of my time. I’d be much more comfortable if I can buy it with at least 6 months.

 

[fitz]

@eddified Upvoting your honestly, that certainly means it’s not really your dream car.

 

[maryatheseeker]

@eddified I think you just answered your question AND showed how deceiving any kind of payment plan is. Kudos to you.

 

[ktb]

@maryatheseeker Haha, yes. If you wouldn't save for a single year but think it's a good idea to do a five year payment plan, that's crazy.

 

[obediahyahu1]

@eddified You look at money the right way, most people will take a loan, pay even more than that, and not understand the real amount of money they pay

 

[christianaspie8701]

@eddified This is the answer right here.

 

[thecross3]

@eddified Start saving up to buy it outright. Figure out the biggest payment you can afford to make and start paying that to yourself.

 

[adb5577]

@thecross3 That’s what we kind of did. By the time we were ready to buy a car we had half the cost in cash for a brand new vehicle. And then we already had a payment built into our budget from saving monthly for the car anyway. Made the transition a lot less painful.

 

[tiei]

@eddified Well looks like you can buy the car in 13-15 months. 65k/5k=13.

My guess is that if you had 65-75k in a HYSA you would not want to blow it on a car. But that would be a more fun decision, than can I afford 5 years of an extra rent payment in a MCOL city.

 

[minhphat]

@eddified I am saving for a 90k car, I want to put at a minimum 50k down and I can pay the rest off in about 5 months with strict budgeting. I am a car guy as well and I spent the last 4 years in a Honda accord and my life has been so boring without my hobby, but this time ima do it responsibly and put down a huge down payment and pay it off as quick as I can.

 

[mrseme]

@minhphat Once obligations are met and retirement is being/is funded...why not spend some money on fun. I'd rather have my cars than a European vacation, RV, or whatever else people spend their play money on.

If you can afford it, enjoy it!

 

[thristyy]

@eddified The reality is that, by any sane accounting, buying a luxury car is always a bad financial decision.

You're really asking how much of your money you can responsibly light on fire. The answer is that it's never responsible to light money on fire, but how irresponsible it is is proportional to how much money that amount is to you. It's okay to be a little irresponsible to have fun sometimes, as long as you're realistic about how much it is harming you (which it is).

I would go to true cost to own for both the car you're imagining getting and the most practical car that meets your needs, and take the difference between the two. Then I would, quite seriously, imagine putting that amount of money into a pile and lighting it on fire.

If that number is a small enough amount of money to you that you would not be that uncomfortable standing there watching it burn, because that amount does not materially affect your life, then it's probably a reasonable budget for additional spending on a fun car.

Personally, for me as a person who loves cars and grew up around them, I wouldn't feel comfortable with that being more than a single digit percentage of my net worth. I probably wouldn't feel comfortable burning that amount of money unless I had ~$1m in investments. If I was just out of school and was HENRY, probably at $300k income I would feel okay-ish lighting that amount of money on fire.

The math changes significantly if it's a car likely to maintain it's value and with low maintenance costs vs bad on those fronts (low true cost to own). A $70k flood salvage bentley bentayga is obviously an incomparably worse financial decision than a $70k clean lotus exige cup r.

 

[longing4truth]

@thristyy I’m with you. I bought my first $50k (used) car when I retired at 56. I had a NW in the multi-millions at the time.

I never missed out on anything when driving reasonable used cars. I never chased the “Joneses” however, and I never tried to impress the guy (or gal) next to me at the stoplight either.

I remember the itch to ‘show off’ when I was in my late teens and early 20’s. Thankfully, I married in my mid twenties and my money was needed to fund our life. There was no money left for fancy cars - or even the dream of them. Life needed funding.

So, investing for my future won out and I was able to retire early. Buying reasonably used cars is a main driver in that outcome.

 

[theqom]

@longing4truth Some of us are too smart to get married and can afford that car at a younger age

 

[longing4truth]

@theqom

 

[strugglewithin9]

@thristyy Incredible comment. Saving for later

 

[crazythat]

@eddified You can but I don’t think you should. What do your retirement savings look like? You should 100% be maxing those out before buying what is essentially a toy equal to over half your net worth. I think when it comes to any luxury vehicle, you should only buy it if you can afford to take that cash and burn it in the backyard rn. Delay gratification, remember the goal is to be rich and not look rich