No Lambo for Get-Rich-Slow Folks?

[PEERless]

At what point are you so rich that you should (not can) buy a six-figure car?

We all know that slow-lane millionaires don't drive Lambos, but should fast-laners? Not just cars, but any extravagance or luxury. It seems like a measure of frugality will protect our wealth when all our wells have dried up. Aren't there better places to use that capital?

I'm not insulting the people who own Lamborghinis. I'd practically slit throats to have one or two, but I'm genuinely interested in discovering the threshold at which I should say, "There's no better way to use this money."
:fastlane:

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[AndrewG]

I'd slit throats to have one or two, but I.....

A little extreme?

 

[Analyzer]

It not just slowlane millionaires that drive old cars. Buffett and that guy that created IKEA are both know for driving old cars.

I guess it depends on what is important for you. Both those guys would probably never be able to spend all their money no matter how hard they tried, they don't get the cars because they wouldn't enjoy them.

 

[TheGreatBear]

On slitting throats:
I assure you, butchers are slow-lane... unless you're selling sturgeon caviar maybe.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[MJ DeMarco]

At what point are you so rich that you should (not can) buy a six-figure car?

You shouldn't do anything that you don't want to do. Some people have a *thing* for cars, some have it for wine or car audio equipment, others have it for watches. Im sure Buffet has a practical view of autos which is why an old Crown Vic works.

We all know that slow-lane millionaires don't drive Lambos, but should fast-laners?

You should spend a portion of your money on the things you enjoy. That might be a car, it might be a vacation, it might be an adventurous journey to Peru for 2 months, it might be a big house. It all depends on the person and what gets their adrenaline running.

It seems like a measure of frugality will protect our wealth when all our wells have dried up. Aren't there better places to use that capital?

Absolutely. The MSRP on my car is $329,000 and obviously those funds aren't in other investments. However, I can afford the auto because I have a substantial monthly income and investments; furthermore, I was frugal (and still am in much respect) with all my income and investments in my income acceleration years.

But I'm genuinely interested in discovering the threshold at which I should say, "There's no better way to use this money."

In my opinion, if it takes longer than 2 months of your income to pay for a car, you can't afford it ... if you can't pay cash for a car, 20 times over, you can't afford it. This (in my opinion I stress) translates into a fact that 99% of society can't afford their cars - they are shackles to living FREE.

The oxymoron of it all is this: People buy luxurious cars to appear rich yet it has the opposite effect -- it puts them in debt and erodes their freedom as they are compelled to work harder to pay for the image.

Conversely, the guy with the website/business profiting $600K/MONTH, semi-passive, do you think he can buy a $250K car and not bat an eyelash? Its like buying a gallon of milk down at the grocery store.

Better uses of the money? Sure, more investments. However, whats the point of trying to harness the Fastlane? "Finishing rich" like David Bach wants you to do? Its to enjoy life with the *things* that you enjoy now, not when you're dead .... those things can be anything, from toys and doodads to home-schooling your children.

My passions are autos, computers, and writing.

 

[PEERless]

Rep Speed to PhxMJ for actually taking my question seriously. I agree 100% with everything you said. I bought my '93 SAAB 900 cash (not difficult), and I'll drive it until it explodes. That's not to say I don't want a $329,000 car, but I'm not exactly pulling in $600,000/month.

I like the 2-month/20x formula for buying a car. There certainly are some silly people imprisoned to some silly monthly payments.

I see the point that at some stage, one must USE some of the wonderful money one has earned. Slow-laners see that as retirement age. Maybe we could all benefit from "retiring" a little more often.

 

[kimberland]

I second MJ's thoughts.
I could be the richest person on earth
and still not want a Lambo.
It wouldn't give me any pleasure,
just the opposite.
(I dislike people looking at me,
I'd rather fly way, way under the radar).

But I'd happily plunk a lot of cash into a vacation
(though I can't think of any six figure vacations that interest me).

And one of the perks of doing well financially
is that there are no "should's" about how you spend your excess cash.
I'm not wealthy by this forum's definition
(our net worth is only about a million)
but we do have more passive income than our needs require.
It is nobody's business how we spend the extra.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[PieThief]

In my opinion, if it takes longer than 2 months of your income to pay for a car, you can't afford it ... if you can't pay cash for a car, 20 times over, you can't afford it. This (in my opinion I stress) translates into a fact that 99% of society can't afford their cars - they are shackles to living FREE.

Nice post. This quoted section is interesting. It's very true that a lot of people drive more expensive cars than they need to be. However, I'm not sure if the math of being able to afford to pay cash for a car 20 times over as a measure of affordability is realistic in the least. By that standard I could not even afford a car like a toyota or a honda (something under 25K) unless I had half a million dollars liquid in the bank.

Now, you might have been talking specifically about luxury "showy" cars like a lambo, but that's not what you said so I'm taking your quote about affordability literally. Let's face it, in this country unless you live in a city with very good public transportation, you need a car. And if everyone was buying $2000 beaters to drive around in, traffic would come to a stop every day because of all the mechanical breakdowns in the middle of the highway in rush hour. Not to mention the fact that they would be buying them every year or two anyway which isn't all that much cheaper than buying a more expensive car and driving it for 5-10 years. (Which I admit most people don't do that either.)

In the end I don't really disagree with what you are saying, just pointing out that I'm not sure the specifics are realistic. One last thing before I get called out... for the record, we drive a 2002 Jeep Grand Cherokee and a 2003 Ford Taurus, neither of which have a car payment attached. However, by your measurements we can't afford either because we couldn't have paid cash 20 times over for the Taurus at the time we purchased it, even though it was only $11,000.

 

[Russ H]

PieThief-

I think MJ's point is that if you make $24,000 a year ($2K/mo), you can allocate $4k to buy a car. $48K a year ($4K/mo) would allow an $8K car.

Until 2000, ALL of my cars (except 1) cost me $2500 or less to buy. I used them for business purposes. The "exception" was a classic Mercedes Benz I bought for $3500.

Let me go on the record here saying that I am one of those people who absolutely LOVES cars. It's not rational. It just is. I grew up in Detroit, my grandpop worked for Ford, and it's in my blood.

Since 2000, I've bought 3 newish cars, all over $15K.

First was a Mustang convertible. $16K. Bought it with bonus income from my biz (grossed over $500K the year before).

Next was an Excursion for $22.5K. This was completely expensed as a business asset that year, due to its weight, and exclusive use for business.

Last year we bought an '06 Mustang convertible for $20.5K. But ONLY after we figured out how to sell other things we had already to pay for it.

My point?

I've done OK driving around in used cars. And paying not so much for them.

I get them serviced regularly, and do the big repairs when needed (which can all be partly or completely expensed, if I'm using the car for my business).

If you and your wife make $60K a year, that's $10K in two months.

I could get an awfully nice used car for that. In the past, I would have gotten at least four cars for that kind of money.

-Russ H.

Rep speed to MJ (like he needs it! )-- your other comments are spot on with what I would have written.

 

[MJ DeMarco]

Nice post. This quoted section is interesting. It's very true that a lot of people drive more expensive cars than they need to be. However, I'm not sure if the math of being able to afford to pay cash for a car 20 times over as a measure of affordability is realistic in the least. By that standard I could not even afford a car like a toyota or a honda (something under 25K) unless I had half a million dollars liquid in the bank.

Now, you might have been talking specifically about luxury "showy" cars like a lambo, but that's not what you said so I'm taking your quote about affordability literally. Let's face it, in this country unless you live in a city with very good public transportation, you need a car. And if everyone was buying $2000 beaters to drive around in, traffic would come to a stop every day because of all the mechanical breakdowns in the middle of the highway in rush hour. Not to mention the fact that they would be buying them every year or two anyway which isn't all that much cheaper than buying a more expensive car and driving it for 5-10 years. (Which I admit most people don't do that either.)

In the end I don't really disagree with what you are saying, just pointing out that I'm not sure the specifics are realistic. One last thing before I get called out... for the record, we drive a 2002 Jeep Grand Cherokee and a 2003 Ford Taurus, neither of which have a car payment attached. However, by your measurements we can't afford either because we couldn't have paid cash 20 times over for the Taurus at the time we purchased it, even though it was only $11,000.

No need for a "calling out" as I agree with you. My post lacked specifics. I was referring more to the purchase of an auto as a toy/doodad vs necessity. I would apply those rules to the auto purchase made for fun vs need.

With respect to that however, most people opt for the $60K Escalade versus the 2 year old Honda for $15K. In that price range, it is a luxury, not a need so I would apply my rules. I wouldn't apply my rules to autos bought out of need unless they scale into luxury ranges. Ugh ... I'm writing a like a backed-up toilet today. I give up.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[KLPInvestments]

Cars are just not my thing. But like someone already mentioned...we all have our thing.

I want a beachfront vacation home. Beyond that, I love to travel. I'd also appreciate a small yacht very much. It would be awesome to load up the boat with a few good friends and take a run to the Bahamas for a few days.

The ultimate for me would be to own a fractional share in a private jet....such as with NetJets.

As far as cars go, I wouldn't want much more than a nice BMW...clean, sporty, dependable.

Yea, we all have our things.

 

[Russ H]

Ugh ... I'm writing a like a backed-up toilet today. I give up.

Quote of the day!

(writer's tip: if you're writing is like a backed up toilet, Don't give up, MJ-- clean out whatever is clogging up the works! )

-Russ H.

 

[PEERless]

I absolutely think we should spend our money on our passions!

...And if everyone was buying $2000 beaters to drive around in, traffic would come to a stop every day because of all the mechanical breakdowns in the middle of the highway in rush hour. Not to mention the fact that they would be buying them every year or two anyway which isn't all that much cheaper than buying a more expensive car and driving it for 5-10 years. (Which I admit most people don't do that either.)...However, by your measurements we can't afford either because we couldn't have paid cash 20 times over for the Taurus at the time we purchased it, even though it was only $11,000.

I drive a $2000 car (not calling it a beater). I have for four years. Before that, someone drove it for 9 years. I have yet to break down on the freeway. A LOT of us love cars and the American freedom they symbolize. Some of us love them so much that we are willing to mortgage our lives to own a depreciating machine. Tsk! We should all take a moment to assess the true psychological REASONS for a purchase which requires a loan.

Pretty sure MJ's "20-Times-Over" method of calculating automobile-affordability is a bit exaggerated, but the point he was making is that a "mid-range" $30,000 car is not affordable on the median $26,000 salary (a 2006 stat).

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[LamboMP]

You shouldn't do anything that you don't want to do. Some people have a *thing* for cars, some have it for wine or car audio equipment, others have it for watches. Im sure Buffet has a practical view of autos which is why an old Crown Vic works.



You should spend a portion of your money on the things you enjoy. That might be a car, it might be a vacation, it might be an adventurous journey to Peru for 2 months, it might be a big house. It all depends on the person and what gets their adrenaline running.



Absolutely. The MSRP on my car is $329,000 and obviously those funds aren't in other investments. However, I can afford the auto because I have a substantial monthly income and investments; furthermore, I was frugal (and still am in much respect) with all my income and investments in my income acceleration years.


In my opinion, if it takes longer than 2 months of your income to pay for a car, you can't afford it ... if you can't pay cash for a car, 20 times over, you can't afford it. This (in my opinion I stress) translates into a fact that 99% of society can't afford their cars - they are shackles to living FREE.

The oxymoron of it all is this: People buy luxurious cars to appear rich yet it has the opposite effect -- it puts them in debt and erodes their freedom as they are compelled to work harder to pay for the image.

Conversely, the guy with the website/business profiting $600K/MONTH, semi-passive, do you think he can buy a $250K car and not bat an eyelash? Its like buying a gallon of milk down at the grocery store.

Better uses of the money? Sure, more investments. However, whats the point of trying to harness the Fastlane? "Finishing rich" like David Bach wants you to do? Its to enjoy life with the *things* that you enjoy now, not when you're dead .... those things can be anything, from toys and doodads to home-schooling your children.

My passions are autos, computers, and writing.

MJ, I couldn't agree with you more on this one. Try explaining it to your friends who think the way to own these cars is to be a lawyer or some executive that makes 180K/yr. No matter how hard I try it seems like they just don't listen and it's not even worth the effort.

MP

 

[PEERless]

180K/yr

Yeah, you can't own a car worth 3 years' gross salary. Prolly shouldn't own ANYTHING other than investments worth 3 years of salary...

 

[hakrjak]

I'm 100% against having a car payment. I feel like if I can't pay cash for it, and have reasonable funds left over for other things -- I can't afford it. In the past I've had the experience of being a dumb kid with a new high paying job, and running out and buying a new BMW -- And boy was that a mistake. A mistake like that can take 3-4 years to get out of, and put you way behind in getting out of the rat race. Save the car purchases for when you've got so much money, you don't know what to spend it on -- IMHO

Cheers,

- Hakrjak

p.s.
I drive a 7 yr old truck with 117,000 miles on it -- and it's still running great!

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[aptohosting]

The oxymoron of it all is this: People buy luxurious cars to appear rich yet it has the opposite effect -- it puts them in debt and erodes their freedom as they are compelled to work harder to pay for the image.

This is sooo true.

 

[White8]

You should spend a portion of your money on the things you enjoy. That might be a car, it might be a vacation, it might be an adventurous journey to Peru for 2 months, it might be a big house. It all depends on the person and what gets their adrenaline running.

That's exactly right. I enjoy the challenge of making money and that's primarily where I spend my money. The toys I like and buy are as much an investment as a toy. My avatar (which I wish I owned) has doubled in value in the last 10 years.

 

[andviv]

The 'conventional' wisdom is that you should not buy a car that is more than a year of your salary (if you make $24K then your max car value should be $12K). Of course, this implies having a car payment.

I read it somewhere (the lambos forum?)... that you can afford the car payment doesn't mean you can afford the car.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[LarryG]

My wife overheard in the Volvo dealership a mechanic at the servicedesk tell an unhappy customer "Ma'am, if you can't afford the pay for the service on a Volvo, maybe you shouldn't own one".
She said that she thought to herself "How true".

 

[camski]

I'm 100% against having a car payment. I feel like if I can't pay cash for it, and have reasonable funds left over for other things -- I can't afford it. In the past I've had the experience of being a dumb kid with a new high paying job, and running out and buying a new BMW -- And boy was that a mistake. A mistake like that can take 3-4 years to get out of, and put you way behind in getting out of the rat race. Save the car purchases for when you've got so much money, you don't know what to spend it on -- IMHO

Cheers,

- Hakrjak

p.s.
I drive a 7 yr old truck with 117,000 miles on it -- and it's still running great!

I use my car for work and am able to expense it on my taxes ( I drive about 30,000 miles a year on business) and I am amazed at how many people in the same situation as me (using personal car for work) have really nice newer cars(that com along with hefty payments). I am currently driving a 2001 chevy impala that is totally paid for and just turned over 200,000 miles. Like Hakrjak I just hate having a car payment and for me I look at a car as a tool and not an extension of myself. When the old impala takes a crap I will go out an look for something in the $3000-$4000 range and pay cash for it.I am sure people will disagree with me but I can tell you that there are a lot of dependable cars out there in this price range. Cars these days if taken care of will last to easily over 150,000 miles (my last two both hit 200k) so even if you drive as much as I do you might get 2-3 years out of one. Some will say I am taking a gamble by doing this, and that might be true but so far my cars are a major tax deduction for me and my view is that even if I get 1 year out of a car for 3-4 grand I will still have gotten my monies worth.

 

[kimberland]

I drive a $2000 car (not calling it a beater). I have for four years. Before that, someone drove it for 9 years. I have yet to break down on the freeway.

Our current car cost $10k.
We've driven it for about 5 years.
Our car before that cost $3,500.
We drove that one for 10 and then resold it for $3,500
(probably could have gotten more for it).
We drive our cars a lot
(we take about a 1,000 mile round trip road trip every month or so).
We've never broken down on the freeway.
Neither of us are mechanically inclined.

Saying that an inexpensive used car is unreliable is simply another excuse to justify overspending on a car.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Russ H]

Saying that an inexpensive used car is unreliable is simply another excuse to justify overspending on a car.

Absolutely. I think this is the #1 reason most folks use to justify buying a car they can't really afford.

The really funny thing is, some cars (like the Mercedes Benz C series) are so unreliable that buying a good used car (a Lexus or Toyota, just to name 2) would be not only much more reliable, but also cheaper!

Ah, the lies we tell ourselves . . .

-Russ H.

 

[GettingThere]

This topic provided a recent turning point in my own decision-making. I have a vehicle in the garage that I still owe money on for the next 18 months. I decided last week to sell it (I can break even at minimum), as it is a third vehicle that gets used maybe 5 days per month. Cars are my weak spot, but I decided to look at the big picture and use my head. The car I'm using daily is a '91 Honda Accord...I could replace everything mechanically/electronically important on the car with new parts for a grand total of less than one month's take-home $$... The other vehicle sits in the garage, draining some decent $$ for nothing and the critical parts on it are not cheap. I may as well take $500 out of my wallet and flush it down the toilet...winds up getting us in the same place financially, all for leather seats, some doo-dads, and a 4-wheel-drive setup that could take me through a couple feet of snow without trouble...there is no snow in FL, though .

No-brainer after I thought about it. Even if i was driving it more often, it still makes a lot more sense to have the 'lesser' car in order to accelerate our plans for our future.

I feel grateful to have seen the light. Thanks, in large part, to this community.

-John

 

[Russ H]

John-

Very cool "aha" for you. :banana:

If you've followed the PLAN thread, stuff like this comes up all the time once people start looking at their expenses.

Link to the PLAN thread:

http://www.thefastlanetomillions.com/showthread.php?t=544

-Russ H.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[GettingThere]

Russ,

I've recently been following the PLAN thread. Thanks for starting it. It is yet another factor in my financial and mental realignment.

 

[Russ H]

You're welcome!

-Russ H.

 

[Legacy Dad]

I'm seeing a trend here!!

How many of you who are free or have broken $1M drove used cars, paid cash, etc. instead of having a car payment?

Seems like a $400/month car payment could go to a lot better areas?

Lance

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[phlgirl]

I am a volvo girl. I buy them certified pre-owned and drive them until they no longer run. Paid 18k cash for my current '02 S80. Her name is Vera.

I came so close to going the other way......

I was working as a software consultant, a few years out of college and making more money than I had ever known what to do with. I had spent at least two weeks picking out a new Mercedes E320 online - selecting colors, options, calculating the monthly lease payment, insurance etc. I had convinced myself that I could afford it and, not only that but, that I desesrved it as well.

As was often the case in consulting (particularly when the weekly pattern is philly to buffalo), I found myself stuck at the airport. A mentor of mine at IBM had told me about a book.... he said to me "If I were your age, THIS is what I would be doing". The book was Rich Dad Poor Dad. I read most of that book in the time that I was stuck at the airport & then in flight that day.

The benz went from being the only thing on my mind to the absolute last thing on my mind. I was (and still am) much more excited about building serious wealth. Someday; however, when I am willing to give up the growth potential that capital provides, I will replace the benz......although, lately, it has become more of a 7 series thing. :smxB:

 

[Poudda]

I made the mistake in 2000 of buying a brand new Jeep TJ. The price tag was about $26K and my income was just over $30K. It worked on paper when I leased it at just over $500 per month. But I never took into account everything else that went with it - insurance / repairs / gas. I think that the total cost adding in interest, was about $35K after 5 years.

Because of the purchase, I lived hand to mouth for five years. I eventually bought it out with my line of credit (maxed it) and finally traded it in two years after that for a slightly cheaper vehicle. Then I got married, and my wife paid off the rest of the debt!

By far, it was the biggest financial mistake of my life. We recently bought a used dodge caravan for about $8K cash, and it works wonderfully.

Let me tell you, I don't expect to ever want to buy a new car again.