Financial Responsibility 101: How much is too much for a car payment?

[luis_m3]

Originally Posted by christopherchenm

get a slightly used one then supercharge it

+2

[squartus]

I just got a mint 2010 m3 coupe with 10k miles with all the options "no sun roof" for 42k.
I put 12 down and took out a 30k loan, 48months at $755 a month. My old car will be sold soon for 20k in cash..
I make 110k a year and to be honest I could afford twice this much car. You dont need freakin 200k a year to get a M3 by any means, not unless you have a wife 3 kids, payin her car the house and debt etc.

Im not married, no kids and doing what life is about, living it.

[IND-Distribution]

Originally Posted by squartus

I just got a mint 2010 m3 coupe with 10k miles with all the options "no sun roof" for 42k.
I put 12 down and took out a 30k loan, 48months at $755 a month. My old car will be sold soon for 20k in cash..
I make 110k a year and to be honest I could afford twice this much car. You dont need freakin 200k a year to get a M3 by any means, not unless you have a wife 3 kids, payin her car the house and debt etc.

Im not married, no kids and doing what life is about, living it.

Wow thats an incredible deal!

[LarThaL]

Originally Posted by squartus

I just got a mint 2010 m3 coupe with 10k miles with all the options "no sun roof" for 42k.
I put 12 down and took out a 30k loan, 48months at $755 a month. My old car will be sold soon for 20k in cash..
I make 110k a year and to be honest I could afford twice this much car. You dont need freakin 200k a year to get a M3 by any means, not unless you have a wife 3 kids, payin her car the house and debt etc.

Im not married, no kids and doing what life is about, living it.

You do realize, of course, that your $42k M3 is costing you $48k. Best to take that $20k from your old car and pay down the M3. Alternatively, if you have the cash and are investing it wisely, you should be able to make more than $6k in 4 years on that $50k ($30k loan + $20k from sale of current car)

[jdogg2000]

Wow, I make over $300k/year but even I hesitated before recently buying my used 2011 e92 M3 due to the cost ... Mind you I did pay cash. After years of leasing BMWs, 4 in a row in fact, I decided to be smarter financially and buy my cars outright from now on since I can't write off my car lease for work. I do own a home, and at least in LA, its a significant expense. Taxes are killer too, paying well over 100k in taxes every year hurts a lot (I'm not married too).

Maybe it's my age, I'm about 10 years older than the OP... I think at some point I realized that I don't want to work forever... You should enjoy life, but I suggest you don't get into too much debt. My coworkers who have grown accustomed to making this salary over the last 10 years are trying to figure out how they're going to adapt their lifestyles to probable significant cuts in pay once Obamacare goes into effect. You can't assume your pay will stay the same or go up, so don't get into too much debt!

[Yugo]

OP, don't buy an M3...everyone on here makes well over $200k and have paid for their M3's cash...also their homes have been paid for full in cash...

Go for it! Now is the time, low interest rates, plus you have no wife/kids etc.

[Lorde]

Originally Posted by Jesal@IND

Wow thats an incredible deal!

Agreed! Superstorm Sandy discount? PPI?

[PetoM3]

Originally Posted by Yugo

OP, don't buy an M3...everyone on here makes well over $200k and have paid for their M3's cash...also their homes have been paid for full in cash...

Go for it! Now is the time, low interest rates, plus you have no wife/kids etc.

What' the rationale for paying cash. Especially with BMW incentives, you may end up not paying any interest on the loan. Then it's much more financially better for you to do the loan + it should help your Credit too.

[LarThaL]

Originally Posted by PetoM3

What' the rationale for paying cash. Especially with BMW incentives, you may end up not paying any interest on the loan. Then it's much more financially better for you to do the loan + it should help your Credit too.

Agreed. I put down $25k and financed the other $50k over 2 years at 1.9%. Loan cost me $1000 total. I have made about $14000 on that $50k in two years. That's just short of 30%. Should have financed more!!! This is a great time to take on debt because money is so cheap. As long as you have the cash to cover, you can use that money to make money.

[PetoM3]

Originally Posted by LarThaL

Agreed. I put down $25k and financed the other $50k over 2 years at 1.9%. Loan cost me $1000 total. I have made about $14000 on that $50k in two years. That's just short of 30%. Should have financed more!!! This is a great time to take on debt because money is so cheap. As long as you have the cash to cover, you can use that money to make money.

What do you mean you made $14000K on that?

[Powerbeast]

Not to sound like a dick but this is a decision that should lye on you and not asking a public forum on your finances

[1MOREMOD]

Originally Posted by PetoM3

What do you mean you made $14000K on that?

he had cash to pay outright for the car but invested most of it instead and took the dealers practically free money. man there seem to be a lot more financially responsible individuals than me. I have a very nice house, x5, e46 track build, but i guess i should be saving a hell of a lot more according to what im reading. just trying to have my fun too!

[toddcc1]

Originally Posted by Skiptomylou37

I am a young guy, mid 20's, who works in medical sales. No wife, no kids, no serious relationship, I make good money, have a retirement plan + full benefits through work and also have a side job coaching hockey privately that I make about 1k from a month. I have a company car and currently have an Evo X MR for a fun/weekend car and am thinking of stepping it up a bit. I had an e90 M3 before the Evo and am considering getting another M3 but for only a little bit more a month I could get a new or almost new M3, get a couple year old M3 and supercharge it, 911 turbo, GTR, etc. I guess my question is is it stupid of me financially to consider having a $600-$700/month car payment instead of my $400/month payment now to drive something newer that has more flare? Two things before you answer. This car payment money is all disposable income. Like I said before, I have a retirement plan, 401k, mutual funds, the works, plus money I put away every month to eventually buy a house. Also, my dad passed way unexpectedly at 50 and always wanted a Porsche 911 but never got one and because of that, I don't want to say I am a "I want it now" person, but I definitely think you really have to go after what you want in life and get it. That all being said, I would appreciate some wise advice.

It's all about opportunity cost. If one desires to allocate an additional $300-$400 per month on a car, there are other opportunites that won't be realized. I say do it, as having the "toy" car may not feasible when wife and kids enter into the picture. At the very least, if you already have your toy car, then it's an entirely different discussion when the sig other says, "uhhhmmm, I think you need to sell your M3". Reply, "oh, it's almost paid off...no way". Versus, "honey, I'm going to buy a M3 for $50/60k".

[roastbeef]

Originally Posted by PetoM3

Actually I was, or am, going through the same. I'm in mid 20s, renting an apt, and my colleague telling me to buy a house first. Supposedly you can write off taxes off your house or car that way. So it does sound like financially better decision, but it may not. I don't know where I want to own the house in the city, I want to have a family on the horizon when buying a house, I'm still early in my career and will just grow up, so I might be considering a totally different house 4-5 years down the road, just because I may be getting married, I might have much higher income, or I might be in a totally different city etc....then I'll just own a house I don't want, I may sell it, but will I make profit? Who knows. So I don't agree with Don't buy a car, buy a house no matter what.

like others have mentioned, every situation is different. i wouldn't be too weary about buying a house. interest rates are low as well as the market. i don't know where to compare a house with other investments (stocks, etc.), but depending on your specific area, it could be very stable and safe.

i won't gloat, but i'll share with you a little bit about my success in real estate;
i purchased my first house when i was 23 years old at $405k, rented two rooms out to friends i get along with well, saved their rental income as well as some of my regular income. i caught more of a break on taxes, and saved that as well.
i purchased my first rental/investment property two years later (this summer) and i'm making a solid profit on that each month. my rental income alone is enough to afford a new m5, but i'm not quite ready to buy an expensive car.

the point i'm trying to illustrate is- i'm making money off other people while covering the costs of an appreciating investment (real estate). my houses are getting paid down while they are appreciating, plus i'm making a monthly profit. this satisfies my long term goals as well as the instant gratification of making a monthly profit.

[roastbeef]

by the way, i don't make a ton of money. no where near some of the people on here.

[PetoM3]

Originally Posted by roastbeef

like others have mentioned, every situation is different. i wouldn't be too weary about buying a house. interest rates are low as well as the market. i don't know where to compare a house with other investments (stocks, etc.), but depending on your specific area, it could be very stable and safe.

i won't gloat, but i'll share with you a little bit about my success in real estate;
i purchased my first house when i was 23 years old at $405k, rented two rooms out to friends i get along with well, saved their rental income as well as some of my regular income. i caught more of a break on taxes, and saved that as well.
i purchased my first rental/investment property two years later (this summer) and i'm making a solid profit on that each month. my rental income alone is enough to afford a new m5, but i'm not quite ready to buy an expensive car.

the point i'm trying to illustrate is- i'm making money off other people while covering the costs of an appreciating investment (real estate). my houses are getting paid down while they are appreciating, plus i'm making a monthly profit. this satisfies my long term goals as well as the instant gratification of making a monthly profit.

I'm glad it worked out for you and you could get an m5! Congrats! You made the point getting a house even more better financially plausible, but, personally, I wouldn't want to share/rent part of a house ... anymore. Already entered post-college era ...getting old, I guess

[PetoM3]

Originally Posted by 1MOREMOD

he had cash to pay outright for the car but invested most of it instead and took the dealers practically free money. man there seem to be a lot more financially responsible individuals than me. I have a very nice house, x5, e46 track build, but i guess i should be saving a hell of a lot more according to what im reading. just trying to have my fun too!

That's really nice profit in 2 years, even on stock! Well you work to spend it later

[Skiptomylou37]

Alright guys, thanks for all the advice! I think I'm going to sell my Evo X and put 8-10k down on a $36-40k e92 M3 and finance the rest at a very low rate over 48 months. I have some equity built up in my Evo and that plus the extra cash down should get my payment to around $600 or so. Really not that much more than my Evo payment now.


P.S. Tell everyone you know a badass, 2008 Evo X MR with 29.8k miles, all the options, and a warranty is for sale! $29,475!!!

[roastbeef]

Originally Posted by PetoM3

I'm glad it worked out for you and you could get an m5! Congrats! You made the point getting a house even more better financially plausible, but, personally, I wouldn't want to share/rent part of a house ... anymore. Already entered post-college era ...getting old, I guess

thanks, i won't be getting an m5 though, i'm going to stick with a slightly used 2011+ m3. i was merely giving an example.
roommates aren't for everyone, thats for sure. i have a girlfriend, but no kids, and with my work schedule and my room mates' schedules, i hardly even see them. i really don't mind. i'll be getting rid of them eventually (can't do it forever, thats for sure), but not before making another property purchase so my rental profits will completely cover my m3 payment.

good luck with whatever you decide. the first house you buy isn't necessarily going to be the house you live in for the rest of your live, by the way.

[LarThaL]

Originally Posted by PetoM3

What do you mean you made $14000K on that?

I could have paid cash for the car and avoided any loan cost whatsoever. However, if I did that, I would have used up $74k. By taking a 1.9% loan on $50k of my purchase, I still had that $50k in hand. I invested it, and since June of 2011 (which is when I bought my M3), that $50k is now over $64k. The loan cost is only $1k. I have made $13k by not paying cash for my car. Take out about 25% in capital gains (thanks Obama) and that still leaves me with a $10k gain over what I would have had if I paid cash.

Does this make sense?

[roastbeef]

Originally Posted by LarThaL

I could have paid cash for the car and avoided any loan cost whatsoever. However, if I did that, I would have used up $74k. By taking a 1.9% loan on $50k of my purchase, I still had that $50k in hand. I invested it, and since June of 2011 (which is when I bought my M3), that $50k is now over $64k. The loan cost is only $1k. I have made $13k by not paying cash for my car. Take out about 25% in capital gains (thanks Obama) and that still leaves me with a $10k gain over what I would have had if I paid cash.

Does this make sense?

awesome, good man.

there was a thread discussing this concept on e46fanatics and lots of members (mostly dumb kids now) laughed at the guy describing the concept.

[fastmike]

Originally Posted by LarThaL

I could have paid cash for the car and avoided any loan cost whatsoever. However, if I did that, I would have used up $74k. By taking a 1.9% loan on $50k of my purchase, I still had that $50k in hand. I invested it, and since June of 2011 (which is when I bought my M3), that $50k is now over $64k. The loan cost is only $1k. I have made $13k by not paying cash for my car. Take out about 25% in capital gains (thanks Obama) and that still leaves me with a $10k gain over what I would have had if I paid cash.

Does this make sense?

+1. Rates are super low right now. I could pay off my car but I'm at 1.79% right now, I should be able to beat that easily over the coming months.

Of course this strategy is not for everyone. A lot of folks don't have the cash on hand to invest elsewhere and just take on more debt. That's when the pay cash mentality is more beneficial.

OP, if you can still save money and not go broke (which what it sounds like) I say go for it. There's a thread on m3forum started by a someone in still on college, which has turned into a similar thread, except the OP is nowhere near as financially stable. Makes my head hurt.