At What Point Would You Be Comfortable with Dropping $60K into a Car ?

RobotWizard on 06/01/2021 - 02:33

Evening ladies and gents,

I am in mid 20's and have been a massive fan of performance cars since my teen years and have owned a few good cars in past, I would blindly spend money on cars or parts without thinking about consequences, I currently own a car which would have market value of between $20K-$25K if I sold it.

I recently became obsessed with CLA45 AMG and the ones I like are between $60K - $80K.

I do currently own a place and have some savings aside but think it's still a stupid decision to spend all this money on car and not on investment property but would love to hear your feedback ! at what point of life you would be comfortable with spending that sort of money on (High Yield Investment) Car ?

Financial Car

Comments

  • locknuts on 10/01/2021 - 09:11

    Only when you have enough cash to buy 5, can you really afford 1.

  • nimnomnimy on 10/01/2021 - 09:59
    +1

    as someone who owns a couple $60k cars i would say when you are comfortable spending $4000+ a year on additional expenses like insurance, performance tyres and overpriced maintenance.

    • citybargainhunter on 10/01/2021 - 10:15

      Same here, I own two BMWs because I enjoy the finer things in life, but I'm a lot older than OP and live within my means.

  • AustriaBargain on 10/01/2021 - 10:31

    If you make 200k a year then 60k on a car is relatively less of your disposable income than spending 20k on a car if you make 50k a year. If you have a long commute or drive to visit mates and stuff a lot and spend a lot of time in your car then it could make lot of sense to have a nice one.

    • [Deactivated] on 23/01/2021 - 22:51

      Dont think 200k/yr is alot these days. Post tax makes it cir 130k.

      • AustriaBargain on 23/01/2021 - 23:04

        It's over four times the median income any way you cut it. People who make four times what most of the country makes saying it's not a lot these days, smh.

        • [Deactivated] on 23/01/2021 - 23:09

          The top x% (not the super rich, just the higher income group) would probably have personal income in the much lower tax brackets, or a large portion of cash in hand income.

          Someone with $200k income allows that person to borrow cir $1mio, and $1mio barely buys anything in Sydney nowadays.

          As well that $200k will eliminate eligibility for most (if not all) government allowances.

          • AustriaBargain on 23/01/2021 - 23:11

            @[Deactivated]: Everyone gets taxed the same on each dollar they earn. From the boy pushing trolleys for Woolworths to the greedy executives of Woolworths. The executives probably know a few tricks to effectively get taxed less on each dollar of wealth they accumulate, but broadly everyone gets taxed the same on each dollar they earn. And nobody is forcing you to live in inner sydney. Plenty of people commute, telecommute, or move to other cities.

            • [Deactivated] on 23/01/2021 - 23:17

              @AustriaBargain:

              1. Medium income is cir $90k, so not 4x, less so once tax kicks in
              2. Not execs, alot of small business owners. Let say my business earn $300k net profit this year. And that business is owned by a family trsut where trustee is family business. The trust has 8 ppl as trustees. Distribution will mean each individual's income to be around $40k. Net post tax is cir $250k. Some of those also get cash in hand jobs too. All individuals "earned" $40k would be eligible for various government benefits - child care, parental leave and so on.
              3. $1mio - even relatively far from the city barely buys anything - Sefton, a 3bdr not so glam house costs $1mio. I wouldnt call Sefton inner city, nor a glam burb.
              4. Execs dont have any tricks to pay less tax. All salary employees.
              • AustriaBargain on 23/01/2021 - 23:28

                @[Deactivated]: I can't comment on what the average medium makes. I wouldn't have thought it was a lot.
                If a family of eight people is learning less per hour of their efforts than minimum wage, they should get out of business. Owning your own business isn't for everyone and if they aren't making enough profit then it's time to sell up and get normal jobs.
                Maybe you shouldn't borrow 1 million dollars then, or move to another city if you can't afford to buy a house anywhere at all in sydney. Sounds like sydney isn't for you.

                • [Deactivated] on 23/01/2021 - 23:33
                  +1

                  @AustriaBargain: No, and no.

                  1. Not saying it is for me or not, nothing personal. Merely to point out that $200k income is not as much as what many people perceive it to be (yes, a decent amount, but definitely not "top income earners" that can easily drop $60k on a car.

                  2. It's a tax strategy many small businesses use in Australia. Not that those individuals earn $40k. It's the " distributed amount" under a family trust. And by law, that amount is the taxable income. Net effect is that, rather paying 45% tax on $300k business income, effective tax rate would be cir 15%.

                  • AustriaBargain on 23/01/2021 - 23:40

                    @[Deactivated]: 200k is over four times the median income of Australians according to ABS

                    Median personal income was $49,805 https://www.abs.gov.au/statistics/labour/earnings-and-work-h…

                    To get specific about employee income:

                    Median employee income was $50,861

                    And if that family is happy for their business to make them only that much per person invested in it, then good for them. 40k is only 10k shy of median employee income so it sounds about right, if those eight family members have no other income to declare and that 40k is the first 40k they are earning each year then by rights they are entitled the same tax rate on that 40k, same as anyone else in the country, same as the first 40k Rupert Murdoch declares.

  • DiscoJango on 10/01/2021 - 10:34

    My 2 cents: in hindsight, i regret spending so much money on cars when i was in my 20's, as fast forward 10 years i realise putting all that money into property would have been the much wiser choice.

    If your a car guy tho, this is an incredibly difficult decision tho, as its literally your hobby which brings you the most joy, and what do people in their 20's want to do most…

  • payless69 on 10/01/2021 - 13:15
    +1

    Borrow 100k and get an AMG that costs 160k. Then burn it on youtube and get back 200k + on their ad program….

  • unravelledtraveller on 10/01/2021 - 13:20
    +2

    Depends….

    What are you intending it for? If it's to show pony then forget it, do something more meaningful like improving yourself, learning new skills, hobbies, volunteering, travelling (locally for now) and creating memories with friends and family. I've never heard of people regret doing this but have heard plenty of regrets in buying toys like performance cars, boats, jet skis, bikes etc.

    How will the car be used actually?
    * If it's a daily shopping cart in stop start traffic then would you get desensitised to the feel and fun factor?
    * If it's being driven during the week on mostly highways then that's better for the car (and maintenance costs) but you'd suffer greater depreciation.
    * If it's a weekend car, then would you be better off hiring a performance car as and when needed which also gives you the ability to mix it up?

    How long are you going to keep it for? Are you going to run it into the ground or trade it for something else in a few years?

    Do you intend to start a family in the above timeframes? Would you be willing to turn it into a family car or will it get traded in for an SUV?

    How are you paying for it?
    * if debt / salary sacrificing, then how does that work in with your disposable income including ongoing maintenance costs
    * whether it's debt or cash, how many years does this put you back in paying off the mortgage? Are these years a trade off you're willing to make?

    I have also loved performance cars since I was a teen but I have never bought one and haven't spent more than $20k buying a car. I bought my current car for $8k in 2015 but I'm seriously thinking about buying a 2-3 year old Golf R, today's money ~$50k, when I pay off the mortgage and save up cash for it in about 3 years time. I don't want kids, I'm in good health, I have a relatively stable and well paid job, I'm well insured and the super balance is healthy. Despite cars being a love, amongst other things like travel, I have to tick a lot boxes before I start spending on discretionary things hence the 50 questions above. Also fun is fleeting and the car won't bring you happiness necessarily.

    On a final note, I have a relative who is a financial advisor to high net worth individuals and families and their firm works off a percentage of net worth for cars, that is, a car shouldn't be more than 10% of your net worth. Doesn't always translates well for the lower rungs of net worth but if financial security is important to you, then it's a good figure to use.

    • idonteven on 10/01/2021 - 21:16
      +1

      I really liked your response. Thanks for sharing.

      A question, how do you calculate net worth. I own a car, am paying a mortgage, have money in the bank and super, etc.

      • unravelledtraveller on 10/01/2021 - 21:36

        At its simplest form net worth is calculated from adding all your assets together and subtracting all your liabilities.

        The federal government has a great website called Money Smart which has a net worth calculator.

  • voiletmay on 10/01/2021 - 13:36
    +2

    I think if it makes you happy and you can afford it, then why not!!

  • JetLi on 10/01/2021 - 16:18
    +1

    do it, you only live once. life is all about trade offs.

  • PepperedAngus on 10/01/2021 - 19:04

    It depends.
    what is the alternative?
    Do you currently have a reliable car?
    How long do you plan to keep the car?
    Are you happy to keep that for a while longer?
    If not, what is a sensible car choice that you could happily live with?
    Can you justify the extra cash upfront and for maintenance/repairs for this car long term?

    You need to justify the decision and live with the consequences.

    I can only justify 5% of net yearly income in annual depreciation costs.
    If I earn $100,000, I would spend $50k max on a car that I could reasonably believe would last 10 years.
    I would also expect the car has a reasonable warranty period by market standards and is rated quite reliably.
    I would not expect a euro car to last 10 years without issues.

    My experience with performance cars is that they are nice to have but hard to enjoy. You cannot truly enjoy these cars on public roads legally. Great handling is allot more important than power on public roads. Unless you're taking the car to a race track, the costly extra performance is going to waste.

    I perfer to have a reasonable daily driver and rent cars I would never reasonable own when on holiday so I can drink the milk without buying the cow.

  • blorx on 10/01/2021 - 21:00

    Around $32k-$38k is my limit based on the last 4. Usually buy 1-2yo with a little warranty left, then keep for 4-6years. I’ve also been looking at the A45 and S/RS3, but have other priorities.

  • baker bob on 10/01/2021 - 21:14

    A lot of people do not have a passion for cars so spending 60k on one is crazy. I'm definitely one of those people. In my mind there is a very clear link between buying crap and having to work longer. Someone posted in here that they buy expensive cars YOLO, yes well to me YOLO means wasting the least amount of my life working, we all have different goals so if cars make you happy go for it, yolo

    • Commander Shepard on 10/01/2021 - 23:14

      It all depends on your perspective. But I think its important to travel, buy some silly things and enjoy yourself while your young. You just need to find the right balance and don't spend more then you can handle. Life can be cut short very quickly.

      • baker bob on 14/01/2021 - 13:14
        +1

        Yeah absolutely. I have a passion for travel and travelled all through my 20's so for me personally, spending on travel is not crap whilst for some others, it is. We all have to spend our money on something otherwise its going to be left to the next generation which IMO is the ultimate waste of money so spend on what makes you happy. Not working and travelling the world makes me happy.

  • bobolo on 11/01/2021 - 08:20
    +1

    Nobody can answer this for you. Even if you had a billion dollars there is always a 'smarter' way to spend $60k

    $60k for a CLA45 AMG is not going to ruin you by any means if you are on an average income. Absolute worst case, you can drive it for a year or 2, enjoy it/get it out of your system/regret spending that much, and sell it for a small loss and move on

    OR it could thrill you so much that you will double down, start a business, become money savvy and invest - because it will motivate you to buy something more exciting/more expensive

    For me cars has always been a passion of mine. I drove a $5000 shitbox around for 5 years whilst investing all my money, building up businesses, and buying a nice car was a large part of my motivation to do so. Now I run successful businesses/investments and drive cars with a combined value of $700k. Not bragging at all, I'm anonymous here anyway, but you could turn it into a goal and come out the other side financially better

  • ddn2004 on 11/01/2021 - 08:29

    If cars were my hobby/passion: yes

    If not, no.

  • chasingstoke on 11/01/2021 - 09:59
    +1

    I posted this in the last big car thread as another option to consider.

    https://au.finance.yahoo.com/news/free-cars-for-life-1044943…

    • mini2 on 11/01/2021 - 11:16

      You buy the *45 for the noise.

  • ghostdom on 11/01/2021 - 10:30
    +2

    I feel you. in my 20s, I spent quite a lot on cars and expensive parts to mod them. Accord, A4, golf R mk6, 328i, dualis,murano, mx-5, ml350, M4, Q7 all brand new expect the 2nd hand golf r mk6 but still over $40k. my income was below $100k a year. it was just crazy with the loans on every car. it made me hard on other spending in life. but I was kind of enjoy it even spending 1/3 of my incomes on cars. Now into 30s with two kids, my M4 has been sitting garage for most of times majorly on Q7. just couldn't bother more about it.

    did I regret it? yes and no. I have been thinking if I put the money into more investments, will it make my current life easier? of cuz yes. will I feel happier at my 20s? no. when you kind of pass the 20s age, you may feel less need of performance cars, yes performance cars, not the luxury cars. with luxury cars you will enjoy even in 50s, 60s. but performance cars is like gaming, you lose passion once you pass the age.

    so my suggestion to you, if you are a car guy like I was. just go for it, it will bring you more joy than an investment at 20s.

  • dsar on 11/01/2021 - 16:08
    +1

    When your emergency fund is bigger than the price of the car you want.

  • Mysterious on 11/01/2021 - 18:59

    Maybe once I had a house paid off, few hundred K in savings and a good income. I wouldn't want to pay so much for insurance and depreciation. I would never buy a car just because its $60K though, it'd be because the car is has good perks (e.g if I have a big family and needed a safe and spacious car for transport). To each their own though, as long as my car runs smoothly and gets me from A to B I don't mind, interior is more important than exterior.

  • achew on 11/01/2021 - 19:14

    I would be comfortable dropping 60K into a car only if said 60K were not apparently in the aforementioned car.

    achew
    'scuse me

  • mousie on 11/01/2021 - 21:41
    -2

    Buy the car.

    I'll buy it off you in 18 mths time for 25k

    Provided it's had all its servicing and no damage

    Thanks mate.

  • TheMindsetTraveller on 12/01/2021 - 10:15

    In life we are often faced with either an emotional decision or a rational decision. I would advocate choosing an emotional decision more often over an objective ones.

    We can live rationally all our very short life and one day, when we look back and reflect, and we will be wishing we did all these things that were 'feel good' decisions. Going on international holidays, buying that sports car, enjoying your sunday by drinking cocktails next to the harbour, or popping champagne on any afternoon just because you can.

    We will wish we spent more time with family and friends rather than working an extra 5 hours each week for the past 40 years because working is the rational thing to do - remember, we are told you can't live on nothing, you can't take risks because your life with be miserable. There are wealthy people who are sad and there are poor people who are happy.

    Do what feels good, you only learn from these experiences and grow regardless of the feedback.

  • Ruddaga on 12/01/2021 - 13:03

    Man you're asking Ozbargainers, the most tight ass people in Australia.

    F the cost. You only live once. If you have the money and want the car, get the car.

  • OG Puppy Banana on 12/01/2021 - 13:50

    I semi-recently traded up to a car valued at over $60k

    I have been very happy with the purchase and have not once thought about the opportunity cost of that cash because I had nothing else to spend it on (as selfish as that sounds….)

    Trade up get that CLA45 AMG.

  • ExpressCoffee on 12/01/2021 - 14:20
    -3

    From a podcast I listen to their golden rule is 50% of net annual income.

    For example, if your take home (net) annual income was $60,000 your limit is $30,000. So if you needed to upgrade your car and had a boat and motorbike worth, say $10,000 combined – you would spend a maximum of $20,000 on a car.

    • hasher22 on 18/01/2021 - 01:04

      That is the worst advice for anyone, even for the rich

  • Dack Smith on 12/01/2021 - 17:10

    What the hell is a high investment yield car?

    You will probably get more gold diggers laid in the car than make money off it

    • bobolo on 12/01/2021 - 18:14

      Limited edition performance cars or cars that are likely to gain a cult following. All comes down to supply and demand. Some examples or cars you could've bought brand new and increased in value over time include;

      BMW 1M
      Nissan R34, R33, R32 GTR
      Honda NSX
      993 Porsche 911 Turbo
      Ferrari 458 Speciale/Aperta
      Ferrari 488 Pista/Spyder
      997.2 Porsche GT2 RS
      Mercedes clk63 Black Series
      BMW M3 CSL

      • mini2 on 12/01/2021 - 18:48
        +1

        The boat has sailed on the bulk of them unless you're spending 6 figures.

        993 turbo has been a 300k proposition for years.

        • bobolo on 13/01/2021 - 10:54

          Yes you are right…as I said, if you had bought the above examples brand new you would have made money on each of them

          So the question is, what cars can you buy today brand that will increase in the future?

          • mini2 on 13/01/2021 - 16:36

            @bobolo: M2 Comp
            Cayman GT4 (the missus’ boss had access to one for 125k but the (profanity) didn’t buy it and only told us about it after it’s sold)

            R32 GTR is a moot point - the 100 locally delivered ones were 6 figures all those years ago, they’ve just climbed back to what they’re worth judging by the recent Shannon’s auction results. R33 is a strange one, I remembered back in the day Chatswood Lexus used to sell these grey imports, they had a series 3 for $80 something k in 2000. $80k from 2000 has a bit more value than $80k now. Opportunity cost/time value and the rest…

    • Make it so on 14/01/2021 - 19:10
      +2

      It's an in-joke - see this comment.

  • Killerbala on 17/01/2021 - 02:11

    Here we go! Déjà vu

  • hasher22 on 18/01/2021 - 00:55

    Never, even with 1 million sitting in my bank account, I wouldn't.

    As I grow older, a car was fun when I had a Rx8 in my mid 20's, now a car is totally useless

    • [Deactivated] on 23/01/2021 - 23:36

      Should have bought one and kept it, market value is 4x of what it used to be.

      Nvm. Sorry, misread it as rx7.

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