Automotive

At what salary til you should invest into a new car?

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  • Jun 13th, 2015 10:32 pm
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Deal Guru
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Nov 27, 2005
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I bought a brand new Civic straight out of graduation after accepting my first job offer. I put zero money down and took a 5-year finance at 0.9%. My monthly payments are just a hair over $400/month. That was the best purchase I've ever made. I plan to drive this car for 10 years, and then sell it and buy another brand new compact sedan.

So no, I completely disagree with the people who say buying a brand new car as a young professional is a bad choice. With the low financial burden of financing this car, I was able to save for a down payment on a condo at the same time.
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Jun 3, 2013
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beppy wrote:
Jun 6th, 2015 7:27 pm
30k now you can get GTI, Hyundai Genesis, 370z, i highly doubt most young people who own those cars earn more than 100k.

What i am wondering is for those who own the 50k level cars, what salary range would seam reasonable 100k+? 120k+? 140k+?
But I thought everyone on RFD had 6 figure salaries and bought Canada Goose Jackets?
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You can get a 3 year old Toyota Matrix for less than $15000. I pick this car, because it is the car you need. It is reliable, so you will get 10 years of service out of it, and the parts are cheap. It can haul a lot of junk also.

As already mentioned, a car is NOT an investment, it is a liability. Why spend $30000 when $15000 does the same thing. You will never get a better car, certainly a nicer car that strokes your ego, but never a better car.
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Chopras wrote:
Jun 7th, 2015 4:33 pm
But I thought everyone on RFD had 6 figure salaries and bought Canada Goose Jackets?
Only if said jackets show up for under $5 each in the hot deals section.
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blitzforce wrote:
Mar 6th, 2015 12:20 am
The one's I'm interested in are around 30k(+ other IDK fees) and even if interest is 0%, monthly payments are still around $900/month for 3 years until everything is paid off. How do most young adults afford that unless they don't save for down payments for the purchase of a home in the foreseeable future, plus other monthly/annually bills?
When I was young, people used to say what ever monthly payment equals 75% of one weeks take home pay, and no more than 60 months. Of course that was before we were paying for internet tv and cell phones every month as well.
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DJ_Peanuts22 wrote:
Mar 6th, 2015 10:51 pm
Driving around in a rusty 10-year old Lexus is not balling.
It might be if you gotta fix it?
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cjottawa wrote:
Mar 6th, 2015 7:54 am
Came here to post exactly this.

Buy used and let someone else eat the depreciation.

Most common single vehicle model for millionaires? "Ratty old pick-up truck."

The whole "but it's free money at 2.9% interest" (or even 0.9% or 0%) on new car financing argument completely ignores the vast amount you're overpaying for the privilege of "new."
There is also the option many are forgetting. Buy a new one year old vehicle. There are dealers out there with 2014s still in their inventory and discounts can be pretty high on old/new stock and even the dealer might take a slight hit to clear them out.

I have also found that dealerships with used cars in the range of 1 to 3 years of age really aren't selling them at a great enough discount imo, and many aren't that interested in haggling. If you buy in this age range it is likely better to buy privately. Unless the dealer just sells used cars and has bought them at auction. Auctions might be a good choice for consumers to look as well, but know your stuff it can be easy to get burned, and remember you will be competing with those curb side dealers, and they have more experience than most of us.
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kitchener
blitzforce wrote:
Mar 6th, 2015 1:42 pm
Investment for your self-esteem. If you are aware of my previous thread in regards to compensation due to a minor accident, you'll know the amount of "your car is shtty dont' bother paying attention to them scratches" replies. I really dislike this feeling of "I broke your sht, so what? It has little market value". If I get a newer/more valuable car, others probably wouldn't give me the same replies.
First...I'm not trying to be an *, but if your self esteem is dependent on the type of car you drive, you have different issues altogether and a new car is not going to help you to resolve them..
Based on what I'm reading, you strike me as a person who worries so much about what other people might think, that you are willing to spend 30 grand to feel better about yourself.

Second...the fact that you are asking this type of question tells me, that you probably can't afford one to begin with and you will most likely struggle financially to keep it.

Third...connecting a car to income earned is very misleading at best.
I know people, who make 35 grand per year and are financially better off, than those who make over 120 grand per year and live from paycheck to paycheck...it all depends on all the other expenses.
I know a guy who makes little over 150 per year....but between paying mortgage on his monster house, new F150, garage full of toys, alimony and child support, he has to borrow money before each payday (which puts him even further behind).
Remember that it's not what you make, but what you get to keep.
My advice is probably pointless, since it is not very likely that you will be receptive to it....but here it goes:

Don't worry so much about trying to impress people, whom you probably don't even know and whom probably themselves wouldn't care to pi** on you, if you were on fire anyway.
Buy a used car and save your money for an actual investment such as higher education, house, or even starting up your own business.
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Sep 25, 2006
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The biggest mistake you can make when starting out is putting your finances on hold when buying a new car. You're young and you have your whole life to buy that nice car, so take advantage of your age and let time grow your investments. Get something cheap, reliable and good on gas so you can focus on real investments (stocks, shares, real estate). The audis and bmws will come later when you're set. They don't make bmws for the 21year olds, they make them for the rich 50yr olds.
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Dec 19, 2013
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I wanna play devil's advocate and it is a bit off topic, but it's already gone that direction, so oh wells. People are taught to save up their money. However, life is short and things are usually best enjoyed when young. Say you have two people. One spends as much as he can, and another saves up every penny he can. The guy who spends as much as he can is having fun along the way, buying fancy cars, living large, saving very little and living paycheck to paycheck. Then the other guy, buys a beater car and lives in the suburbs in a tiny house, saving as much as he can. In this situation, it's obvious the guy who is spending is having more fun as the guy saving. Utility as you call it in economics.

Now the first guy doesn't care about retirement, he's gonna pull the plug at 65. The second guy is saving up for pretty much retirement. Now here's the thing, the guy saving every penny, he hasn't had any "utility" as he been saving up his money all his life. Now what if something happens. He got in an accident, injured himself and became a paraplegic. Now he can't enjoy driving the car he was saving up to buy. What if now he's too old to enjoy some of the things he wanted to do, like skydiving, tracking a purposely built weekend car, vacations, etc. Illnesses, lack of energy; these usually appear the older you are.

The first guy enjoyed all of those things. The second guy doesn't get to. So many people have saved up their whole lives, then when they finally retire have no use for a lot of their money. They can't travel far, they are too weak to walk many kilometers. Can't do any intense things as they may have heart problems. A lot of them just give their money away to their kids and relatives. Some of them grow old regretting not doing a lot of activities they wish they've done when they were younger.

Now obvious these two are extreme cases meant to spark a debate, but it is true to some extent. How much are we suppose to save and how much should we be enjoying life? I'm pretty sure everyone agrees life is short, time is the biggest asset we have and it's ticking away every second.
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Quanger wrote:
Jun 8th, 2015 1:07 am
The biggest mistake you can make when starting out is putting your finances on hold when buying a new car. You're young and you have your whole life to buy that nice car, so take advantage of your age and let time grow your investments. Get something cheap, reliable and good on gas so you can focus on real investments (stocks, shares, real estate). The audis and bmws will come later when you're set. They don't make bmws for the 21year olds, they make them for the rich 50yr olds.
Actually I would say buying a new car when you're young is the best choice if you can find a long, low interest finance. People have such a negative attitude toward buying new cars because all they see is the depreciating value. However, there are some pretty decent advantages of buying a new car when you're young.

1. Paying a few hundred dollars monthly is much easier than paying $10k upfront when you're just starting your first job, especially if you still have student loans.
2. Put your leftover money into higher paying investments instead of upfront into the car, which is a depreciating asset whether it's new or used.
3. You get the full length of the manufacturer's warranty if you buy new. This will keep your maintenance costs at a minimum in the first new years, which is when you need it the most if you're young.

Of course this only applies to econoboxes. Buying a $50k car right off the bat is a stupid move.
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Sep 25, 2006
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board123 wrote:
Jun 8th, 2015 1:55 am
Actually I would say buying a new car when you're young is the best choice if you can find a long, low interest finance. People have such a negative attitude toward buying new cars because all they see is the depreciating value. However, there are some pretty decent advantages of buying a new car when you're young.

1. Paying a few hundred dollars monthly is much easier than paying $10k upfront when you're just starting your first job, especially if you still have student loans.
2. Put your leftover money into higher paying investments instead of upfront into the car, which is a depreciating asset whether it's new or used.
3. You get the full length of the manufacturer's warranty if you buy new. This will keep your maintenance costs at a minimum in the first new years, which is when you need it the most if you're young.

Of course this only applies to econoboxes. Buying a $50k car right off the bat is a stupid move.
It all depends on how you look at it. Buying new will guarantee no headaches with repairs but this will cost your wallet. My scenario so far has been: graduated at 23, bought a $6000 car and spend $1000/yr in maintenance. Fast forward 9yrs, still driving the same old car but I've been able to pay down 64% of my mortgage, and bought a second home (rental) and have paid down 27.5% of that home (really I only paid 20% and the difference has been paid down by the tenant). During that time, I've gotten married and have travelled to Asia once and Europe twice. Also travelled down to the carribean 3 times as well as 3 trips to California. I've got a bit in rrsp but have dbpp so no concerns there. The plan for the next 9 years will involve kids, dream car, bigger home and 2 more investment properties.

Oh and absolutely no handouts received from my parents or my wife's parents. Zippo.
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Jul 24, 2009
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kitchener
bomiheko wrote:
Jun 8th, 2015 1:23 am
I wanna play devil's advocate and it is a bit off topic, but it's already gone that direction, so oh wells. People are taught to save up their money. However, life is short and things are usually best enjoyed when young. Say you have two people. One spends as much as he can, and another saves up every penny he can. The guy who spends as much as he can is having fun along the way, buying fancy cars, living large, saving very little and living paycheck to paycheck. Then the other guy, buys a beater car and lives in the suburbs in a tiny house, saving as much as he can. In this situation, it's obvious the guy who is spending is having more fun as the guy saving. Utility as you call it in economics.

Now the first guy doesn't care about retirement, he's gonna pull the plug at 65. The second guy is saving up for pretty much retirement. Now here's the thing, the guy saving every penny, he hasn't had any "utility" as he been saving up his money all his life. Now what if something happens. He got in an accident, injured himself and became a paraplegic. Now he can't enjoy driving the car he was saving up to buy. What if now he's too old to enjoy some of the things he wanted to do, like skydiving, tracking a purposely built weekend car, vacations, etc. Illnesses, lack of energy; these usually appear the older you are.

The first guy enjoyed all of those things. The second guy doesn't get to. So many people have saved up their whole lives, then when they finally retire have no use for a lot of their money. They can't travel far, they are too weak to walk many kilometers. Can't do any intense things as they may have heart problems. A lot of them just give their money away to their kids and relatives. Some of them grow old regretting not doing a lot of activities they wish they've done when they were younger.

Now obvious these two are extreme cases meant to spark a debate, but it is true to some extent. How much are we suppose to save and how much should we be enjoying life? I'm pretty sure everyone agrees life is short, time is the biggest asset we have and it's ticking away every second.
Sure...if he can afford the good life without any negative consequences, then all the power to him.
Anyone can be hit by a train any time and any day can be their last.

Not sure if I understand what you mean by "he's gonna pull the plug at 65" in your scenario above, but unless his plan is to jump off the bridge he may be stuffed in some retirement home for the poor and that is not a very pretty sight (I have seen one and it is pretty much as close to hell as you can get while still alive)....while the other guy might be living by the beach somewhere in Florida and enjoying his retirement.

At that age, the most realistic scenario is the one, in which he will dump most of his disposable income into a car and he will be stressed out about money to the point where he won't be able to afford other fine things in life, such as going out or taking a vacation...in other words it might actually kill his ability to "have fun".
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Jun 28, 2006
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Life is short OP, if you want to drive that BMW or Audi I say go for it. Just don't go all in on it. Save some money first in case of an emergency and finance it for a longer term than 3 years.
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board123 wrote:
Jun 8th, 2015 1:55 am
Actually I would say buying a new car when you're young is the best choice if you can find a long, low interest finance.
And that's how you end up with negative equity - long term finance rates to "afford" something you can't afford. Then, you have no money for your next car (who saves? I want it NOW) and you roll the negative equity from your old car into your new car and the cycle continues.....

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