Dear Quentin, I’m looking to buy a used Nissan GTR and spend around $ 80,000. I am 41 years old, I am single, I do not have children and I have always been a great saver. I currently make $ 128,000 a year and have a combined $ 1.1 million in my 401 (k), Roth IRA, and brokerage accounts. I am saving 15% of my income before taxes with a 4% contribution from my employer.
“Can I afford the car of my dreams? ”
I have $ 56,000 left on my mortgage, of which I am paying an additional $ 500 a month for the beginning and I plan to pay within 5 years. I have about $ 150,000 of equity in my condo and about $ 22,000 in savings. The dealership valued my current car, which I paid cash for, at $ 6,500, but I may end up staying because there are some activities I can’t / can’t do on the GTR (e.g. parking in town, hauling bikes, moving) . semi-large / dirty items, etc.). 1. Can I afford the car of my dreams? 2. If I can, how should I finance it? Should I pay for it? Loan? Any help you can provide will be greatly appreciated. Thanks in advance for reading this. Potential Dream Car Owner You can email The Moneyist with any financial and ethical questions related to the coronavirus at firstname.lastname@example.org, and follow Quentin Fottrell on Twitter. Dear dreamer, I don’t want to annul your dreams of having the car of your dreams. (Like I did with this boy). But your circumstances are different from those of that good boy: that is, you are financially independent and you are in a very comfortable position for retirement, despite any unforeseen events. You’ve worked hard to get the car you want. Bravo, my friend! But should you get it? Think about this: it’s more than 62% of your gross salary and it will make you happy (for about five minutes). Yes, that sentiment usually depreciates along with the value of the car. I don’t know what this model means to you, but I do know that from what it says about your finances, you are not the type to give in to your impulses at the expense of your financial security.
“The biggest and best dreams don’t cost $ 80,000. ”
It is an expensive toy and an expensive piece of machinery. Cars do both: they take you from A to B and give you that Christmas feeling when you receive the keys. Please keep that in mind before purchasing. Alternatively, consider renting the car first to see if it’s an everlasting love. I didn’t say you should buy it, and I didn’t say you shouldn’t buy it, mainly because I think if you really knew that it was the right decision, at this point, you wouldn’t seek a second opinion from The Moneyist. I’ll say this: it’s a relatively modest dream for a not-so-modest price. Here’s a secret that shouldn’t be a secret: the biggest and best dreams don’t cost $ 80,000. Generally, people should not buy a car with cash when the price exceeds their own liquid savings and / or during a time when interest rates are so low. Given your $ 22,000 in cash, buying a car at this price with a low finance rate would make more sense. But the question of cash versus financing is highly price dependent. If I were you, would I buy it? No. For all of the above reasons. What if you bought it with financing? Even though you would still enjoy driving it, the day may come when you owe more than it’s worth on this car. Too often in America, that’s the stuff dreams are made of. The Moneyist: I am a farmer in my 30s, I live a frugal lifestyle, and my son has a disability. Should I pay more on my mortgage or save for retirement? Hello MarketWatchers. Check out Moneyist’s private Facebook group US: FB, where we seek answers to life’s thorniest money problems. Readers write to me with all kinds of dilemmas. Post your questions, tell me what you want to know more about, or comment on the latest Moneyist columns. By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, on all media and platforms, including third parties.