I’m looking to purchase a used Nissan GT-R and spend about $80,000.
I’m 41 and single with no kids, and have always been a big 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’m saving 15% of my pre-tax income with a 4% contribution from my employer.
“ ‘Dealership appraised my current car, which I paid cash for, at $6,500, but I may end up keeping it as there are some activities I don’t/can’t do in the GT-R.’ ”
I have $56,000 left on my mortgage, of which I’m paying an extra $500 a month toward principal and planning to pay off within five years. I have about $150,000 equity in my condo and about $22,000 in savings.
Dealership appraised my current car, which I paid cash for, at $6,500, but I may end up keeping it as there are some activities I don’t/can’t do in the GT-R (e.g., parking in the city, transporting a bike, moving semi-large or dirty items, etc.).
1. Can I afford my dream car?
2. If I can, how should I go about financing it? Should I pay it off? Loan?
Any assistance you can provide would be greatly appreciated.
Thanks in advance for reading this.
Would-Be Dream Car Owner
You can email The Moneyist with any financial and ethical questions related to coronavirus at firstname.lastname@example.org, and follow Quentin Fottrell on Twitter.
I don’t want to squash your goal of owning the car of your dreams. (Like I did with this guy.) But your circumstances are different from that good fellow: Namely, you are financially independent and in a very comfortable position for retirement, notwithstanding any unforeseen circumstances. You have worked hard to have the car you want.
1. Yes, you can afford your dream car. But should you get it? I will say this: It will make you happy (for about five minutes). But that feeling typically depreciates along with the value of the car. I don’t know what this particular model means to you, but I do know — from what you say about your current finances — that you don’t give in to impulses at the expense of your financial security.
I haven’t said buy it. But I haven’t said don’t buy it. It’s an expensive toy and a pricey piece of machinery. Automobiles serve both functions: They get you from A to B and they give you that Christmas morning feeling when you get the keys. Keep that in mind before buying. Alternatively, consider leasing the car first to see if it’s an everlasting love.
2. People should buy a car with cash when — among other reasons — they have enough cash without dipping into their savings and during a time when interest rates are prohibitively high. Given your $22,000 in savings, buying a car with a low rate of financing makes more sense. Just remember that there may come a day when you owe more than it’s worth.
3. I am not a car owner, so I give you these two responses to your letter from readers, one in favor of you buying the car, and one who regrets doing what you are considering doing now. One reader emailed me to say buy it: “I bought my dream car, a 2010 Ford Shelby GT500, 10 years ago for $41,000 and I continue to get goose bumps whenever I take it for a drive,” Jeff wrote.
“The 10 years of enjoyment I’ve had it is of course is a lot longer than the five minutes you mention in your article. It also represents years of working hard to become financially secure enough to be able to afford it,” he added. “Most people think of a car as a way to get from Point A to Point B. Others, like myself, consider some cars to be a work of art that can also be driven from Point A to Point B.”
“I’ve had people rain on my parade for owning the car, sometimes I get accused of having a mid-life crisis. But they fail to understand I’ve been involved with sports cars in one way or the other my whole life. I guess my ultimate point is everyone’s passions are different and should be respected. I get a bit of judgement for having a somewhat pricey toy others do not understand.”
And now for the naysayer: “I bought my dream car — a very expensive European sports car — almost 19 years ago when I was 33 and in really good financial shape, like the letter writer. Looking back now, it was an absolutely terrible financial decision,” he wrote. “I had invested the money spent on that car (over and above the money spent on a “normal” car) I could retire about 3 years earlier.”
“Being able to retire and spend more time with my family and friends means a lot more to me now than the feeling of driving a rare/fast/exotic sports car ever did,” he added. “If he can’t pay cash, then he can’t afford it, period. That said, I did meet a couple of friends that I never would have met if I didn’t have that car, and it’s impossible to try to put a value on that.”
Hello there, MarketWatchers. Check out the Moneyist private Facebook US:FB group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in 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, in all media and platforms, including via third parties.