My customer Jim made me an offer--a good offer--to lease an 80K car for $900/month. But I don't want to spend that much, and I don't want to be locked in. I like knowing that if we get in a pinch, we can sell Car #2 and be debt-free with 20K in cash.
So, fiance and I have been talking about the cars.
Car #1
I bought Car #1 right out of grad school. I got ripped off on my trade-in. I got ripped off on the loan. I got ripped off on the price. I pretty much did everything wrong because I don't come from a place where you buy new cars.
Car #1 is paid off now and worth about 18-20K.
Car #2
We bought Car #2 right as fiance was starting his business. We needed a flashy car for both of our work. So, we trade off driving Car #2 when we need it, but it really doesn't get driven very much.
Car #2 is worth about 40K.
The Future
Our 40K flashy car is not the newest. It's not the flashiest. But fiance loves it. He loves that car. The 80K car didn't mean much--we actually like the 40K car better. We've decided to keep Car #2. It's only got 17K left on the loan. We can make it work.
Instead, we're thinking about selling Car #1 and buying a much cheaper car for less than 10K. That would give us 10K in cash, we could use that cheaper car for most of our driving. Really, the 10K car meets our needs most of the time.
19 comments:
This is painful to read. I hope you and your fiance get over your obsession with expensive cars soon.
Hate to break it to you, but 60K in cars on a household income of 200K is not expensive. 50K is downright average.
We live in a driving culture (Texas). Don't hold your breath for us to get over cars. Appearance matters in our work and in our city.
I agree with mr. toughmoneylove. As for worrying about what other people think about the car you drive -- you are only as shallow as you want to be. I think spending that much on cars is ridiculous. I'd like you to call up Suze Orman's show for her "Can I Afford It?" segment and tell her you're thinking about spending $900 a month on a car lease (she'll tell you leasing a car is one of the stupidest financial decisions you can make) for a $80,000 car when your net worth is only about $50,000. She'll press the "Denied" button so fast your head will spin.
Your decision to buy an inexpensive car, however, is one of the best financial decisions I've seen you write about. If you continue to make wise decisions like this one, you'll soon be able to stop wondering why you make more than your relatives but have less money.
I see the problem is bigger than just cars. It's the "driving culture" and, worse, the "appearance matters" rationalization syndrome. You've got some work to do.
I know appearance doesn't matter in everyone's jobs/lives. It matters in mine. It really matters in fiance's because he is in a luxury business.
I didn't lease the 80K car. I didn't buy a 60K car. I bought a used, 40K, high-mileage older luxury car that I got a heck of a deal on.
I am genuinely interested in why having an expensive car matters in your work and city. I am not asking in a sarcastic way at all. I think that we don't understand the importance of the expensive cars because we aren't sure exactly what you need them for. Is your work ABSOLUTELY dependent on having nice vehicles?
I didn't see that comment before I posted mine. So now I understand a little bit more about your situation.
I understand wanting a luxury car - especially when you spend the majority of your life in your car; you want the best in safety, comfort, and convenience (you might as well have something that is good to look at, as well!).
But, monthly car payments make me feel trapped. :( Once my current car gets paid off, I'm not buying my BMW until I have enough to pay for it in cash.
@mr.toughmoneylove - you have to admit that there are certain jobs in which appearance DOES matter. Attorney would be one of them. Really any industry in which you actively have to interact with clients. I guess the car comes into play when you have to drive said clients around.
As an account executive, my husband has clients in his car all the time. He drives a Toyota Camry that I think cost his company about $27-28k. But guess what? The fact that he doesn't drive a luxury car doesn't stop his clients from giving him orders that total millions of dollars a year. But then again, he's selling to businesses not consumers. Their concern is how he's going to solve their business needs, not what kind of car he's going to take them to lunch in.
It might be helpful to remember this quote when thinking that you need something expensive to impress others:
"You probably wouldn't worry about what people think of you if you could know how seldom they do."
Olin Miller
Sunflowers - I understand your point but don't agree with it 100%. I am an attorney and know from personal experience that some clients actually react negatively to displays of wealth. I've even had them say (when walking through our nicely decorated office space) that they were forced to pay for that space with high fees. I would actually feel uncomfortable having a client see me drive up in a car that had a $80k sticker price. At the end of the day, don't blame the expense on your customers - it's all on your perception of yourself. Finally, if the luxury car is really necessary for the business, then the smart thing to do is lease it, not buy it, because you can write it all off. I doubt that applies in this case however.
@barb: That really depends on the type of clients you're dealing with.
I'll give you an example from the firm I used to work for: One of the attorneys (a partner) went to court with his client, and the client gave him a once-over, and said "I pay you all this money and you wear THIS?" The attorney wears suits (perfectly presentable in my eyes), but not designer, which is apparently what this client preferred. This client and his company bring in A LOT of money every year for the firm. Guess what the attorney did? Went out and bought the designer suit.
The clients go to a pricey firm, they want well-dressed and well-manicured attorneys, which in their mind is equated with power, confidence, and intelligence. In meetings, I'm sure they also hope it intimidates the other side.
Those same clients are likely going to have a similar mentality when it comes to cars. If the snooty client wants to drive with the partner to a meeting, it would likely not be wise for the partner to drive his Camry.
Not saying I'm justifying the mentality, but I know it exists.
@mr.toughlovemoney - You're right. There are clients on both sides of the coin. I encountered mostly clients on the snooty side, probably because I was in a large LA firm. They were driving up in 100k cars , so anything less was not a problem. But even there, an 80k car was not a true necessity. Wasn't very often that the clients drove with the attys in their cars, let-alone saw the cars. We had a huge parking structure.
I'm not sure what industry DAMF is in. But I assume she knows her own client base? I can imagine someone in the entertainment industry might feel like they need an expensive car.
I don't know how lawyers operate.
I do know that when I go for a lunch meeting at a fancy place, there are no Camrys in the parking lot. After the meeting, we're all waiting at the valet. I'd rather not have them remember looking around to see whose Camry just pulled up.
So, instead of a 30K Camry, I have a 40K used luxury car. It's not the best or the flashiest. But it fits in. It might not be ideal, it might not be your reality. But it's my reality.
I do understand that appearance matters in some industries, and in some cities especially, but don't you think that clients would give you a little leeway on this because you are just starting out in your career and in your mid- to late-20s? What may seem like projecting "success" to some may appear to others as projecting "daddy's little princess." Now I know your parents are not that type, based on your previous posts. But you may be falling into a common trap -- a lifestyle inflation or creep as you try to match the standard being set by people a decade or more into their careers. You've posted about this before, re: your mentor at work, and feeling like a "loser" compared with other coworkers who seem to have more. Beware of playing "catch up" at the very beginning of your career and earning potential. This is what sets many 20-somethings into debt.
Is there a conflict of interest doing this deal with your client?
Also, I get the feeling that you really want to get this car and just want the rest of us to agree by giving the various justifications.
Don't you think that the fact you are having a hard time deciding indicate to you that you know deep down inside, you know you should not do it?
Finally, a well maintained older "luxury car" will say much better things about you than having the "newest and the brightest."
People forget you can write off leasing for a business. Leasing can be a good deal for business owners. Not saying it's true for you.
By the way image does matter for some careers. I've had LOTS of friends who make bank tell me that. I don't but it's not my field.
So saying it's not important, could depend on the situation.
40k for a used high mileage car? Not for me. Probably why our household income is less then half of yours, we are 26 years old, and have about same net worth (within a thousand dollars). We are accountants though and don't need the status car to drive to the office.
for once I can kind of see your point even though I don't totally agree.
I think you are not very secure in yourself and your talent. It's almost like you continuously have to show us how much you have accomplished and spent to give you some self worth. You right well and so I think your story is plausible. However, it all seems so...childish.
Like those celebrities who make crazy money very early and start buying stupid stuff.
Wealthy people and not people who are "rich" tend to be a bit more conservative. They don't need the newest toys or what not but they are tastefully dressed.
I don't think anyone here (actually there might be a few) wants you to live like you earn 40k a year when you don't. You worked hard for the money so why shouldn't you enjoy it... I guess it just seems like you make a lot of "young" decisions.
oh..ps barb.. i love that quote..never heard it before and I have some friends that I am going to email it to!
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