Submitted by Which-Ad6431 t3_z859ix in personalfinance
I'm a single guy in my early 30's and I make about 100k per year. I always want to get a BMW M3 and I'm kind of in a position where I could afford one. However, is it realistic to spend nearly 100k on a car when I'm only making 100k per year?
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How much do I need to make per year to buy a 100k car?
You can afford a car, you can not afford the car that you're describing
I don't agree with him on everything, but I really like Dave Ramsey's rule of thumb on this: the value of your car(s) shouldn't exceed 50% of your annual income. So in your situation, you'd want to look at a car worth no more than $50,000. Dave would say to pay it in cash, but it's not completely in the realm of stupid to finance it for a couple years. Just don't get upside down on it.
Can you afford the monthly payment on a $100k car? Sure. But you'd be tying up a huge chunk of your income and net worth into a depreciating asset. In other words, it's a stupid idea. Just because you can doesn't mean you should.
Haha yeah I was going to say the same thing. I looked it up and brand new it’s like 90k
Whether you could afford it depends on the rest of your budget. But you shouldn't want to afford a car that costs your entire annual salary over things like building an emergency fund or maxing out your retirement savings.
To buy a $100k car, you would have to be making $250k IMO.
On your budget, go with something ~$35k. You can still get something VERY nice albeit slightly used for that price.
Not just the payment but also insurance which would be high due to value of car and financed
Agree with everyone here. Recommend to put some money away first at the very least but look at a car that is in line with your income. If this is your first car, maybe just consider getting a cheap or used car and learn the ins and outs of car ownership. There are other things to consider like the gas mileage, maintenance, etc.
Good luck OP
Yup, great point. Many people understandably want to get a nice car once they make a good income or get their first "adult" job, but fail to consider that it's not just the monthly costs — payments and insurance — but also the ongoing maintenance costs, fuel costs, etc.
And that's not even factoring in the opportunity cost that's associated with spending $1,500+ per month on a car payment when that could be going to investments.
It is never recommended to buy a car that equals your annual income. Most recommendations are that you spend 20-30% of your annual income (conservatively), and no more than 50%. So most people would recommend that you be making at least $200k before you consider a car that costs that much.
I took out a 2.5 year loan on an $11,950 CAD/$8,900 USD 2015 Fiat 500 Abarth in 2020. I paid it off early. The total interest paid was some $750 USD/$1,000 CAD. The loan ensured I always had enough cash reserves to take care of any issues that might crop up during maintenance and mods.
It might not be a $100K USD vehicle, but man is this thing ever fun to toss around on twisty country roads! 😁
>Can you afford the monthly payment on a $100k car?
Plus interest.
Also, it's an M3.
I have an "equivalent" (no religious wars, please), the Audi RS 5. There's the ongoings too, on a performance car:
New tires? $2,000.
New brakes? $6,000.
And so on.
Can you afford to pay $2K for tires? $6K for brakes? That's the kind of numbers I see on my Audi RS 5.
I'll disagree slightly with the rest of the posters here in just that there's not enough info to give you any good advice. It all depends on what your overall financial position looks like. $100k/year is only one part of the equation. There's no way to reasonably give you advice without the entire picture. If you have millions in liquid assets, do it! If you're barely scraping by on your salary because you're paying $5k/month in rent, fuck no. What does your overall budget look like? What do your assets look like? Do you own your own house? What are your other life goals? Do you have a place to park it inside or is that an additional expense? Would this car be daily driven?
Find a used one. BMWs typically depreciate something crazy in the first couple years.
The caveat is the current auto market and the ‘M’ will probably hold its value a little better than most.
Either way, I don’t think a $100k car is a very smart financial decision. But as a car guy I totally see where you’re coming from lol.
the best feeling is having no car payments. my last two cars I bought used and paid in full with cash. I spent the first 10 years of my driving life with car payments and its just not worth it.
look in to used Luxury cars, you will be shocked how cheap they get after a few years
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All you need to be able to afford a 100k car is 100k in the bank. The question is more whether it's a good idea, and the answer to that is almost always no when it comes to expensive luxury items unless you think you've exhausted potential for having more fun for the same money (that's a lot of fancy vacations, for instance, or a lot of months rent in the event of an unexpected layoff). But only you know what you value so it's hard for someone else to tell you it's definitely not worth it.
As to how sensible a purchase it would be, that depends how much you spend on the rest of your life - housing, food, health insurance, taxes, etc - and your circumstances, eg do you have any dependents / is your job completely stable (are you 99% certain you will be earning this much or more for the next five years?) / how much do you have in savings / do you think you might have any big life events in your medium term (career change / starting a family / buying a house / moving abroad / etc). I can't really envisage a scenario where spending the entirety of your annual salary on a depreciating and expensive-to-maintain luxury is anything other than foolish, but depending on the above it might change towards "lol that was pretty dumb" instead of "holy sh*t he's completely ruined his future for no reason"
If you’re willing to sacrifice the quality of every other aspect of your life, such as housing and food; yes, you can afford it.
But of everything else in your life you can invest $100k in (your health, your education, your retirement, your home, your future children, your friends, your family, your real investments) is your vehicle really where you want to spend $100k? which with interest will be $200k?
Were I you, I’d make a budget defining ALL my expenses, including how much i want to put toward savings and my retirement, and see how much money you’ll have left at the end of the month. Then I’d ask what vital parts of my life would benefit most from additional sums.
Then I’d allocate that much more to those areas, and once I’m satisfied that everything is taken care of and I have “free” money at the end of the month, i’d check to see if that’s enough to afford the vehicle i want
If it ain’t, I need more money; if it is, I’ll look into it
I would never buy a car that was equal to my annual income. Let’s start with that as a benchmark.
My parents would say, “only buy a car if you can buy it outright.”
Now on the same token, if you’re a truck driver or you commute is long to work, then you can justify more money toward a vehicle for both practicality and comfort, but that doesn’t seem to apply here
To me it’s less about income and more about net worth. If your making 20k as a fry cook and have 100 million in the bank you can buy a 100k car. I wouldn’t want more than 10% of my net worth tied up in depreciating assets. So by my rule of thumb your need 1 million in the bank.
I have a 2000 z3 and I love it. Bought it for $10k
Make sure you can afford the maintenance too. BMWs have expensive parts that need repaired or replaced more often than boring, reliable cars
I always see nice cars out there and think people are doing better then me, but then I see posts like this and immediately feel better
I would venture to say 200k after tax to be safe. 200k gross is not enough to take on a 100k depreciating asset and still have enough leftover for retirement and other life goals. Unless you are planning to live in the 100k car, then ok.
You can afford it but you shouldn’t do it
I have a 2002 BMW e46 M3 that I bought back in 2012 for 23k. That car has been the best car I have ever driven. However, I would not spend 100k on the new M cars. Look into the e46's and make sure the VANOS and Subframe have been done.
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Keep in mind the maintenance on an M car is amplified quite a bit. Performance everything parts that have shorter life cycles to replace. Tires go fast, brakes are very pricey, spark plugs every 10k to 15k, etc. The mechanic labor rate is amped up for an M too.
I got a used M2 comp that was still under manufacturer warranty for a little less than a year. Enjoyed it for 6 months and moved on. Whelped a lot of money, glad I scratched that itch, but honestly it wasn't worth it.
All that to say, the way I did it is a more practical approach than buying new.
Will also say you'll find a 340i isn't that much of a compromise vs. the M3.
I've owned a 135i, 128i, and M2 comp. In reflection my favorite was the 128i, it was still quite fast and great handling but it was simple more agreeable in traffic. The M2 only wants to go fast and isn't fun inching along, granted being a manual didn't help that.
Pretty much same numbers. Bought a 30k car, making 130k. And I thought I was kinda stretching it.
If you already have a car worth about as much as an m3 move to PA. You can use the insurance payout from totalling it in a deer hit to buy an M3. 😆
LOL..right! And that thought alone will go right over peoples heads!
Unless u got a bunch of money saved up n that’s like prolly 1-1.5+ mil but that’s a lot still for being ur yearly salary
We make somewhere in the 450k-800k range. Our cars were 39k and 52k. Would need to make a lot more to drop 100k on a single vehicle.
My beater is dying and I'm struggling with the decision to buy in this range with the same salary. It's more the opportunity cost that gets me: I'd much rather invest in retirement or save for building a house than put that money into a car. But man the reliability would be nice! : )
Don't do it, you don't need a robot child who will drain your money
It would be totally insane to buy a $100K car on a $100K salary. Youre basically working just under 2 years to pay for it after taxes, I cant even fathom making a purchase like that with your salary.
What's your goal in life? You want to look cool or retire early/comfortably? My wife and I make $300+k and a few years ago got a $40k highlander (new) on a great deal. Cars aren't investments and just get us around.
Are you maxing out your 401k? Are you maxing out a Roth IRA? Do you have 12 months of expenses in an emergency fund? Those are the kinds of questions that come to my mind, but I'm fiscally conservative/responsible and want to retire early.
JD
Werewolfdad t1_iy9sz7c wrote
> However, is it realistic to spend nearly 100k on a car when I’m only making 100k per year?
Not unless you have a massive amount of savings