...and that speaks to societies problem with people buying things they can't afford and the auto manufacturer's success in getting people to buy them anyway!

....carry on.


Dave

 

You are looking at it the wrong way.

Use your heart and not your brain.

An F-Type is an emotional decision. I was going to get a Porsche Carrera S - I was iffy. Then I drove the F-Type V8S and I knew after 100 metres of my test drive that I was getting it.

 

.....and who are we to judge what somebody can afford or not....or what someone does with their money. If everyone in the world waited around til they're able to afford what they really wanted, the vast majority of them would be dead. And capitalism would cease to exist. Do you think everyone who buys a F-type (let alone any car) pays cash? The auto industry exists because of financing. The so called "American Dream " is made possible for the vast, vast majority by this thing called credit.

 

Very true . . . credit is the lube that keeps the economy running. Credit drives sales, which keeps industries and businesses open, which creates jobs, which produces income to pay off credit. Without the lube, the economic engine stops running.

 

As W.C. Fields once Said "The Eighth Wonder of The World......Compound Interest "

 

I made it all the way to retirement, with rarely a car note. But now the decision is a little different. To get extra cash, I have to take it out of an IRA, or 401k, and lose whatever that may be earning at the time. When the F-Type I ordered arrived in December, JLR had a Christmas special, and paid me $1,000 to finance with them, for 1.9%. which effectively knocked the rate down to about 1.5%, and I usually make more than that on my investments. So, now I'm paying a car note.

 

Nothing wrong with that...in today's low interest lending environment it makes perfect sense.

Some will say if you don't pay cash, you can't afford it. IMO, those people are misinformed or still believe President Carter is in office.

100k if invested in a 5% tax free muni bond, pays out 5k a year interest. 100k car loan at 1.5% costs ya 1500 a year. Why would anyone think that paying cash is the only option, in fact in this case it is the foolish option.

As an added bonus, if you need to access that money for an emergency you have it available rather than having to sell a car.

(With that being said, I typically buy cars in cash and have never spent more than 40-50k).

As well, the interest rate environment will be changing, and this technique will no longer become a useful strategy.

A bonus for you, being retired, if you pulled all the money from an IRA or 401(k) at once you would get hit hard with taxes, better to spread it out! Congrats, you are doing right!

 

Correct, my brain is way overrated....gonna have to locate that cold dead heart of mine and follow it to the dealership...

 

Ohhh...please tell me where I can buy 5% muni's. (Please don't suggest Flint or Detroit)
Last time I saw a 5% muni was also back in the Carter days. I think they're currently running 1.6 to 2.6% depending on maturity.

 

Most of my bonds are right around 4% (all Michigan). And actually Detroit would be a great investment right now. Its on a meteoric comeback. :-)

 

PenFed currently offers a 1.49% refinance for 'new'. 6 months back is was 1.0%.

I bought used through a dealer to get an incentive and refi'd with PenFed to 2.0%.

Just like you I couldn't bring myself to pay out cash when I could get a better return on that money with low risk.

 

If 'afford' only relates to cash stream I agree with you, but personally, I've never viewed it that way. As a financial advisor I'm sure you try to make sure your clients understand what 'afford' really means.

Income is just a piece of the puzzle and yes, too many only think about a 'monthly payment' and then go get themselves into trouble.

I did find your original post odd as either you find personal 'reward' in buying an F-type or you don't. You obviously can truly 'afford' it as you know the impact to your current wealth as well as the likely impact to it down the road. Not sure why anyone else's opinion matters here. If 100% of folks say buy it, but you don't get enough personal satisfaction out of it, then you are a fool to actually buy one.

I don't even own an F-type, but any purchase (even a $100 one) should be made with the same thought process...is the enjoyment/personal reward/fun/etc worth it to the buyer? There only ever is one person that can answer it.

I see from a later post you are going to go look at an F Type. Have fun!

My advice is worry a little less about what anyone, anywhere thinks.

 

I am a Financial Planner and a CPA. I am in a similar income bracket like you, but much older in 60's. My advise to you as a FP, is look at what % of your net worth is this purchase? If it is close to 7 to 8% of net worth, I would advise against it. Of course if your Net Worth is in multiple millions, it's ok. You are young and did not mention about children. Have you built up a college fund? College costs are astronomical, Have you funded your retirement? Since you seem to be the main earner, you must aggressively fund retirement when the going is good. Financial services business is very dynamic and things can change very dramatically and may reduce your income potential.

Since you are a FP and were very open, I have added my sincere opinion. If all the pieces of your financial puzzle are in place and you feel comfortable, go ahead, if not it's a no go.
I must add, I am dreaming of a Porsche Cayman, new vs used. Still thinking deeply about it, though I can afford to pay cash.

I personally feel a brand new car with that kind of price tag is a stretch, when you can get a similar experienice with lesser priced cars, especially when you change cars every couple of years.

I hope I have not offended you on this. Interesting and legitimate question you have raised. Hope you get the clarity.

 

Sorry that was for illustrative puproses, however finding 4% selling at par may take a little patience, but doable. (Obviously that would be a long term bond and other items must must consider with that).

 

I don't judge what individuals should do (other than my kids!) but people as a whole carry far too much debt IMO.....a symptom of todays entitled society. ....but whoever said it's good for the economy is right so spend away!

Dave

 

Your question at the end is "do you make enough to get this?" Yet I think you answered it already yourself. I'm honestly not sure if you're looking for justification as we know the prospect of buying high end cars, watches, homes, is all subjective.

 

Good advice, not offended at all, I haven't looked at it from the net worth angle, which I probably should do.

In general, for my income, my networth would be on the lower side, part of which is due to my age, as well as the "good money" only starting coming in about 3years ago.

4 rental properties on average with about 13yrs left before they are all paid off.

No kids-I guess kids in the future are a possibility.

Maxing out Roth(k), historically receive a 5% (of gross income) PS contribution from employer, max out after-tax employer plan contribution-convert that to Roth(k), and lastly max out non-deductible IRA and convert to Roth yearly. It is a good chuck of change, but have only been doing it for about 3yrs.

College is expensive, IMO, that would be that would be funded after a F-type like purchase. Not because I think it is a bad idea, perhaps from how I was raised....my parents bought my books in college. I worked and took out loans and somehow made it. My buddy, I call him "the doctor," was working on his undergrad for 9yrs....and you will never guess who paid for every year of his schooling (and boarding)....it wasn't him.

I am sure I may feel differant once/if we have kids, but in my mind, 529's are for rich grandparents to fund and the very kids who want to go to school.

I don't want to sound like I have a cold, dead heart, I would definitely help or do something like, "I will pay for years 3 and 4, based on your performance in years 1 and 2."

Probably best if I do hold off a little and see how the new Department of Labor regulations will affect me.

Thanks for the input!

 

Exactly.

It never fails, about 5 minutes after meeting any car salesman they ask what you want you payments to be. Not sure why so so many people fall for this...just sets you up to have poor terms on a car that, thanks to he dealer's finance department, you can now "afford."

 

We had over 5% money market in early 08'. Investment grade, 5% munis only became scarce about 3yrs ago.

Heck, part of Obama's stimulus package was Build America Bonds...many paying well over 5%, (in full disclosure, those were federally taxable).

 

With your income level, if and when you have kids funding $ 500 pm per child from day one would be sufficient to fund a four year public college. I feel the best gift a parent can give is the gift of education. Think about it. I put my son in Med school and daughter in Law school. Very satisfying to see they have a great head start in life just like my dad did for me. Looks like you are a deep thinker and I am sure you will succeed well. Good luck.