| Author | Message | ||
| Collin Hays (Chaysintexas)
New member Username: Chaysintexas Post Number: 22 Registered: 4-2002 |
If you are going to be a bear, you might as well be as GRIZZZZZZZLY. | ||
| Dave Wapinski (Davewapinski)
Member Username: Davewapinski Post Number: 258 Registered: 8-2001 |
I have been through 2 IRS Audits. They seemed to be looking if I had a car seperate from the corporate vehicles. Did not have an exotic at the time. I know people who use exotics as company cars. They report no problems. Is having an exotic as a corporate car really that much of a problem? | ||
| Chuck Babel (Chuck_98_rt10)
New member Username: Chuck_98_rt10 Post Number: 18 Registered: 5-2002 |
The IRS has waaaayyyy too much power. The first thing to do about that is to cut the IRS budget thereby reducing the number of agents. | ||
| Horsefly (Arlie)
Junior Member Username: Arlie Post Number: 53 Registered: 5-2002 |
In 1985, I bought my 1980 Corvette from a guy that owned a carpet laying business. The title was in the name of his business. How many rolls of carpeting do you think he ever carried in that Corvette? I think he was pulling a fast one on the IRS. | ||
| martin J weiner,M.D. (Mw360)
Member Username: Mw360 Post Number: 479 Registered: 5-2001 |
One yr after buying a new '79 Aston Vantage had an IRS audit.(my accountant deducted 80% of the car for business purposes) Tha agent said "the Doctor can drive a Chevy for work-he doesn't need an Aston Martin" ---and disallowed all but 10 %(and I had all the documentation) so be careful. | ||
| Bill Steele (Glassman)
New member Username: Glassman Post Number: 48 Registered: 4-2002 |
Martin, I agree that the IRS sucks. But after being audited by an over zelous agent, and hashing thru paperwork as old as 1985, I think I can give some educated advice. Your leasing idea will fly only until you are audited. They will rip you apart on that one, trust me. | ||
| arthur chambers (Art355)
Member Username: Art355 Post Number: 506 Registered: 6-2001 |
Frank: That works, but if and when you get called for an audit, and they ask to look at the car, once they see it you're in trouble. I think I called the car "Art's Car" on the tax return. You should have seen the look on the young agent when she saw what Art's Car was: a red 930 Targa slope nose(NOT a look alike, a real one, with the dial up boost, etc.: turn the knob and go from 250HP to 600HP). From that point on there was grief with them. Still is. | ||
| Frank Parker (Parkerfe)
Intermediate Member Username: Parkerfe Post Number: 1027 Registered: 9-2001 |
Martin, don't you have to claim the lease payments you make to your lease company as income ? If so, doesn't the tax on the income cost more than the savings from the deductions ? | ||
| Frank Parker (Parkerfe)
Intermediate Member Username: Parkerfe Post Number: 1026 Registered: 9-2001 |
Arthur, now you know why I call my 348 a Dino instead of a Ferrari ! It throws off the IRS. Mayby I'll start just calling it by it's corporate umbrella name, Fiat. What IRS agent would question you claiming depreciation on a Fiat ! | ||
| Martin (Miami348ts)
Intermediate Member Username: Miami348ts Post Number: 2366 Registered: 5-2001 |
The IRS sucks! They allow a max of $ 3000 in depeciation in a vehicle although we all know that a regular car depreciates much more. My wifes CLK 430 depeciates more than that and we can only deduct $ 3000 per year. Worse, if you actually sell and can prove you lost $5,000 on that car that year, you can still only make $3000 count. Solution: I have to create my own leasing company and sell the cars to my leasing, lease them back (now you can deduct the full lease amount). The initial expense is fully deductable for the leasing company, so for the next 3 years the leasing has a carry over loss and the income on the lease will slowly offset this by 36 month there is no more to offset. That is when the leasing company sells the car for $1.00 to a private party, or my dealership and no prifits have been paid and the other business could fully deduct the lease amount, thus, the IRS gets screwed! Proving you need that car? Where is the difference between owning a 2002 Mercedes S 600 as a business car ($90,000) or a 348 ($55,000). Both cars are used to impress your customers. I can see my wife showing up in a Jugo trying to sell a $1.5M mansion. Yes, that brings a lot of confidence in your client. "She must know what she is doing, she drives a Jugo after all". There is an attorney here in Miami, who bought a Lambo Diablo and since he parks his car under his office building, clients are coming in and he has more than doubled his business. Yes, it does not work for everybody, but I would argue that case for most people. A Expedition will cost you the same! | ||
| David White (Dwhite)
New member Username: Dwhite Post Number: 1 Registered: 7-2002 |
Cash is king right now, Why part with it(the buying opportunities in the market are near). Besides, what about inflation? Financing during an inflationary time frame gives you the opportunity to pay the loan back with much less valuable dollars. As for cars depriciating, speak to anyone who bought 60's vintage/race cars in the late 60's and 70's - huge appreciation. To the question of at what income level is required to buy an exotic, I agree this is a very subjective question, but the ROI is usually calculated in smiles. Seriously, exotic cars require extreme maintanence with expensive parts and if you can't perform the work yourself be prepared for some sizable outlay from time-to-time. The initial cost is just one component to the overall ownership of the car. As my parts guy once said "Ferrari parts are 10X what you think they should cost"(ie: distributor caps $200 - $400) | ||
| arthur chambers (Art355)
Member Username: Art355 Post Number: 504 Registered: 6-2001 |
Ross: Maybe we went to the same school. I never buy new either. I do have one bone to pick with you however: writing off an exotic may not be a great idea. If you have ever been audited, and the irs agent sees the exotic, there is trouble coming your way. Even if you can document with a log, all of the mileage for a business purpose, you better have a lot of reasons why you need an f-car to drive, otherwise you run the risk of tax court. Having been there, I hope no one on this threat is forced to document that to an irs agent. Art | ||
| bruno bandaras (Originalsinner)
Junior Member Username: Originalsinner Post Number: 195 Registered: 5-2002 |
It's all relative to me. People making 35k a year think nothing of signing up for a long loan for a 40k+ minivan/suv.I think what matters most here is are you PAYING the money for it or are you going into DEBT (borrowing) the money for it? Makes a difference regardless of your income level. | ||
| Racer 001 (Mr_0011)
Junior Member Username: Mr_0011 Post Number: 70 Registered: 3-2002 |
I can't really speak here, but people I know with 'exotics' tell me it's best to pay cash for the toy. | ||
| Martin (Miami348ts)
Intermediate Member Username: Miami348ts Post Number: 2347 Registered: 5-2001 |
BTW I think you should treat borrowed money the same way as your own, after all you have to pay it back at one point or another. | ||
| Martin (Miami348ts)
Intermediate Member Username: Miami348ts Post Number: 2346 Registered: 5-2001 |
Dave, I totally hear you. The 100% increase was a one time deal and I do not expect this to continue to happen. The question is not really that if it increases or not. That is a side effect and we all know in the long run it will increase. Taking the money and buying a property with a return will give you a return at the same as the interest rate you are financing your car, therefore the tenant at the propety is paying your car payment interest. YOu just pay the principle. I agree that too many people see the quick buck and use other peoples money to make that buck and mostly end up getting bitten in the ass. As I said the overextending is what kills, not borrowing on your car. 20% cash down on everything so you can unload quick if need be. | ||
| Dave Wapinski (Davewapinski)
Junior Member Username: Davewapinski Post Number: 249 Registered: 8-2001 |
Ross, I would not call you a Cheap Bastard, but smart. However, I do not understand your logic of if one can deduct part as a business expense, then lease or loan. It would seem that the same logic would hold. Of course, the interest is deductable. However, so would increased marketing to get more business. It seems that spending more on things like increasing sales, increasing skills, etc. would make more sense than spending more on interest. One still gets the tax deductions. Paying with cash increases discipline. I have seen companies spend minor fortunes on modernization with little increases in quality, production, or sales. If spend cash, makes one consider everything and make hard decisions. Does one really want to spend the cash here or there? This cuts down on initial investment money. However, discipline and savings on interest can also increase investment money. Martin, has the market continued to double since then? I have known of people who make a small fortune, then overextend to make much more, and end up losing almost everything. People with unlimited credit make much at one point, seem to go overboard and then lose everything. I think paying interest on real estate investments make sense if conservative. Real Estate can go down also. I believe there was a real estate bust in CA in the early 1900s. On toys - why pay interest unless it is extremely important for some reason? I have seen many people loose their shirts on stocks on margins. We know that things will change, just not when or in what direction. Just what I have seen of life. Dave | ||
| bruce wellington (Bws88tr)
Member Username: Bws88tr Post Number: 483 Registered: 4-2002 |
where i cant tell you guys which way is the best way, i simply took my old mortgage for my house was 7%(1998) with 170,000 left on it , refinanced it to 240,000 with a 4.5% rate i got from my company(eveready battery company)paid out for the f-car,payments are even smaller with a lower rate and still enjoying the interest tax break | ||
| Martin (Miami348ts)
Intermediate Member Username: Miami348ts Post Number: 2341 Registered: 5-2001 |
Ross, right on! Did we go to school together? The Cheap Bastard College? | ||
| Martin (Miami348ts)
Intermediate Member Username: Miami348ts Post Number: 2340 Registered: 5-2001 |
I bought my 348 in 2/2000 and paid $ 56,000. I financed $ 45,000, so if I needed I could sell the car quick and still not worry about coming with money to get rid of the car. The car today is still worth $ 50K. As far as what I have done with the other $45K that I did have cash at that time to pay immediately, I invested them in Real Estate. Since 2/2000 our market has almost doubled, so in essence I made another $40K with that money. I can actually show you that on the property I bought right after the car, with the money from the car. My payment is $1466.01 per month and in a few more month is paid off. I never had to worry about that payment, because the income from the property I bought almost paid for that payment. Again, I stand by my statement that strapping yourself short is what kills people in this country. I like to see 20% cash in every deal for the rainy days. | ||
| ross koller (Ross)
Junior Member Username: Ross Post Number: 162 Registered: 3-2002 |
seems to me there is another difference of opinion underlying some of these responses, and that is new vs used/old cars. which one you prefer tends to dictate your method of payment. i must admit that i am in the 'cheap bastard' category, whereby i have never, and will probably never buy a new car. all of you know the depreciation cliff that you face. to a certain degree this applies to newish cars that have not yet fully depreciated as well. if you can afford a brand new 575 for cash, god bless you and stop reading now. for those of us who love fcars and are always scheming how to get/afford the next one here is the way i (cheap bastard) look at it. if by some way you can write off some of the expense of the car, then lease it or buy w/ a loan, and use your cash for other investments. if this is not possible, then you have to make the calculation of how much you want to pay for fun. if you just can't stand not having the latest hot rocket then you can also stop reading now. for those of you looking to get some relatively 'cheap' fcar adrenalin, then pick out the older model that has already dropped considerably down that depreciation curve. i know all this may sound patronizing, sorry. but i have done this a few times with cars (see profile) and i have rarely lost money (vs owning run-of-the-mill transportation). the 348 broke even over 18 mths; the 512tr i now own, is worth more than i paid for it etc etc. then you can pay cash, get that peace o'mind feeling, and still not lose money (and thereby tell your wife 'its an investment honey'). so you don't always lose money on cars if you buy right from the start. imho | ||
| acw (Acw)
New member Username: Acw Post Number: 49 Registered: 2-2002 |
In my opinion, a loan is only interesting to buy a good or property which value will likely go up, not down. Most cars unfortunetly only depreciate. I believe buying cash is cheaper, because you only pay the depreciation, not depreciation + loan interests. I know that smart investors disagree. That's because they can offset loan interest with great investments. The problem is that most people don't invest that well, and end up paying way to much by paying interests. My $.002 ACW | ||
| nick m........ (Nickm)
Junior Member Username: Nickm Post Number: 93 Registered: 8-2001 |
TWA, What kind of interest are you paying for that car loan? What is the total cost of that $50,000 car once your done making the payments on it? I love no payments on things like cars. I would rather score a deal on a car because I did pay cash, drive it for a few years, then sell it for what I paid for it (or maybe make a few bucks). Viola... free car! Ive done this many times. I would not like making that payment EVERY month, while the value of the car is going down. (unless its being paid for by a (my) company) | ||
| Ernesto (T88power)
Member Username: T88power Post Number: 460 Registered: 2-2001 |
You are exactly right TWA... Ernesto | ||
| TWA (Exoticars)
Junior Member Username: Exoticars Post Number: 76 Registered: 8-2001 |
Never ever never never ever never pay cash for a car!!!!!!!!!!!!!!!!!! EVER! Unless it's a $2,000 heap of crap to go to Home Depot with. So I guess that's not 'never' then.  The car is absolutely guaranteed to be worth less tomorrow.. or even minutes afrter your purchase. If I told you that I had an investment for you that would cost you 68,000 and next week it was pretty much guaranteed to be worth about 64,000, would you buy from me? By the way, I also believe that you can comfortably afford a 50k car with a 100k income. Payments around $900/mo. can easily be afforded on 5-5.5k/mo. net pay even with a 2k mortgage and still save plenty. Here's another analogy..... You want to buy a building for 1M. You could pay cash. Would you buy it cash, buy 10 buildings with 100k down and finance the rest, or buy 5 buildings with 100k down/ea. and diversify the other .5M? The more diversified, the better. All into one thing (especially a depreciating piece of metal) is a very BAD idea. IMHO | ||
| Ernesto (T88power)
Member Username: T88power Post Number: 459 Registered: 2-2001 |
OK? Ernesto | ||
| BobD (Bobd)
Member Username: Bobd Post Number: 488 Registered: 3-2001 |
Ernesto, you are one interesting individual. | ||
| Eric Eiland (Eric308gtsiqv)
Member Username: Eric308gtsiqv Post Number: 315 Registered: 11-2001 |
You mean all of you actually P-A-I-D for your Ferraris??? My 308 doesn't cost me a dime -- some guy by the name of "Robin Masters" handles that for me!  Seriously though...Nick, if you're married with 3 kids and are considering a 50k-plus "car toy", then you would certainly want to factor the maintenance bills and insurance into the budget -- especially when considering cars in the 100k - 200k range. As far as income goes, I would think it would be relative to an individual's particular budget (income vs. outgo). | ||
| Marq J Ruben (Qferrari)
Junior Member Username: Qferrari Post Number: 52 Registered: 2-2002 |
Well said, Bob. Plain and simple & how true! Again, I concur with pay cash, pay cash, pay cash. Oftimes your 'good' investment decisions have nothing to do with the actual outcome. Often much is beyond the investors control. | ||
| Ernesto (T88power)
Member Username: T88power Post Number: 458 Registered: 2-2001 |
Making poor investment decisions is another subject... Ernesto | ||
| BobD (Bobd)
Member Username: Bobd Post Number: 487 Registered: 3-2001 |
Ernesto, three yrs ago I could have invested my money rather than pay cash for my 328. I chose to pay cash. My 328 is still worth $50K, my investments are.... well, I don't even want to go there! OUCH!!!! :-( Thank God I paid cash!!! | ||
| Edward Gault (Irfgt)
Intermediate Member Username: Irfgt Post Number: 1542 Registered: 2-2001 |
If you are living paycheck to paycheck and are on this board then you are living in a dream world. If you can pay for your car and then give it away without it hurting your financial situation then you are ready for a car toy. | ||
| Barry Wolinsky (308gtb)
Junior Member Username: 308gtb Post Number: 154 Registered: 2-2002 |
Nika, You could have had a 250 GTO and lived in the car. | ||
| Martin (Miami348ts)
Intermediate Member Username: Miami348ts Post Number: 2335 Registered: 5-2001 |
wanna see that intake manifold | ||
| Nika (Racernika)
Member Username: Racernika Post Number: 619 Registered: 12-2001 |
Martin - that's Martha Stewart not Steward.... I bet YOU don't even know how to make your napkins look like F-40s or make paper mache intake manifolds.....sheeeeeesh!!!!! | ||
| Nika (Racernika)
Member Username: Racernika Post Number: 618 Registered: 12-2001 |
hmmmmmm Well house paid off and 308 when I could of had a Daytona and a mortgage (Nika hitting head on desk) | ||
| Martin (Miami348ts)
Intermediate Member Username: Miami348ts Post Number: 2331 Registered: 5-2001 |
Why cares if you have an 8 figure income and get stock tips from Martha Steward ? | ||
| Michael Fennell (Mfennell70)
Junior Member Username: Mfennell70 Post Number: 63 Registered: 7-2001 |
If they're in the tech world, more than a few of those guys are regretting that expensive car now. I confess, I owe about 1/2 the value of my S4s but our house is the only other debt I carry. I could pay it off and probably should but I feel more comfortable paying a little interest than spending all that cash. My girlfriend has no debt at all besides the house. With the telecom industry collapsing around us, we still sleep pretty well at night. It's taken me far too long but I finally appreciate the obvious truth that you never get anywhere if you spend everything you earn. | ||
| Ernesto (T88power)
Member Username: T88power Post Number: 456 Registered: 2-2001 |
Well, first, in Puerto Rico, car payments are tax deductible. Of couse, the maximum limit is usually already reached by other "daily use" cars, so the interest on the Ferrari would still not be deductible. But, for example, the rate on my 360 loan is 9.95%. I can do two things: buy the car cash and lose the money to make investments or finance the car and use the money to buy real estate or other investements that will (hopefully) generate income/capital appreciation. I just would not be able to sleep at night knowing that I had $150,000 tied up in a car and could use to generate income. I agree that a home equity loan would be the best/cheapest way to finance a Ferrari, but it still leaves you will unused available capital for other things as the Ferrari is unleveraged. Of course, if your income is well into the seven figures and net worth well into the eight figures, then this discussion is moot and you can pay cash for everything. But my investment capital souces are fairly limited and I'd rather invest the cash than spend it in a car... Ernesto | ||
| Todd Chen (Tec)
New member Username: Tec Post Number: 36 Registered: 2-2002 |
I don't get it. You can get a car loan of 5-6% these days. If you could invest your cash and earn 7-8% or more, wouldn't it make sense to finance the car and invest the cash? The car is sure to lose money. | ||
| James Selevan (Jselevan)
New member Username: Jselevan Post Number: 19 Registered: 6-2002 |
Sorry for the duplicate entry - hit the button again after changing voltage regulator - Another way to look at this is that the purchase is actually a transfer of assets. If one purchases a $100,000 car, they have, for the immediate moment, not changed their net worth. However, two things will/may occur. First, depreciation will drop the value, and second, it becomes less liquid (then cash). In the worse case scenario, one will lose a proportion of the $100,000k, BUT NOT ALL OF IT. This, of course, assumes adequate theft and collision insurance. If they need the cash, they can sell the vehicle, and derive, for example, $70,000 back within a reasonable timeframe. If time is the pressing issue, then, perhaps, they will have to sell for $60,000. The take home message is not that the $100,000 is lost, but that some fraction of it may be. Not a great investment, but it can be thought of as the cost of having fun. No different than owning a boat, playing golf, skiing, etc. My thoughts. Jim Selevan | ||
| Jack (Gilles27)
Member Username: Gilles27 Post Number: 443 Registered: 3-2002 |
Obviously the cash/credit issue is one of personal preference. Nick, early on you said that "younger" members of the NSX board thought $100K/year warranted buying a car worth half that. If you have been earning 6 figures for a while, then yes. The problem I see a lot of is guys who have their first good year financially, and suddenly go out and buy an expensive car, pricey watch, etc. They get a "shooter" mentality and want everyone to see them and think they're millionaires. The time to buy the car is when you know it's appropriate. Generally, if you have to ask, it's probably too soon. | ||
| Marq J Ruben (Qferrari)
Junior Member Username: Qferrari Post Number: 51 Registered: 2-2002 |
Well expressed, Todd. After establishing credit/credit history as a necessity, there is no better feeling than not owing any bank/finance co. anything! I can't tolerate sharing anything I own with a bank/finance co.,etc. It's not truly YOURS if you share ownership, is it? Peace of mind, in this regard, is indeed priceless. | ||
| Todd Gieger (Todd328gts)
New member Username: Todd328gts Post Number: 18 Registered: 6-2002 |
I do not live "the American way" b/c financing everything does not leave me any sanity. I am married with 2 kids, 5 and 3 and have always despised paying bills even when I got out of college paying off the never-ending student loan. It is also due to the nature of your business...for me, being in sales I could have a slow month and then POW a boatload comes in. I agree you need a good credit history and you need to finance some things....but I will always argue with my accountant every year because (although I know on paper it is smarter) I like to live liquid and pay cash for almost everything simply because for me...you can't put a price on piece of mind. | ||
| Steven J. Solomon (Solly)
Member Username: Solly Post Number: 312 Registered: 6-2001 |
Although I pay cash for just about everything, I don't necessarily agree with the pay cash mentality for a car. I know many people with decent incomes (100-200k) who lease or finance 2nd cars, typically Porsches, Audis, M-B etc. just to have a "toy". Their incomes justify the monthly nuts, so god bless them. So what's the difference between financing or leasing one of the above, or substituting say a 348 spider (same price range)? Is it just the perception that a Ferrari is a frivolous "toy" while the Porsches and Audis are somehow utilitarian besides being sports cars, and thus are ok? I know one person using his f-car as a daily driver. What's the difference if he financed or leased a 70,000 P-car vs. the above 348? In fact, the 348 (or 355) has already gone through the depreciation curve, while the new P-car has not. all the above presumes you can afford the maintenance on a Ferrari. As a former Porsche owner- they ain't cheap to keep either. | ||
| russell rosenblum (Rosenblumr)
New member Username: Rosenblumr Post Number: 24 Registered: 6-2002 |
Ernesto: It depends. I generally agree, I leverage everything. But there is an interesting phenomanon with a car like this and financing. It is either being financed because it can not easily be afforded, or it becomes a small enough amount of $$$ that it is not worth paying the interest (which is NOT tax deductable). The best route is to get a home equity loan, up to 100k, use it for the car--this is fully deductable. Then (if you have more equity) borrow more money and use it for investments, such interest MAY be deductable as an investment expense. It is important that the first 100K is used for the non deductable item, and the later cash is used for normally deductable items. I never like paying interest unless I can deduct it. The spread on a car loan and a treasury not for the same term is quite high. So where are you putting that cash you financed to buy the car? If it is in the S&P you have a lot of risk reward to evaluate. | ||
| Terry Springer (Tspringer)
Junior Member Username: Tspringer Post Number: 122 Registered: 4-2002 |
Pay cash? Not me. I think the smartest way to look at any car is to compare its total cost on a per mile basis. One of the cheapest cars I have owned was my '95 Porsche 993. I bought it used for $46,000, drove it for 2 1/2 years and sold it for $45,600. During this same period my wife drove a '95 Dodge Stratus that had been purchased new for $19,000. When I sold the 993 the Dodge was worth only about $11,000. Neither car had required any maintenance other than oil changes. Even after accounting for interest on the loan, insurance and tag charges, the Porsche was a far cheaper car to own. If you buy smart and play the depreciation game right, you can come out very well in a high end car. I hope my 308 GTB will do as well. At least I dont expect it to depreciate. Then again, I dont consider any of my cars as just toys. If it cant be used for transportation purposes it wont be in my garage. After all... they are CARS! | ||
| Rob Lay (Rob328gts)
Board Administrator Username: Rob328gts Post Number: 1805 Registered: 12-2000 |
Too many variables to have a black and white answer for everyone. In my case Ferrari is one of the top priorities in my life and I make sacrifices because of it. I have a home equity loan for my Ferrari that's at 6% and the interest is tax deductible. My investments earn more than that. So I'm better off that I have another tax deduction, I have more money to invest, and my Ferrari won't depreciate like a $35k BMW (that is within my means). I think all my future Ferraris will be cash though. | ||
| Marq J Ruben (Qferrari)
New member Username: Qferrari Post Number: 49 Registered: 2-2002 |
I concur with the "pay cash" opinions expressed. It's the only way to go. | ||
| russell rosenblum (Rosenblumr)
New member Username: Rosenblumr Post Number: 23 Registered: 6-2002 |
Income is just one component. It is also about net worth, and other debt level whether or not you are paying cash for the car. If you own a million dollar house with no mortgage and have 1 million in the bank (or safe assets like bonds etc). You might make 100K per year, and buy a ferrari for cash (or finance it). It would be like 20% of your cash or 10% of your net worth, but it probably would still be ok. OTH if you have that same house and same cash with a 900K mortgage, and the same 100K income (not that you could get that mortgage), you woul dbe INSANE to spend 100K on a car. If you own no house, have no cash in the bank, and make 500K per year, a 100K car is still a bad idea. My advice: 1)Own a house 2)make sure that even if your salary is cut in half you can still pay the mortgage 3) have at least 6 months living expenses in cash available AFTER buying the car. 4) Then buy the car (preferably with cash). 5) if you have to finance, make sure you have at least 1 year of living expenses in the bank and borrow against the house to buy the car (better interest rate), if things go bad SELL the CAR before they foreclose on the house. 6) Do not buy a car over list (ie a 360 spyder for 250K you cant risk the depreciation). 7) A friend of mine once told me: You should spend 2% of your net worth annually on toys." So if you are worth 5M, you can ignore all of the above and just buy it Quite simply will purchasing this car change your lifestyle in anyway assuming worst case scenario? Are you willing to live with that? | ||
| Ernesto (T88power)
Member Username: T88power Post Number: 455 Registered: 2-2001 |
Never pay cash for anything... make your money work, not sit there idle in car or a home. If you cant think of anything worthwile to invest your money in, then sure buy it cash. But I couldnt dream of buying my 360 cash... that money is put to good use to generate income! Ernesto | ||
| arthur chambers (Art355)
Member Username: Art355 Post Number: 500 Registered: 6-2001 |
I agree with the cash argument. Since this is a toy, you can't afford it if you can't pay cash for it. Unless your income is beyond your needs and you have disposal income sufficient and guaranteed to pay the payments, you can't afford the car if you can't pay cash for it. Art | ||
| Tyler (Bahiaau)
Member Username: Bahiaau Post Number: 323 Registered: 12-2001 |
I agree with the "pay cash" mentality. Do not make the mistake of confusing income for wealth. The most important factor is your net worth, not your income. | ||
| James Selevan (Jselevan)
New member Username: Jselevan Post Number: 18 Registered: 6-2002 |
Another way to look at this is that the purchase is actually a transfer of assets. If one purchases a $100,000 car, they have, for the immediate moment, not changed their net worth. However, two things will/may occur. First, depreciation will drop the value, and second, it becomes less liquid (then cash). In the worse case scenario, one will lose a proportion of the $100,000k, BUT NOT ALL OF IT. This, of course, assumes adequate theft and collision insurance. If they need the cash, they can sell the vehicle, and derive, for example, $70,000 back within a reasonable timeframe. If time is the pressing issue, then, perhaps, they will have to sell for $60,000. The take home message is not that the $100,000 is lost, but that some fraction of it may be. Not a great investment, but it can be thought of as the cost of having fun. No different than owning a boat, playing golf, skiing, etc. My thoughts. Jim Selevan | ||
| Jim E (Jimpo1)
Member Username: Jimpo1 Post Number: 535 Registered: 7-2001 |
I'll jump on the cash for toys bandwagon. If you have to finance it, you might want to reconsider. A friend of mine bought a vacation house about 18 mos ago and decided NOT to pay cash, even though he had it. He thought he could make more money in the market. Now the money's gone and he has a mortgage on the 2nd house. Cash will set you free! | ||
| BobD (Bobd)
Member Username: Bobd Post Number: 485 Registered: 3-2001 |
I absolutely agree with the posts below... when you can pay cash for them... esp an F-car. | ||
| ross koller (Ross)
Junior Member Username: Ross Post Number: 158 Registered: 3-2002 |
i tend to agree with frank. if you can pay cash (and still afford to eat) then you have sufficient income, and the question is moot. btw, as an interesting aside, a statistic that i love to quote is that the richest 1pct of america has a debt to equity ratio of ....... 3pct. | ||
| Frank Parker (Parkerfe)
Intermediate Member Username: Parkerfe Post Number: 1019 Registered: 9-2001 |
Never finance a toy. It is and has always been my opinion, based on what my father taught me, that you only finance necessities, never toys. If you can't pay cash for a toy, then you can't afford it. | ||
| Dave (Maranelloman)
Junior Member Username: Maranelloman Post Number: 231 Registered: 1-2002 |
I'm gonna take a contrarian view: that you should only buy a car that you could pay CASH for without seriously harming your life, if you chose to. | ||
| bruce wellington (Bws88tr)
Member Username: Bws88tr Post Number: 476 Registered: 4-2002 |
solly nice pictures with adam at poconos, sorry i missed it.. | ||
| Steven J. Solomon (Solly)
Member Username: Solly Post Number: 311 Registered: 6-2001 |
If you are single with no kids you have a lot of disposable income, and few future obligations like college tuition, etc. Take your annual salary after taxes, reduce it by average estimated monthly living expenses and pension plan contributions(be realistic, and always put something away for a rainy day-my dad taught me that 10% of after tax income to savings works well), and use whatever is left over to indulge your hobby. So, if you earn 100k, taxes are approx 40k, living expenses in New York City for a small studio and 1 meal at McDonalds each day=50k, you have 10k to spend on your dream car. Or, spend 50k on the dream car and finance over 5 years, and use the 10k to pay the nut. Buying a 100k car on 100k income might be fun, but you will never become truly wealthy with that philosophy. Read "The Millionnaire Next Door", although I do not agree with his philosophy of driving cheap American metal to become wealthy. You must have some fun or it's all boring. | ||
| Bill Sawyer (Wsawyer)
Member Username: Wsawyer Post Number: 320 Registered: 2-2002 |
Be careful when looking at income statistics. Some come from surveys (people lie...really?), others come from demographic data companies that estimate income based upon occupation, home values and other voodoo. Sometimes they are accurate, sometimes they aren't. $100K/year with a wife and three kids is not much in the US. You might be able to afford a $50,000 vehicle if it's your only car, but how will your spouse get around? Figure two $25,000 cars at that level. And don't lose sight of Martin's advice. Situations change rapidly in today's world. | ||
| TomD (Tifosi)
Member Username: Tifosi Post Number: 937 Registered: 9-2001 |
Nick Take a look a average incomes of a particular model car - all manufactures keep the stats. I saw in the WSJ that for a range rover (50k+) the average income of the buyer was like 80-90k. I wonder if people lie when filling out the surveys. Maybe they think the irs will be after them | ||
| Martin (Miami348ts)
Intermediate Member Username: Miami348ts Post Number: 2329 Registered: 5-2001 |
I do not believe in formulars but in general that formular sounds somewhat right. More important is that it will not hurt or strangle you. Best if you can afford to pay cash for it, even if you finace it and use the money for other investments. Remember your income today may not be your income tomorrow and that is litterally the case in this current market. Today you are employed by Worldcom and tomorrow Martha Steward is selling her shares and you are "Living"! | ||
| John Li (Pchop)
New member Username: Pchop Post Number: 9 Registered: 6-2002 |
Nick: someone once told me that to be practical, you should buy a car that's worth about half of what you take home (after taxes)...and a house that's twice what you make (before taxes). But then again, Ferrari is not exactly a practical car... | ||
| nick l (Nsxnick)
New member Username: Nsxnick Post Number: 42 Registered: 7-2001 |
actually, i wasnt asking for advice. i am not married nor do i have 3 kids. i was using the scenario as a basis for ballpark estimations. i was curious to see what ferrari owners would consider "living within their means". there was a similar thread in the nsx board and some of the younger members thought $100k/yr was more than enough for a $50k car... which to me is ludicrous. | ||
| William Huber (Solipsist)
Member Username: Solipsist Post Number: 292 Registered: 9-2001 |
Maybe you ask your wife & kids to get their opinion. | ||
| TomD (Tifosi)
Member Username: Tifosi Post Number: 934 Registered: 9-2001 |
I don't think anyone can give you advice based on such limited info (not that I want more). You are really the one that needs to make that decision | ||
| nick l (Nsxnick)
New member Username: Nsxnick Post Number: 41 Registered: 7-2001 |
just curious... at what income should one consider purchasing a $50k, $100k, and $200k car respectively? lets say married with 3 kids. | ||
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