At what point does a new Ferrari become attainable?

Hi all,

I dont have a Ferrari yet, nor do i have the means. I have a newer BMW M3 that is draining my bank account!

I'm wrapping my brain around something:

I am 21 right now, sort of starting out. Im trying to invest what i have into assets, and not pickup too many liabilities. At what point do you start to be able to pickup liabilities that are at the F430 price level?

This may sound like a strange question, but i havent experienced it yet, and I have no idea as to how that point will arrive into my life?

Thanks! Great forum!

 

Oh my i don't think you are going to like this.

 

get rid of the m3. cars are terrible investments and at 21, i'm guessing you are endangering your future by wasting money on it. Like they say, if you have to ask, you can't afford it.

 

What you do is run a financial analysis of your current financial plan for important things like retirement,childrens education (if you have them),disability income,Buying your first home or your dream home if your a homeowner already,a contingency plan for loss of job ETC. If you have planned for all these contigencies and you still have left over monthly income then by all means live it up. If you dont have a spouse and family and that is why you have extra income dont make the move to an Fcar. you will just end up selling it and loosing money on it when you do have these obligations later. Jon in Delaware

 

+1

The insurance on an M3 must be brutal for a 21-year-old.

 

OK - contrary to the above, hang on to that M3. It will prove to be far better than any Japonobox you can replace it with for the same money.

The Ferrari will wait.

 

When you have liquid assets that are about 10X the cost of the toy you are purchasing I think it is okay. So if a 430 is $240k you need $2.4 million liquid (not equity in a business or house). At that point if the tables turn and you need some cash the toy should not be the reason for your downfall. Also, if the toy goes useless you should not be in a dire need to cash it out. Plus you won't be worried about it all the time.
BT

 

When I first read this I thought it was nuts. But then I looked at my situation when I bought my Ferrari and indeed it cost about 10% of my liquid assets at the time, so in reality I applied this theory without consciously doing so. It was just when it felt "right".

 

it's not about replacing it with another car. it's about getting out from under the debt and insurance. i could be wrong, but i'm assuming he borrowed to buy it. Even if he didn't the money could be used to much better effect elsewhere. Why an average 21 year old isn't driving a paid for 5k car is crazy financially. My brother was driving a financed 25k car when he was 20. I didn't pay over 20k for a car until i was 40.

 

I'm 21. I drive a camry. Its cheap on fuel, and cheap to run. Yes i dislike the car, and its lack of power, but in time that will change.
My brother drives a 96 toyota supra. He's just turned 18. His insurance is 3k per year. He is in 5k of debt and needs another 5k to go overseas next year. He chose to spend his money on his car which was fine, but it's costing him an arm and a leg to run, which i don't think he anticipated.
I'll only change cars when i have the means to financially afford it and keep it running.

 

Unless you have more than 2 million in liquid assets at 21...I think going out and buying a Ferrari or any other expensive toy is just about the worst decision you could make. Let that money make money for you and later on down the road you can afford all the Ferrari's you want.

edit: I know this doesn't apply to the OP but - I personally disagree with buying your 21 year old son a Ferrari even if you have more money than God. Instead, take that money and teach your son how to invest their money or how to open up their own business or buy a real estate investment property. He will learn valuable life lessons and it will also teach him responsible spending and the value of a hard earned dollar.

Give a man a fish; you have fed him for today. Teach a man to fish; and you have fed him for a lifetime

 

+2. Drive something cheap and fun like a Cooper or GTI, or if you want real practical a Honda Civic. Your goal at 21 should be to channel your money into something productive and prepare to buy a house once you're somewhat decided where you'll live and what you'll do for a living.

As has been posted here a thousand times, a Ferrari becomes attainable when you own the roof over your head (or have a realistic mortgage), have no stupid debt (credit cards being the worst), and have a paid-for daily driver in the garage.

I'd say you're ready for a Ferrari when you have all that taken care of, and you can pay cash for the car without tapping your retirement or other significant future investments.

The other tip is that insurance rates for these cars are probably obscene if you're under 30. Enjoy your 20s -- save the stupidly expensive cars for later when you're established in your career and can indulge in a toy or two.

 

Probably so. But, my point was that once you are into a car, trying to trade from upside down is just going to cost you money.

Also that the M3 might be enough to put off the itchiness until the right time comes along.

 

I knew of so many male adults 21-25 at my old job that lived with their parents and drove around 40k cars. It made no sense to me. Get out of the HOUSE and learn some responsibility!

 

so it doesn't cost him anything to keep it? it wouldn't be cheaper in the long run to get out of it? i don't think his itch is scratched or he wouldn't have posted how to get a ferrari.

 

The OP is not itching to get into a Ferrari just yet. He was just asking what kind of financial goals he needs to achieve to be able to afford a newer Ferrari.
BT

 

+100

In the meantime, a lot of members here are telling the OP why shouldn't buy a Ferrari now.

He just wants to know how far he has to go in life before actually being able to afford a new Ferrari.


And these posts from turbos7903 and BT both answer the OP's question:

~shahedc
.

 

it took me only 40yrs. to get mine. you can hold out awhile.
afterall, "good things come to those who wait".

 

+1

 

True, but the OP also contradicts himself in his original post...

That's most likely where he opened himself up to all of the free advice that he's getting beyond his original question.

 

Mine was simple:

Bought house and paid for it in 25 years
Put kid through college (2 degree's) no payments
No Credit Card debt
No open car loans
Large 401 K plan
Retired with good pension
Collect SSI

Own and repair my nice little 308

 

Three very simple rules:

1) security for your family with a paid off home, plenty of investments, and no debt
2) pay cash
3) the car should cost no more than 1/4 of your annual gross salary + investment income (unless your retired or have a liquid net worth of 10X the cost of the car)

Anything less than the above and you'll be living pay check to pay check and your car will become one of the many deferred maintenance examples out there. One more thing: stop watching those get rich quick bling videos. Nothing can be further from reality

 

You can buy a Ferrari at any time that you can make the payments. But a car like Ferrari (or even an M3) is not a necessity to get to work or transport family, so you shouldn't apply the same rules (e.g. typical transportation expense rules of thumb of 10% of income or car price no more than 1/3 to 1/2 of annual income). Ownership doesn't become stress-free until it doesn't impact your responsibilities and other needs and wants in your life; so that level will depend on what those other obligations and wants are (do you want to travel, want to own a plane or boat, be a high-roller in Vegas, want to send the kids to college, want to retire comfortably, etc). However, if you can make the payments for such toys and expenses out of annual investment income or better yet pay cash for the toys and expenses out of annual investment income (nominally 5% of liquid net worth, but depending on your actual returns), then that's the level of "affording" that you won't need to ask any questions.

 

Thanks for the great response! This forum provies a very unique viewpoint.

Ok maybe i should explain about my situation, YES i still live at home with parents, my goal is to be moved out in to a house with a reasonable mortgage for me by next year.

The M3 can be expensive for your average 21 yr old, but i have found one at a good value. It was $30,000 with 15,000kms. Its been in an accident, but the market value today should still be about $40,000. So its reasonable to think i can drive this car for a few years and not lose a dime on the depreciation. Insurance is less than my previous car + sport bike, so its not too bad. I owe about $20,000 on it and the monthly bills are a lot for me. But i can justify it because it was a dream for me. Being 21, financial freedom is a definite goal, but i LOVE cars and the M3 was higher up on my priorities list. Hey im only in my 20's once! (Definately backwards thinking on the path to financial freedom isnt it?)

I have a family friend who is in his late 50's, has been through a number of high-end cars. He would say "I wish i had this car at your age". So i took him literally. Although i cant hold a candle to some of the young drivers on this site!




Moving on, this is what im really wrapping my brain around:

Of course the purchase price of a new F430 (for example) would go far in a real estate investment, or business venture. But at what point do you have an additional $300k and say "ah i dont need the passive income this can create. I'll blow it on a car".

Some have said 10x the amount in liquid assets, and others said when it feels comfortable to do so, ad when your family is taken care of and when you have no debts.

I personally wouldn't wait till i have millions in the bank to buy one, because it is a goal that i want to happen sooner than later.

Any other responses from those who have actually done it would be great, i appreciate your input! It's a lot better than my random friend or family members advice, neither of which have a ferrari, or the means.

 

Wow so you are suggesting that I create a portfolio with 6 million in annual returns first?
no comments, im just absorbing opinions...