News

Ideal Supercar Expense/Income-Net Worth Ratio???

Discussion in 'General Automotive Discussion' started by dev98GT3, May 12, 2020.

  1. dev98GT3

    dev98GT3 Rookie

    Apr 12, 2020
    2
    Full Name:
    Joshua Melo
    Without being intrusive, since typical automotive financial affordability models don't typically apply to super cars, what would you guys say is the ideal or acceptable income or net worth to Total supercar expenses ratio?
     
  2. C50

    C50 Formula 3
    Rossa Subscribed

    Aug 19, 2016
    1,338
    808
    There was a long thread sometime ago examining that very question. I’m sure it’s out there in the search results. I feel like the consensus was about 5%. Obviously this is subject to significant variance based on personal opinion.
     
  3. maxemus

    maxemus Karting

    Apr 25, 2009
    96
    Miami, FL.
    Full Name:
    Ernie
    Do what you love and can afford to lose without changing your standard of living . I love cars. It’s my passion so I am getting deeper into the hobby. Image Unavailable, Please Login
    If they all disappeared tomorrow or we’re worthless I’d be fine.


    Sent from my iPhone using Tapatalk
     
    technom3, lewishou, DIGMAN52 and 7 others like this.
  4. absent

    absent F1 Veteran
    Lifetime Rossa

    Nov 2, 2003
    8,393
    illinois
    Full Name:
    mark k.
    I really don't like these price to income charts.
    Everyone's situation is different, saying that you need to be in a situation where the car cost does not exceed a certain percentage of your net worth is pointless.
    Maybe your income or net worth is not in that required zone but you have no dependents, that car is your passion and you can handle the expense or payments then go for it by all means.
    Your life is too short to bend it to comply with the "rules" made by others.
     
  5. Jo Sta7

    Jo Sta7 F1 Rookie
    Silver Subscribed

    Oct 13, 2015
    2,716
    Scottsdale/Pittsburgh
    Full Name:
    Jon
    I think you should be able to cover with liquid assets any super car or other silly purchase by at least 5x. That's bare minimum. If you don't have $1mm liquid don't buy a $200k car. period. People finance crazy deals though based on income and never put any money away. I have a little different situation having had a major business exit in 2019 but I lived by the 5x rule from 28 years old onward though. Now about 100x. Still applies.
     
  6. Auraraptor

    Auraraptor F1 World Champ
    Owner Lifetime Rossa

    Sep 25, 2002
    11,217
    MO
    I also agree its very person dependent. Numbers mean less the following questions:
    1) Will I incur net debt for this purchase? (after accounting for funds for savings, retirement, family expenses etc)
    2) Will purchase cost + upkeep costs + depreciation result in net harm to me/my family's lifestyle?

    Recall upkeep includes consumables, maintenance/repair, insurance, storage, etc.

    Also never assume appreciation...its a dangerous trap.

    Everyone's numbers are different and every car is different as they can vary wildly.
     
  7. RaceMX-M3

    RaceMX-M3 Formula Junior
    Silver Subscribed Rossa Subscribed Owner

    Dec 15, 2010
    488
    Frisco, TX
    Full Name:
    Scott
    This is such a subjective topic with limitless variables. Although I chose to finance a portion of my car for various financial and tax benefits I wouldn't purchase any depreciating luxury item car or otherwise unless I had the funds to pay cash for it - and not negatively impact other more important financial goals. I put enough down to keep what I owe below what the car will be worth regardless of how long I keep it or how much I drive it. I would think that should be a minimum requirement, my personal view.
     
  8. absent

    absent F1 Veteran
    Lifetime Rossa

    Nov 2, 2003
    8,393
    illinois
    Full Name:
    mark k.
    There you go, setting rules for others.
    Why factor 5?
    Why not 4 or 6?
     
    technom3 and Shark01 like this.
  9. Jo Sta7

    Jo Sta7 F1 Rookie
    Silver Subscribed

    Oct 13, 2015
    2,716
    Scottsdale/Pittsburgh
    Full Name:
    Jon
    pick what you want, but the point is to set a reasonable ratio that keeps you safe in a down time and stick to it. Why pick a fight?

    On a side note, you do realize that people make rules for others to follow constantly? Sometimes the following of such rules is voluntary, sometimes compulsory.
     
    anunakki likes this.
  10. ttforcefed

    ttforcefed F1 World Champ
    Rossa Subscribed

    Aug 22, 2002
    12,936
    i think you are referring to the thread roma started...it was a while ago...but if i remember correctly it was more what percentage of net worth do you have in cars as opposed to expenses.
     
    C50 likes this.
  11. Ianjoub

    Ianjoub Formula Junior

    Dec 22, 2019
    498
    Homosassa, FL USA
    Full Name:
    Ian Joubert
    It differs for everyone. A single young person with no other debt could finance their 'dream car' priced at 3x their annual income. I would not consider it wise, but it is their choice. A married person with several children to care for should be more conservative in my opinion.

    My car was priced at +/- 35% of my annual retirement income. I would cringe a bit if I threw a rod through the block and had to buy a new motor, but I wouldn't be down for long. I buck up and get it.
     
    anunakki likes this.
  12. RaceMX-M3

    RaceMX-M3 Formula Junior
    Silver Subscribed Rossa Subscribed Owner

    Dec 15, 2010
    488
    Frisco, TX
    Full Name:
    Scott
    If I was single now I'd be rolling in a La Ferrari. :D
     
    technom3 likes this.
  13. BMW.SauberF1Team

    BMW.SauberF1Team F1 World Champ

    Dec 4, 2004
    12,695
    What is being defined as a supercar? Price over a certain amount or just another name for an exotic? To me a supercar is an F40, F50, etc. Hard for them to be under $1 million I'd think. Are people financing cars that high???
     
  14. Thecadster

    Thecadster Formula 3
    Rossa Subscribed

    Apr 27, 2017
    2,268
    I’m going to devote my 2000th post to this topic because I am passionate about it. The “should I or shouldn’t I” question comes up frequently on the various automotive boards. And the resident super smart dudes with tons of money usually weigh in with something along the lines of wait until you can pay cash or until you have so much money that it simply doesn’t matter. That’s solid advice and certainly tough to argue against, but I will give it a shot nonetheless.

    First, like was mentioned earlier, there are really no formulas, rules, ratios, or criteria. Instead, taking the plunge is a deeply personal and deeply unique decision. I’ll share with you my own experience: my only regret is that I waited 10 years too long to get in the game. I erred on the side of prudence. I’m risk averse by nature, and wanted to build my reserves, my portfolio, and my businesses. However, had I known then what I know now, I would have strapped into a loan and made it work.

    What do I know now? Mainly, that cars, after my wife and kids, are by far my biggest passion. I go to bed thinking about cars, I wake up thinking about cars, and I spend all my waking hours thinking about cars. I think about acquiring more. I follow 200 cars that I am interested in. I have multiple searches set up on the various marketplaces. I think about various specs I would create. I learn everything I can about the cars I like. I research current cars, older cars, and future cars. I watch videos, all of them. Most of all, I think about my next drive. I let my mind drift to how the car feels, and how it makes me feel. Then, 3-4 times per week, I get behind the wheel for a 20-40 minute drive, mainly in the late evenings, but sometimes in the early mornings. I explore the two lane country roads in the various rural counties around where I live in North Carolina. I build my relationship with my cars through consistent driving experiences. Sometimes, I sit in my garages and just look at the cars; study the design, examine every detail. Often, I just sit in the various cars late at night.

    In sum, I’m a weirdo. I wish I would have known how much joy the cars would have brought me, I would have done it much sooner. So my conclusion, which will be controversial among this crowd, is that how bad you want it along with how much you will enjoy it, are in many respects just as important as the financial aspects. If you are anything like me, your passion will help you find a way, even if you take the plunge a little earlier than you should have. In the end, obligation creates ambition.

    Important disclosures, I’m not trying to give anyone license to be financially stupid. If you can safely buy a car, maybe you should. If you can’t, you shouldn’t. If you have a low debt load, a solid investment plan, a good income, strong job (or industry) security, and a favorable career trajectory or arc, go for it.

    To be clear, the “cash only” crowd and the “wait until the money is disposable” crowd are made up of very smart, very successful, very wealthy people. Anyone would do well to follow their sincere advice. Their’s is a solid strategy, but for the freak shows out there (like me), I submit a different path. A road less traveled.

    Writing this post inspired me to submit an offer on what will hopefully be my second pandemic acquisition. I had planned to only add one nice car this year to my collection, but f*** it...
     
    Andy348, lewishou, FLGT and 10 others like this.
  15. ferrariwithsnowtires

    Dec 17, 2005
    119
    My simple approach would be to keep the car purchase including sales tax to 2-3% of net assets

    So if you have $10 million, $200-300K for the car
     
  16. BMW.SauberF1Team

    BMW.SauberF1Team F1 World Champ

    Dec 4, 2004
    12,695
    That's just 1 car, but how much of your net assets would you be willing to put into multiple cars? 10%? 15%? 2-3% of net assets for collective value of multiple cars is pretty low....where else is the money parked for a car guy...
     
  17. Shark01

    Shark01 F1 Rookie

    Jun 25, 2005
    3,537
    Ugh.....crap like this drives me nuts, because it doesn't take lifestyle into consideration.....

    I have two $200k supercars, paid cash, and no where near $1M liquid. But wait, 75% of the money I used was outside my regular salary so no one is starving, bills get paid, Texas A&M gets their tuition, the wife has her 5.5 Karat diamond ring.....

    Everybody is different, formulas are useless....
     
    7ven11ven, lewishou, Ianjoub and 2 others like this.
  18. Shark01

    Shark01 F1 Rookie

    Jun 25, 2005
    3,537
    A real bad ass weirdo though.....
     
  19. Jo Sta7

    Jo Sta7 F1 Rookie
    Silver Subscribed

    Oct 13, 2015
    2,716
    Scottsdale/Pittsburgh
    Full Name:
    Jon
    so you have two $200k super cars and don’t have access to over $1mm in liquid assets? I’m including stocks/bonds in this. I’ll also include equity in real estate that can easily be pulled out. If the answer is no I’d say that was foolish. But hey, to each their own.
     
  20. Shark01

    Shark01 F1 Rookie

    Jun 25, 2005
    3,537
    As you know, I am none of these things.

    But I adhere to the cash only principle to keep my desires reigned into reality. Honestly, my wife would let me buy anything I want, from the lowest priced FGT in the country (suck it Hoovie) to a Carerra GT or beyond and let me finance all of it, because she trusts that I will not sacrifice family needs for play cars.

    So I choose to pay cash, because my job (rank and file 40 hour a week Engineer) can disappear tomorrow.....
     
    lewishou, Thecadster and ryalex like this.
  21. Shark01

    Shark01 F1 Rookie

    Jun 25, 2005
    3,537
    #21 Shark01, May 20, 2020
    Last edited: May 20, 2020
    Nope, none of these things add up to $1M.....

    Now the only real negative in my situation is that it takes time......I can't roll out of the rack and make like a you tuber and go buy stuff on the spur of the moment. The first time it took 9 years, the 2nd time 6 years
     
    lewishou and Thecadster like this.
  22. Jo Sta7

    Jo Sta7 F1 Rookie
    Silver Subscribed

    Oct 13, 2015
    2,716
    Scottsdale/Pittsburgh
    Full Name:
    Jon
    So a few thoughts. Number 1, the OP asked, so my response was my opinion. How someone chooses to live their life is on them. Second, I admire your ability to steadfastly save towards a goal. Third, I'd argue those were foolish purchases from a pure monetary/opportunity cost standpoint and that spending significant portions of your net worth on a depreciating asset is unwise. I can't assess the utility you get from these purchases, so for you that opportunity cost may be worth it. From a purely financial standpoint though I'd never advise someone to do that. Enjoy your cars!
     
  23. ferrariwithsnowtires

    Dec 17, 2005
    119

    Sorry, I thought the context was for a single super car.

    And my approach is on the conservative side, which is not aligned with many many other people here.

    If you are talking multiple super cars, that implies that we have someone more "all into" the game. I guess you could expect up to 10% of net assets into the collection. That would be a percentage I could't see getting to.

    My previous "vision" would be to have my 2017 NSX, an LFA and an R36 GTR (if they ever roll off the factory floor).

    My current approach would be to add a new Tesla Roadster to the NSX. Car number 3 is more ambiguous at this point.
     
  24. Thecadster

    Thecadster Formula 3
    Rossa Subscribed

    Apr 27, 2017
    2,268
    I love a REAL car guy, and you my friend are as legit as it gets. You do whatever it takes to fuel that passion in your life, but not to the risk of your other priorities either. Tons of respect brother.

    Hahahaha... Takes one to really know one...

    What’s next Shark? I know you have something you are working towards? That engineer in you developed some type of plan.
     
    lewishou and Shark01 like this.
  25. Thecadster

    Thecadster Formula 3
    Rossa Subscribed

    Apr 27, 2017
    2,268
    Look, if we were all perfectly prudent with our every dollar we would all be driving 1994 Honda Accord’s. You can’t take it with you... Live fast, drive faster. That said, a thorough reading of Shark’s posts makes plainly clear that the dude is fully buckled down. You don’t need to lose any sleep over his financial security. He’s good to go.
     
    technom3 likes this.

Share This Page