Reply to If you like cars, what is a reasonable car price based on income

Forum Index » Cars and Transportation

Reply to "If you like cars, what is a reasonable car price based on income"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]OP here. We cars for transportation but we like to drive nice cars not clunkers.
Our current cars are 8 years old and it is time for a replacement.
Our HHI is $300k and we have no debt. 
We are looking to replace both cars. We would pay up to $50k for each.
DH thinks that this is reasonable for people in our income range.
[b]Based on most answers here, that doesn’t sound crazy. That’s only 33% of our annual income[/b].[/quote]

Please point to the answer that told you 33% of your annual income on cars wasn't crazy.  I'll wait.

The correct answer is to stagger your replacements so you don't buy 2 new cars in one year and get cheaper cars -- or at least one fun car/ one reliable unexciting transport car as a compromise.[/quote]

See Dave Ramsey link. He’s pretty clear about the value if your cars bot exceeding 50% of your income.
This is a good default rule of thumb for starters.[/quote]

The same link states the car should be purchased in CASH and should never be brand new until assets exceed $1M. Does that describe you OP? You want to spend $100k IN CASH on these two new cars and have at least $1M in assets? [/quote]
We could pay cash for one car. But we will put $25k down on each.
Cars won’t be brand new. [b]DH likes to buy 1 yo used cars that have already taken the depreciation hit.[/b]
Maybe it will make sense to stagger the purchase as others have suggested.[/quote]

This is a terrible strategy for some brands. Which ones are you looking at? [/quote]
Why is it a bad strategy? Please explain. A 1 year old used car is almost new.
We are looking at a Porsche and Mercedes.[/quote]

It may make sense for a Porsche or Mercedes but you still have to be careful. Most people think the depreciation from a car is the difference between sticker and the now-slightly-used price, but this is not true. The depreciation is what you could have bought the new car for and the now-slightly-used price. For example, the 2016 C300 my wife bought had a sticker of $48k but she bought it new for $41k - brand new car with less than 20 miles, bought in October 2015 so it was not late in the model year. A similarly equipped 2016 C300 with 27k miles (what she has) is around 33k asking, which I'll assume can be gotten down to 31k, so lets call the depreciation 10k for the 2 years 10 months that she's had it. This represents a 25% depreciation over just shy of 3 years. If we regard the useful life of a Mercedes to be 10 years, and I see that a 2008 C300 is about $8000 on average, that means the 10-year depreciation my wife's car can look forward to is $33,000, or about $3300 a year. In the first 3 years of my wife's car, this is nearly exactly the amount of depreciation that has occurred. Now think to yourself, if the car is going to depreciate $3300 a year on average, wouldn't it make sense to take that depreciation and enjoy the car new, rather than buy it used?

The situation is far worse for Honda/Toyotas, where it makes little practical sense if any to buy slightly used, and always better to buy new. [/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics