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Old 12-15-2012, 01:07 PM   #21
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In my younger days right out of college, I had to have the cherry red Iroc Z28 with the t tops and louver. Damn did I love that car and the girls I could catch with that. But after about 3 years of realizing almost half of my net income was going to that car whether by payments, gas, insurance, or taxes, I realized the thrill was gone. Now that I am at the point of my life where I can easily afford a brand new one, I ironically find that I have the oldest car I have ever had in my life. 11 years old with over 180k on it and wont consider trading until it doesn't run. I don't want the auto companies in my wallet, I don't want the insurance company in my wallet, and I don't want the government tax collector in my wallet. But to each his own. I certainly can't fault you as I once was like that, but if the allure to retire early starts to pull at you harder, be prepared to suddenly change your view point on what type of car you like!

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Old 12-15-2012, 01:28 PM   #22
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I've had a Lexus company car for 11 years now. First two were ESs, third was an IS, and I'm on an HS now. I can't say the IS and the HS were worth the money, although I thought the ESs were. I switched only because they stopped selling the ES in Japan, where it is made...go figure.

As we move into retirement next week, we have a 2005 Honda Odyssey Touring that cost maybe 5-6% of my gross that year (had a really good year), which has only 40k miles on it and is in great shape. We'll probably put another 30-50k and 3-5 years on it before trading. When it is time to replace it, we will most likely do do with a CRV, Accord, or possibly a Camry.

We also have a 2007 Tundra 5.7L SR5 that set me back 3-4% (another really good year). It only has 11k miles on it. Now, DW and I are debating on whether to get a travel trailer or a fifth wheel TT. I'm leaning towards a 29 foot fiver that has a max weight right up near my towing capacity, although its cargo carrying capacity is huge at 2700 pounds. I'm trying to decide if my Tundra is enough truck. If it isn't enough truck, I may have to upgrade sooner than I wanted, to an F-250 or F-350 with a Powerstroke Diesel engine. Then again, if we get an F-350, we could tow a bigger fiver (and so the cycle begins). Slightly off topic, but as newbies to RVing, I really don't want to go all out until I'm sure we'll enjoy it (why buy a powerstroke for $55k when my 5 year old Tundra will do everything I need a truck to do except pull a gigantaur Fiver). At the same time, if we go too small, it would be akin to buying a guarantee that we won't enjoy it. I'm trying to find the happy medium.


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Old 12-15-2012, 01:36 PM   #23
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Originally Posted by W2R View Post
Yes. Someone else was able to spend 50% of income on a car and still retire. Either their initial income was stratospheric, or else they cut back mercilessly in other areas and/or didn't get another car again for ~20+ years.

There are people here who manage to retire early and whose entire yearly salary would not cover a new Lexus. Their secret? As far as I can tell, they spend less than many others think possible and manage their money carefully.. If you are one who is prone to say, "It's impossible for me to live on $25K/year!" and "I need a new Lexus at least every four years!" then I'd sure suggest thinking twice.
thanks for the input. care to share your car and percentage for me to assess how much weight i should put into your insight. being in late 20s i am on this board because of the experience users have over me.

Originally Posted by Midpack View Post
Why would you care what they think, or what any of us spent? So you spent more than most of us would (you had to know that before you even posted), now what?

And we may be willing to spend 'more than others would' on something other than cars (homes, boats, vacations, collectibles, other 'toys'), so what we spend on cars misses the point WRT RE in many cases.
Originally Posted by Midpack View Post
I always thought I wanted a bonafide luxury car until I could actually afford it too, no interest any more. We all learn to master ego if we're smart...
i can't help but sense some negativity from your responses. if this thread raises your blood pressure, i suggest you not participate and create a new thread about homes, boats, vacations, collectibles, and toys.

if i have misunderstood your intentions i apologize.

the point of this thread is to create a discussion and to obtain an understanding of how much money people allocate to cars. i do not want to be in your situation where i end up with more money than i can spend. i would like to balance my present finances with my future finances.
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Old 12-15-2012, 01:46 PM   #24
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Approximately 7%. DH and I both have high mileage midsize cars that we paid cash for. We can easily buy luxury cars, but we are aiming for ER and if we spent the extra money on cars, it wouldn't be continuing to grow our ER fund.

I agree to each his own choice, but looking at my colleagues and friends, most who have luxury cars, biggest houses, spend their checks before they get them, are not ERing.....

Just my opinion based on real experience. Enjoy your car.
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Old 12-15-2012, 02:13 PM   #25
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Tell us what the 3 most important features you want in a car and how much a year you want to spend.....either leasing, making paymtents etc. Then how many miles you drive, does your 50% include gas and insurance? Then we'll be able to suggest, recommend since we'll have enough info to share advice.
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Old 12-15-2012, 02:34 PM   #26
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Right now I drive a Ford Explorer, DH drives a Hyundai Veloster. He is retired and I am semi-retired.

In the distant past (25 years ago) I paid about 50% of my annual income to buy a Corvette. I don't look back on it as a good decision.

Your question though is too narrow. Is it possible to pay 50% of your gross income and still retire early? Yes, under certain circumstances. It is the certain circumstances part that varies.

Keep that Lexus and drive it for the next 15 years and I don't think the fact you bought it will be a negative impact.

Trade it in every two years for ever increasingly expensive cars and yes it is a problem.

The bigger issue is that the more fun, expensive, luxury items you buy now the less you can save for the future. It is your choice how you want to make that balance.

Saving 10% of your income is good. However, unless you have a traditional pension or your income grows very, very high it won't be sufficient to allow you to retire early.
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Old 12-15-2012, 02:51 PM   #27
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Originally Posted by zxcvlkj View Post
being in late 20s i am on this board because of the experience users have over me.....the point of this thread is to create a discussion and to obtain an understanding of how much money people allocate to cars. i do not want to be in your situation where i end up with more money than i can spend. i would like to balance my present finances with my future finances.
It is great that you own a Lexus at your age. I'll have to admit that I don't know many people your age who drive a Lexus.

I don't think of allocating a certain portion of my income to cars (or houses or whatever). I buy cars that I like and enjoy owning and that I believe give me good value for my money - at the end of the day I guess it is a judgement call on my priorities. While I could probably 'afford" a Lexus, what I would need to spend for a Lexus is just more than I would want to spend on a car.

DD is about you age and very LBYM. She owns a nice used Saab that was probably 20-30% of her gross when she purchased it but I suspect that she will drive it until the fenders fall off. Unfortunately I don't have many datapoints to offer.

What do your peers who seem to be positioning themselves well for financial independence drive? That might give you better insight than us geezers.
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Old 12-15-2012, 03:17 PM   #28
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I find your question difficult to answer. ER is based upon how much is saved, not spent. Thinking with the end in mind, a person needs to determine how much money they think will be required when they retire. As you know, there are lots of tools to help you with that. Based upon the analysis, you will be able to know how much to save. Once you have built your saving plan, you will know the amount of assets required for a successful ER. Buy all the cars, houses, etc. that fit into your plan. Save more money to reduce the likelihood of failure during ER. Spend more money now to enjoy the present and raise the future risk. There is not a right answer, just one that makes you comfortable. For me, material things are not that important. But, as I look back, while I was frugal, I still think I spent too much money on my various homes purchased during re-locations.
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Old 12-15-2012, 03:20 PM   #29
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My DW bought a new Lexus 8 years ago. Best car either of us has ever had. No regrets and no plans to get rid of it any time soon.
Also it certainly has had no negative impact on our FI or RE plans. Buy what you want and keep it forever.
Taking Social Security at 62 and hoping I live long enough to regret the decision.
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Old 12-15-2012, 03:51 PM   #30
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The last car we bought was about 12.5% of our gross annual wages, but only about 1.25% of our net worth. I expect we'll have it for at least the next 15 years.

I should add that it's also by far the most expensive car we've ever purchased.
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Old 12-15-2012, 04:06 PM   #31
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We're in the group that will buy a nice new car but then keep it until either reliability or parts availability become issues. In 2002/2003 we bought two new cars and a new house all in the same 12-month period but I'm pretty sure we'll never do that again. All of those purchases were planned years in advance so they were not impulse buys. The two new vehicles replaced a 14-year-old car and an 18-year-old pickup truck.
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Old 12-15-2012, 04:12 PM   #32
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I'm probably a bad example since I'm a car enthusiast, and own several vehicles. My daily driver is a used Honda that cost 4.5% of my gross salary at the time. The value of all of my vehicles represents one year's salary, and I owe approx 50% of my gross salary on outstanding vehicle loans (@1.99%). However, I'm pretty frugal in other areas of my life, and my annual expenses are about 45% of my gross salary, plus I have four times my salary accumulated in retirement savings.
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Old 12-15-2012, 04:25 PM   #33
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FIRE (Financially Independent, Retired Early) is generally a state of mind. With financial independence, one can choose to work or not work, with or without compensation. Spending a lot on luxury items is generally not considered the way to financial independence. Attaining FI is so ingrained that I could not imagine splurging on such an item, would not wish to jeopardize reaching FI by such a splurge. But we all have some special item/activity that gives us pleasure and a car may be yours. For me, there was a 15 year period where an annual ski vacation (lived in Alabama at the time) was my special exemption to being FI orientated.

Regarding your question, most I spent on a car was for my first new car in 1974 which cost me about 35% of my income in that period. My last new car, an 1989 Grand Prix, was at about 20% of that years income. Since then, I've always been below the 20% level after realizing that 1-3 year old used cars provided the most bang for the buck. Last car a bought was a 2005 Freestar Limited in 2007, got it for about 40% of the original sticker price. Have yet to pay over $20K for any vehicle and only once in my life did I finance a car. Financing, until the advent of 1% or less deals, was not consistent with achieving FI.
Once I reached FI, I was no longer beholden to the organization or management for my continued comfort. Where I work seasonally, they know that I can take or leave the job, they treat me really nicely.
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Old 12-15-2012, 04:26 PM   #34
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The first car I bought (new) in 1986 I spent about 25% of my annual income (which was rising quickly in the late 1980s). The second car I bought (used, with a trade-in) in 1992 I spent about 17% of my annual income (which was still rising quickly but not as quickly as in the 1980s). My current car I bought in 2007 (a new Corolla) I spent about 60% of my annual income but that was because I reduced (again) my annual income in anticipation of an early retirement in 2008. The car, paid in cash like the other two, was only about 5% of my taxable investments so it was barely a blip on the radar screen.
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

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Old 12-15-2012, 05:35 PM   #35
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I drove 2 BMW 3 series during my accumulation phase, though at least I bought them "pre-owned". I regret it now because the maintenance and repairs over time (15 years between the 2 of them) added up to more than I paid to buy them. Approaching ER I traded the second one in toward a used 2009 Honda Civic which is driving well and is cheap to drive and maintain. I guess it doesn't have the prestige of the BMW brand but that's not what I'm about anymore.
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Old 12-15-2012, 05:39 PM   #36
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I'm happy with my car, which cost less than 25% of our annual budget. Being the kind of person who actually enjoys long drives, I typically put well over 20,000 miles per year on my car, so they tend to last 6-8 years before I feel it advisable to get a new one.

When I was the OP's age, and for a good while after, I thought my ultimate goal would be to own a Mercedes Benz. But as others have said, the feeling passed without my even realizing it. I could afford one now, but no longer have any interest in it. My Honda meets my needs nicely, is extremely comfortable, and I will probably buy another one when the time comes.

OTOH, I have two friends who own and love BMWs. I have to smile inwardly at the fact that a significant fraction of their conversation revolves around discussion of the latest repair work they're having done, and how close a relationship they have with their BMW repairman. It's worth it to them, but not to me.
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Old 12-15-2012, 05:51 PM   #37
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Old beat up Subaru. Bought it new many years ago. Not even factored into net worth. But it does bring this classic song to mind :-) So guess it's worth somthin'
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Old 12-15-2012, 05:53 PM   #38
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Usually it cost me less than 10% of gross salary for a new-to-me used car, but the last one I bought I sprung for new at a little over 15% of gross. Then I still have that car 17 years later, so on the whole the new car was cheaper in the long run than the used ones were.

If I manage to retire in a few years, one of the first things I might like to do is drive all around the country, so it could be time for another new car purchase.
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Old 12-15-2012, 06:12 PM   #39
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Originally Posted by zxcvlkj View Post
I spent approx 50% of my gross on a Lexus.
I notice you said spent, not spend. I interpret that as meaning you bought a car with a price equal to 50% of your income. No big deal, IMO.

The relevant question is not what % of your income the car price is, but what the annual carrying cost is as a % of your income. I don't think 50% of your income is that unusual if you are talking about the purchase price of the car. The average income in the US is about 40K, yet it's pretty hard to find a new car for less than 20k.

Let's say someone makes 100K per year and buys a 50K car. Today you can finance a new car for 6 years at 3% (or less). The car payments in this example would be about 9K per year, or only 9% of one's income.
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Old 12-15-2012, 06:33 PM   #40
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Salary... Salary... Prithee, Stranger, what is this "Salary" you speak of?

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