I have $1.1M saved for retirement, earn $128K and have $56,000 on my mortgage. Can I afford my dream car, a Nissan GT-R?
Dear Quentin,
I’m looking to purchase a used Nissan GT-R and spend about $80,000.
I’m 41 and single with no kids, and have always been a big saver. I currently make $128,000 a year, and have a combined $1.1 million in my 401(k), Roth IRA and brokerage accounts. I’m saving 15% of my pre-tax income with a 4% contribution from my employer.
“ ‘Dealership appraised my current car, which I paid cash for, at $6,500, but I may end up keeping it as there are some activities I don’t/can’t do in the GT-R.’ ”
I have $56,000 left on my mortgage, of which I’m paying an extra $500 a month toward principal and planning to pay off within five years. I have about $150,000 equity in my condo and about $22,000 in savings.
Dealership appraised my current car, which I paid cash for, at $6,500, but I may end up keeping it as there are some activities I don’t/can’t do in the GT-R (e.g., parking in the city, transporting a bike, moving semi-large or dirty items, etc.).
1. Can I afford my dream car?
2. If I can, how should I go about financing it? Should I pay it off? Loan?
Any assistance you can provide would be greatly appreciated.
Thanks in advance for reading this.
Would-Be Dream Car Owner
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Dear Dreamer,
I don’t want to squash your goal of owning the car of your dreams. (Like I did with this guy.) But your circumstances are different from that good fellow: Namely, you are financially independent and in a very comfortable position for retirement, notwithstanding any unforeseen circumstances. You have worked hard to have the car you want.
Yes, you can afford your dream car. But should you get it? I will say this: It will make you happy (for about five minutes). But that feeling typically depreciates along with the value of the car. I don’t know what this particular model means to you, but I do know — from what you say about your current finances — that you don’t give in to impulses at the expense of your financial security.
I haven’t said buy it. But I haven’t said don’t buy it. It’s an expensive toy and a pricey piece of machinery. Automobiles serve both functions: They get you from A to B and they give you that Christmas morning feeling when you get the keys. Keep that in mind before buying. Alternatively, consider leasing the car first to see if it’s an everlasting love.
People should buy a car with cash when — among other reasons — they have enough cash without dipping into their savings and during a time when interest rates are prohibitively high. Given your $22,000 in savings, buying a car with a low rate of financing makes more sense. Just remember that there may come a day when you owe more than it’s worth.
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