[Z06] Debt for a vette?
Drifting
Joined: Jul 2012
Posts: 1,325
Likes: 239
From: Missi'ppi... no mo' MO for me!!
That's a good way to look at it, but here is another.
Sure, if you have a a hundred thousand or more sitting in an account, paying cash makes perfect sense. However, even here there are exceptions.
For instance, if you can finance a car for 3% interest or less, you will actually be SPENDING MORE MONEY, if you take your cash out and pay for the car yourself. With $100,000.00 even if you invest conservatively, you should average around 5% interest per year. By paying cash, you are actually costing yourself 2% or 400.00 a year by paying cash (assuming you are buying a 20K car). In this respect, you are paying MORE by paying cash. This of course, assumes you are paying around 20K for the car.
However, if you have say 50K in your account, and you are making 70K plus a year, better to finance in any case. You need an emergency account that will last you up to six months in case of loss of income. Being solvent for six months gives you plenty of time to liquidate other assets if the need arises. You can always accelerate you pay off date once you have more disposable income.
Don't be stupid in your purchase, like buying a 50K plus priced vehicle period if you only have 50K in the bank. Don't buy vehicles with a rapid depreciation rate. A lot of the luxury vehicles lose over 25% of their value in the first year. Stay away from those vehicles, period. Of course if you have 200K sitting around and you are earning six figures or better, buy that 50K plus car if that is what you want.
The general rule is to never obligate yourself to over 50-60% of your total income. That includes all bills, mortgage/rent, insurance (all), utilities, car payments, etc. If you do not have the discipline to pay off credit cards every month, do yourself a favor BURN THEM. The only exception is a dire emergency and make a generated effort to get rid of the debt ASAP!
If you follow these general rules, you will be OK. Wished I had listened to my dad when he had this talk with me back in my twenties. I could semi-retire if I had listened.
Nothing wrong with using credit if you do not allow credit to control you. If you are an impulsive buyer, avoid credit like the plague.
Use your nogging for something other than a hat rack and you will be fine.
Sure, if you have a a hundred thousand or more sitting in an account, paying cash makes perfect sense. However, even here there are exceptions.
For instance, if you can finance a car for 3% interest or less, you will actually be SPENDING MORE MONEY, if you take your cash out and pay for the car yourself. With $100,000.00 even if you invest conservatively, you should average around 5% interest per year. By paying cash, you are actually costing yourself 2% or 400.00 a year by paying cash (assuming you are buying a 20K car). In this respect, you are paying MORE by paying cash. This of course, assumes you are paying around 20K for the car.
However, if you have say 50K in your account, and you are making 70K plus a year, better to finance in any case. You need an emergency account that will last you up to six months in case of loss of income. Being solvent for six months gives you plenty of time to liquidate other assets if the need arises. You can always accelerate you pay off date once you have more disposable income.
Don't be stupid in your purchase, like buying a 50K plus priced vehicle period if you only have 50K in the bank. Don't buy vehicles with a rapid depreciation rate. A lot of the luxury vehicles lose over 25% of their value in the first year. Stay away from those vehicles, period. Of course if you have 200K sitting around and you are earning six figures or better, buy that 50K plus car if that is what you want.
The general rule is to never obligate yourself to over 50-60% of your total income. That includes all bills, mortgage/rent, insurance (all), utilities, car payments, etc. If you do not have the discipline to pay off credit cards every month, do yourself a favor BURN THEM. The only exception is a dire emergency and make a generated effort to get rid of the debt ASAP!
If you follow these general rules, you will be OK. Wished I had listened to my dad when he had this talk with me back in my twenties. I could semi-retire if I had listened.
Nothing wrong with using credit if you do not allow credit to control you. If you are an impulsive buyer, avoid credit like the plague.
Use your nogging for something other than a hat rack and you will be fine.
Financial prudence was ground into me by my elders during my college years. Childhood experiences (we were poor) reinforced it.
I don't think I'd pay cash for a car over $5G's if all I had was $100G's squirreled away. I'm not sure I'd advise financing anything over $10-15G's with a $50G account and $70G's-per-year job. True, in both cases the payments probably won't push the debt total past the 50-60% income rule you cite, but just as a WAG, I think my limit would be that the car's value probably wouldn't be any higher than 10-15% of my yearly gross.
Then again, I waited until I was in my late-30's for my first 'sports' car; thinking back, it's cost was ~15% of my net worth.
Paying cash comes with a lot of "penalties"--opportunity cost, loss of leverage(d money), and generally a smaller total in all accounts.
It has one GREAT advantage though and most of the time it's intangible--security. The nice thing about paying cash (if you can truly afford it) is that there's no specter of financial burden.
When I paid cash for my house, I did it with the decision that this was my retirement home, and I was retired. Income was going to be steady, but set; never increasing unless my mutual funds etc. pulled in a windfall. In this case, there's no reason to pay any interest especially since I could "afford" it. The general rule was, "there's no reason to take a risk." Hindsight made me content for once, in my financial practices. When the "Great Depression" of 2008 hit the nation, I could give a shipt; I had no worries whatsoever. We made some BIG money because the market crashed. Leverage is a great tool, but it must be used not only wisely, but prudently.
Instructor
Joined: Mar 2014
Posts: 106
Likes: 0
I pulled a loan out on my Z06 because I'm 24, My Porsche was expensive to fix so I got the Z. I drive the car like I stole it, I've dumped a ton of money into it, I don't have much of a savings and I would do it all again. I have suffered a trans failure, and the infamous valve spring failure in less than a year of ownership. Its getting cammed this winter and has high mileage. I regret nothing haha.
Drifting
Joined: Jan 2014
Posts: 1,285
Likes: 164
From: MA
I think almost all of that is great advice. I'm *really* financially conservative though, and found your first limit ($100G's) startling; "...if you have a a hundred thousand or more sitting in an account, paying cash makes perfect sense." Even the second generalization--"However, if you have say 50K in your account, and you are making 70K plus a year, better to finance in any case." gave me the *******.
Financial prudence was ground into me by my elders during my college years. Childhood experiences (we were poor) reinforced it.
I don't think I'd pay cash for a car over $5G's if all I had was $100G's squirreled away. I'm not sure I'd advise financing anything over $10-15G's with a $50G account and $70G's-per-year job. True, in both cases the payments probably won't push the debt total past the 50-60% income rule you cite, but just as a WAG, I think my limit would be that the car's value probably wouldn't be any higher than 10-15% of my yearly gross.
Then again, I waited until I was in my late-30's for my first 'sports' car; thinking back, it's cost was ~15% of my net worth.
Paying cash comes with a lot of "penalties"--opportunity cost, loss of leverage(d money), and generally a smaller total in all accounts.
It has one GREAT advantage though and most of the time it's intangible--security. The nice thing about paying cash (if you can truly afford it) is that there's no specter of financial burden.
When I paid cash for my house, I did it with the decision that this was my retirement home, and I was retired. Income was going to be steady, but set; never increasing unless my mutual funds etc. pulled in a windfall. In this case, there's no reason to pay any interest especially since I could "afford" it. The general rule was, "there's no reason to take a risk." Hindsight made me content for once, in my financial practices. When the "Great Depression" of 2008 hit the nation, I could give a shipt; I had no worries whatsoever. We made some BIG money because the market crashed. Leverage is a great tool, but it must be used not only wisely, but prudently.
Financial prudence was ground into me by my elders during my college years. Childhood experiences (we were poor) reinforced it.
I don't think I'd pay cash for a car over $5G's if all I had was $100G's squirreled away. I'm not sure I'd advise financing anything over $10-15G's with a $50G account and $70G's-per-year job. True, in both cases the payments probably won't push the debt total past the 50-60% income rule you cite, but just as a WAG, I think my limit would be that the car's value probably wouldn't be any higher than 10-15% of my yearly gross.
Then again, I waited until I was in my late-30's for my first 'sports' car; thinking back, it's cost was ~15% of my net worth.
Paying cash comes with a lot of "penalties"--opportunity cost, loss of leverage(d money), and generally a smaller total in all accounts.
It has one GREAT advantage though and most of the time it's intangible--security. The nice thing about paying cash (if you can truly afford it) is that there's no specter of financial burden.
When I paid cash for my house, I did it with the decision that this was my retirement home, and I was retired. Income was going to be steady, but set; never increasing unless my mutual funds etc. pulled in a windfall. In this case, there's no reason to pay any interest especially since I could "afford" it. The general rule was, "there's no reason to take a risk." Hindsight made me content for once, in my financial practices. When the "Great Depression" of 2008 hit the nation, I could give a shipt; I had no worries whatsoever. We made some BIG money because the market crashed. Leverage is a great tool, but it must be used not only wisely, but prudently.
Now if you're near retirement age and/or found your "forever home" - I agree that is one thing that is prudent to be paid off in full. However, a good case study is pro athletes who buy million dollar homes only to sell them off in a couple years and sometimes take a bath big time - better to plop a 20 or 30% downpayment and play w/ the bank's money for the rest of the note.
Melting Slicks
Joined: Aug 2011
Posts: 2,423
Likes: 200
From: Atlanta GA
I think almost all of that is great advice. I'm *really* financially conservative though, and found your first limit ($100G's) startling; "...if you have a a hundred thousand or more sitting in an account, paying cash makes perfect sense." Even the second generalization--"However, if you have say 50K in your account, and you are making 70K plus a year, better to finance in any case." gave me the *******.
Financial prudence was ground into me by my elders during my college years. Childhood experiences (we were poor) reinforced it.
I don't think I'd pay cash for a car over $5G's if all I had was $100G's squirreled away. I'm not sure I'd advise financing anything over $10-15G's with a $50G account and $70G's-per-year job. True, in both cases the payments probably won't push the debt total past the 50-60% income rule you cite, but just as a WAG, I think my limit would be that the car's value probably wouldn't be any higher than 10-15% of my yearly gross.
Then again, I waited until I was in my late-30's for my first 'sports' car; thinking back, it's cost was ~15% of my net worth.
Paying cash comes with a lot of "penalties"--opportunity cost, loss of leverage(d money), and generally a smaller total in all accounts.
It has one GREAT advantage though and most of the time it's intangible--security. The nice thing about paying cash (if you can truly afford it) is that there's no specter of financial burden.
When I paid cash for my house, I did it with the decision that this was my retirement home, and I was retired. Income was going to be steady, but set; never increasing unless my mutual funds etc. pulled in a windfall. In this case, there's no reason to pay any interest especially since I could "afford" it. The general rule was, "there's no reason to take a risk." Hindsight made me content for once, in my financial practices. When the "Great Depression" of 2008 hit the nation, I could give a shipt; I had no worries whatsoever. We made some BIG money because the market crashed. Leverage is a great tool, but it must be used not only wisely, but prudently.
Financial prudence was ground into me by my elders during my college years. Childhood experiences (we were poor) reinforced it.
I don't think I'd pay cash for a car over $5G's if all I had was $100G's squirreled away. I'm not sure I'd advise financing anything over $10-15G's with a $50G account and $70G's-per-year job. True, in both cases the payments probably won't push the debt total past the 50-60% income rule you cite, but just as a WAG, I think my limit would be that the car's value probably wouldn't be any higher than 10-15% of my yearly gross.
Then again, I waited until I was in my late-30's for my first 'sports' car; thinking back, it's cost was ~15% of my net worth.
Paying cash comes with a lot of "penalties"--opportunity cost, loss of leverage(d money), and generally a smaller total in all accounts.
It has one GREAT advantage though and most of the time it's intangible--security. The nice thing about paying cash (if you can truly afford it) is that there's no specter of financial burden.
When I paid cash for my house, I did it with the decision that this was my retirement home, and I was retired. Income was going to be steady, but set; never increasing unless my mutual funds etc. pulled in a windfall. In this case, there's no reason to pay any interest especially since I could "afford" it. The general rule was, "there's no reason to take a risk." Hindsight made me content for once, in my financial practices. When the "Great Depression" of 2008 hit the nation, I could give a shipt; I had no worries whatsoever. We made some BIG money because the market crashed. Leverage is a great tool, but it must be used not only wisely, but prudently.
1. Do not obligate yourself to over 50-60% of your bring home income. I am not talking short term income either. Steady measurable income.
2. Do not buy a home where the purchase price is more than 2-3 years of your income (ideal is 2/2.5 your annual gross income).
I would limit it to 2.5 times your annual gross income, but I realize this is impossible in some areas (like California or New York). In any case, If you go over 3.5 times your annual income (unless you are expecting some type of guranteed windfall in a short time period), you are going to get into deep trouble, FAST! During the housing bubble, lending institutions were going up to five times annual income. Ask those 5 times people how many lost the house, had to sell it, or feel like those walls are closing in on them financially. Of course rule of thumb is at least 20% down.
3. Pay yourself at least 10% of your income per month (savings).
Follow these general rules and you will have a comfortable life. Remember folks it is easy to over-extend yourself and hard to get out of it. How do I know? Ask my wife!
Pro
Joined: Jan 2012
Posts: 561
Likes: 27
From: Sterling Heights Michigan
I can really appreciate this thread. If there is one thing I will spend money on, it's cars (and sometimes bikes). I battle daily with the "life's short" and "save every penny". I just bought my z06 and literally spent everything I have. I love these cars and said a few months ago, i am buying one. I am a co-op. I am still in grad school and know that my income is only going up. I live at home so I realize this will end too. I know it will all end so why not enjoy the z. I don't have a payment on it and absolutely hate owing anyone. And at this point, I do not have any debts in life.
My thoughts were, enjoy it for 2 years and then sell it. I realize I will lose a little (not too much) and can sell it for a downpayment on a house. I justified any loss from depreciation on smiles. Plus, I still need transportation. I will drive it daily until snow falls.
I figure as long as I invest in my 401k up to company match and continue to max out or come close to maxing out my Roth IRA then I am okay. It's worth it completely.
You are in a completely different situation as you definitely have the ability to buy it and not look back, but I still understand.
My thoughts were, enjoy it for 2 years and then sell it. I realize I will lose a little (not too much) and can sell it for a downpayment on a house. I justified any loss from depreciation on smiles. Plus, I still need transportation. I will drive it daily until snow falls.
I figure as long as I invest in my 401k up to company match and continue to max out or come close to maxing out my Roth IRA then I am okay. It's worth it completely.
You are in a completely different situation as you definitely have the ability to buy it and not look back, but I still understand.
Melting Slicks
Joined: Aug 2011
Posts: 2,423
Likes: 200
From: Atlanta GA
I can really appreciate this thread. If there is one thing I will spend money on, it's cars (and sometimes bikes). I battle daily with the "life's short" and "save every penny". I just bought my z06 and literally spent everything I have. I love these cars and said a few months ago, i am buying one. I am a co-op. I am still in grad school and know that my income is only going up. I live at home so I realize this will end too. I know it will all end so why not enjoy the z. I don't have a payment on it and absolutely hate owing anyone. And at this point, I do not have any debts in life.
My thoughts were, enjoy it for 2 years and then sell it. I realize I will lose a little (not too much) and can sell it for a downpayment on a house. I justified any loss from depreciation on smiles. Plus, I still need transportation. I will drive it daily until snow falls.
I figure as long as I invest in my 401k up to company match and continue to max out or come close to maxing out my Roth IRA then I am okay. It's worth it completely.
You are in a completely different situation as you definitely have the ability to buy it and not look back, but I still understand.
My thoughts were, enjoy it for 2 years and then sell it. I realize I will lose a little (not too much) and can sell it for a downpayment on a house. I justified any loss from depreciation on smiles. Plus, I still need transportation. I will drive it daily until snow falls.
I figure as long as I invest in my 401k up to company match and continue to max out or come close to maxing out my Roth IRA then I am okay. It's worth it completely.
You are in a completely different situation as you definitely have the ability to buy it and not look back, but I still understand.
All of us have to factor saving for the future verses qaulity of life. Having lived in the cycle where I could not rub two nickles together even after pay day verses the other living off about 60% of my income, I like the latter a whole lot better.
Most of us are going to hae emergency expenses we simply cannot count on or even control in our lifetimes. I have had to help both my kids out of very bad sitatuons and it has cost me a couple of Corvettes.
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Team Owner
Joined: Sep 2003
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From: Freedom is never more than one generation away from extinction.
St. Jude '03 thru '24
Like a fellow CF'r quoted recently:
Gentlemen, Life WONT WAIT FOR YOU. Sooner than we think, we'll get sick, and end up in a retirement/nursing home.
That's exactly why there is a Z16 parked in my garage. Floated a loan and happy as a clam.
A friend passed away, but before he did we talked him into buying a new C6. I'll never forget his glee and joy going out on drives.
Have another that is going fast, he wants a C7 Z06. Talked him out of it today as the delivery date is too far away.
We're going to a dealer as soon as he gets out of the hosp.
Gentlemen, Life WONT WAIT FOR YOU. Sooner than we think, we'll get sick, and end up in a retirement/nursing home.
That's exactly why there is a Z16 parked in my garage. Floated a loan and happy as a clam.
A friend passed away, but before he did we talked him into buying a new C6. I'll never forget his glee and joy going out on drives.
Have another that is going fast, he wants a C7 Z06. Talked him out of it today as the delivery date is too far away.
We're going to a dealer as soon as he gets out of the hosp.
Thread Starter
Advanced
Joined: Feb 2014
Posts: 77
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From: Norwood North Carolina
Saving for the future vs quality life is what I struggle with. I am very conservative. With the extra money I pay on my house its 38% of my net. 10 % of gross go into retirement. 20% of net goes to savings. Then rest goes to utilities, food, and a little extra to spend.
Team Owner
Joined: Aug 2005
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From: Riverside County Southern California
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Pro
Joined: May 2012
Posts: 666
Likes: 30
From: Milwaukee WI
I paid for my car in cash cause the whole out of state loan thing seemed like a pita. I didn't feel comfortable with how much cash i had on hand then(below my happy cash zero level) so i just went to a credit union and got an auto loan at 1.9% for half the value.
I took a 4 years cause that's what they had at the minimum 1.9 rate. paid it off in 13 months while keeping my savings account happy. Worked for me.
IMO the c5 is no longer an old rich mans toy. At 15-25k its a car anyone can own. I would have 2 if i lived down south. one for my track car one as a dd that was a vert.
Which means its not unreasonable to buy it with a loan.
I took a 4 years cause that's what they had at the minimum 1.9 rate. paid it off in 13 months while keeping my savings account happy. Worked for me.
IMO the c5 is no longer an old rich mans toy. At 15-25k its a car anyone can own. I would have 2 if i lived down south. one for my track car one as a dd that was a vert.
Which means its not unreasonable to buy it with a loan.
Drifting
Joined: Apr 2008
Posts: 1,464
Likes: 32
From: Ocala FL
However, for people who are looking to add it as a 3rd car as just a "toy" that they would either track or just drive on sunny days then I think the number of people that could buy one is reduced greatly.
Pro
Joined: Jul 2008
Posts: 726
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From: Newport MN
It all depends on what kind of car you want for a daily. I have a $600 ranger that has been running and driving for me for 5 years now with little into it. So as long as you dont need another 20k car it is very easy to afford a 15-20k vette. All about what you want to drive.
Pro
Joined: May 2012
Posts: 666
Likes: 30
From: Milwaukee WI
It all depends on what kind of car you want for a daily. I have a $600 ranger that has been running and driving for me for 5 years now with little into it. So as long as you dont need another 20k car it is very easy to afford a 15-20k vette. All about what you want to drive.
Only rich people could consider that you must buy something as expensive as a car cash. c5's are not only for rich people now a days. Just a matter of priority. I would rather have a 130k house , 2 cars, and 5-6 track days a year then a 200k house and 1 car and no track days.