Everyone deserves a nice car. If you've been saving and diligently for years, then a nice car you should get!
After analyzing the safest cars on the road and researching the best mid-life crisis cars to buy, I've finally come to a decision on what to get next. For almost three years, I've been driving a Honda Fit to weave my way around Bay Area traffic. The $235/month business lease is almost over, and it's time to move on. I'm turning 40 this June, and gosh darn it, I think I deserve to drive something nicer!
Given I've spent my whole life being frugal, it's been extremely hard to spend more than $20,000 on a car. It just feels dumb when my car will just sit in the garage for 23 hours a day on average. Further, cheap ride sharing options are everywhere. What used to cost $25 to go downtown via taxi from the western side of San Francisco now costs only $6 through Lyft line!
To help overcome my frugality, I asked three folks with nice vehicles to share their perspective. For those who are also suffering from frugality disease due to an intense desire to never have to work for anybody again, I think you'll find this post to be incredibly insightful.
How To Feel Good Spending Lots Of Money
Let's say you want to spend lots of money on a nice car. But you don't want to feel guilty. Here are some examples of how to do so.
1) Henrique, 26, $8,000 net worth, $48,000 salary, drives a 2016 $72,000 BMW M4
Hey Sam! Cars are more than just going from point A to point B for me. It's a lifestyle brother! Whenever I pull up to the club in my pearl white M4 with black tint I feel woke! The ladies turn their heads to see who's driving because they all want to talk to me once I'm inside. The guys ogle even more because I got the freshest rims and the slickest aftermarket lights.
When I could only afford a beat up Toyota Corolla life was hella boring. Now I feel like a confident man. When you have confidence, everything gets better. I feel like a million bucks driving my M4 for only $985/month. That's a great deal to me!
2) Lacy, 29, $150,000 net worth, $130,000 salary, drives a $81,000 2017 Porsche Boxster S 718
I just love convertibles. It's sunshine all the time in California so why not? Before coming to Newport Beach, I worked in dreary Washington D.C. for six years and took the subway everywhere. Hated it! I don't know why anybody would willing stay on the East Coast if they knew how awesome it is out west. For those six years, I patiently saved my pennies. When the new Boxster S 718 came out, I just had to have it. It's a dream car that handles better than the 991, for less!
I'm determined to live my 30s the way I want. Not only did I leave my old job for a new one with better pay and benefits, I also left a guy that I thought was the one. Turns out he was a scumbag. I work hard at my asset management job. I max out my 401k. My parents only live a 1.5-hour drive away so I'm saving money on flights. I see no problem living it up a little.
3) Sanjay, 45, $3,000,000 net worth, $600,000 salary, drives a $199,000 Mercedes Benz S600 Maybach
Sam, I fully admit I'm in full on mid-life crisis mode! My hair is thinning, my stomach is growing, and my wife made me get a vasectomy before we divorced! I hate her. But, I love our kids. But, I still hate her. Is that weird?
When you get to my age, you start wondering what's it all for? I've been in the business for over 20 years now as a Group Vice President. I'm a multi-millionaire, even after my divorce.
Thus, I should be able to buy whatever the hell I want! I have good friends who've passed away because of cancer before their 50th birthday. And I know all about your views on Stealth Wealth, but dude, that's what blackout tinted windows are for.
Oh, and one more thing. When I turn on the ambient lighting in the Maybach, it's game over! No woman can resist. There's no better family car for a 44-year-old executive than what I'm rolling in now.
Time To Live It Up!
It's helpful to listen to other people's reasons for why they spent so much on a depreciating asset. Perhaps it's because I've been trained so long to only invest in potentially appreciating assets that spending a lot of money on a car just feels so wrong.
But I plan to start a family so it's all about safety first, second, and third. The key for any middle-aged family man is to find that one vehicle that combines safety, fun, looks, and performance all in one. Given I live in sunny San Francisco, I've obviously got to have a convertible. But I can't get no dinky two-seater because I've got to get one large enough for the kids!
OK folks, are you ready to judge?!
I've decided to put down a $25,000 deposit for the 2018 Mercedes G650 Maybach arriving this fall! Not only is it a tank, it also has a convertible section in the back to soak up the rays.
Now that global warming is over, I plan to go up to my place in Lake Tahoe all the time now. We've got a record 600 inches of snowfall in Squaw Valley this year! So sick.
The funny thing about the G650 Maybach is that I actually owned the G500 version of it way back in 2002 when I was 24. It was one of my largest financial mistakes since I sold it a year later for a ~$16,000 loss because it was too tall to fit in the condo garage I wanted to buy! The body hasn't changed since it first began production in 1979.
I'm kind of embarrassed to admit the purchase price of the G650, but here goes nothing. This limited edition vehicle, which can certainly become a collector's item that appreciates in value one day, will cost me $520,000.
I know some of you are now unsubscribing because that's just a ridiculous sum of money to spend on a vehicle. But hear me out on why I think I deserve this vehicle besides the fact that it's safe and good for the mountains.
Why I Deserve A Nice Car!
- I purposefully went to William & Mary, a public university that cost $2,800 a year in tuition instead of attending a private university that cost $25,000+ a year in tuition at the time. That was a $100,000+ savings.
- I didn't bother my parents for money after I graduated from college, nor did I move in with them like so many do right now. See: How To Get Your Parents To Buy You Everything As An Adult Child
- I've religiously saved 50% or more of my after-tax income for 18 years in a row. In comparison, the average American only saves 5% a year. Here's how much savings you should have by age.
- I'm no longer going to buy another property in Honolulu or San Francisco due to additional maintenance headaches and property taxes. Instead, I plan to continue paying down my mortgages after paying off one rental mortgage in 2015. It feels so good to have less debt and a simpler life.
- From 2005 – 2012 I drove a used Land Rover I bought for $8,000. From 2012 – now, my business has only had to pay $165/month after deduction for my Honda Fit. This means that for the past 12 years I've driven a much cheaper vehicle than I can afford. All I wanted to do was invest in the bull market!
- I successfully negotiated a severance package that may or may not be equal to more than the value of the G650 Maybach. If I had quit, I would have got zilch. The severance feels like free money that should be spent however I wish. There's something to be said for proper planning and negotiating.
- A $60,000 private equity investment I made in 2007 is finally making a profit after the company was sold earlier this year. It's not a big windfall as I'll share with you in a future post. But it's certainly more than the $0 I thought I was going to get since it's been so long!
- A Financial Samurai post went aggressively viral, bringing me a respectable five-figure revenue windfall in one week as a result. How many people can say they were a “Twitter Moment” for three days in a row? That's Big Time Blogger (BTB) status. My English teacher would be so proud!
- I'll be paying over $50,000 in income taxes on top of over $50,000 in property taxes for 2016 as an early retiree. It kinda makes me ill seeing the amount spelled out like that, but I feel proud to help contribute to the greater good of this country.
- More than 12 people have already privately written in saying that some post I wrote in the past has helped improve their finances for the better. Making a difference in 12 people's lives was one of my goals for the entire year. At the end of the day, helping others while providing some entertainment is what blogging is all about.
So there you have it. If you want to still judge me for my purchase, so be it. But I feel that after all this saving, investing, planning, and writing, I deserve to finally drive a luxury vehicle.
The main thing I kept on going back to is whether I could live with myself if my family got injured in a car accident because I wasn't willing to pony up for a larger, more expensive vehicle. The answer was always no.
Money is meant to be spent, otherwise, what's the point of working so hard? Now to find me a tinted window shop to keep up the stealth!
Related: The 1/10th Rule For Car Buying Everyone Must Follow
Be More Responsible, Buy Less Car
OK, I was a little facetious in this post. I don't think you should spend whatever amount of money on a car. Instead, follow my House-To-Car Ratio guide for fiscal responsibility and buy a cheaper car. If you want to eventually reach financial freedom, you should have a house-to-car ratio of at least 50. Cars are guaranteed to depreciate in value, houses tend to appreciate in value.
As the father of the modern-day FIRE movement, I want all of you to have more wealth and more freedom. No car can match the joy you will experience once you are financially free.
Buy Real Estate Instead Of An Expensive Car
Keep your car expenses to a minimum. Instead of buying a fancy new car, use the money to invest in real estate instead. This way, you can build more wealth and achieve financial freedom, which provides way more value than driving a nice car.
To invest in real estate without all the hassle and unexpected costs, check out Fundrise. Fundrise offers funds that mainly invest in residential and industrial properties in the Sunbelt, where valuations are lower and yields are higher. The firm manages over $3.5 billion in assets for over 500,000 investors looking to diversify and earn more passive income. The minimum investment amount is only $10.
Another great private real estate investing platform is Crowdstreet. Crowdstreet offers accredited investors individual deals run by sponsors that have been pre-vetted for strong track records. Many of their deals are in 18-hour cities where there is potentially greater upside due to higher growth rates. You can build your own select real estate portfolio with Fundrise.
I've personally invested $954,000 in private real estate since 2016 to diversify my holdings, take advantage of demographic shifts toward lower-cost areas of the country, and earn more passive income. We're in a multi-decade trend of relocating to the Sunbelt region thanks to technology.
Both platforms are sponsors of Financial Samurai and Financial Samurai is an investor in Fundrise funds.
For more nuanced personal finance content, join 100,000+ others and sign up for the free Financial Samurai newsletter. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. Everything is written based off firsthand experience.
FS. You only live once. If you don’t care for cars and only see a car like a transportation appliance, just like a fridge is a cooling appliance, then go for a used well maintained Camry or the likes and you will be fine. Affordable to own, safe (You have a family, priceless!) reasonably comfortable, not expensive and it gets you from point A to B and nobody knows you are rich. Or maybe a nice used (hybrid) SUV of family prefers that. This really won’t break your bank. I have spent more on my car than you would advice in your blogs, but I enjoy driving my new car. And even though it has been almost 2 years now, it still smells like new, because I keep it like new, borderline insane. And I don’t just use for for driving from-to work (apart from Corona, now I temp work from home), but I also go out just for a joy ride, get an ice cream or coffee somewhere and drive back. I enjoy this. I don’t smoke, drink, have fancy clothes, don’t care for luxury furniture or have an overly expensive home, so why someone cannot have a hobby one can afford? Death can come unexpected, I have seen that with one of my uncles who became quite rich later on in his life but only enjoyed it for a very little time. How sad! If you like something (car, boat, motor cycle, whatever) and it is affordable well within your means (Important!) then go for it. It is good to be financially well off, great for your kids but you can’t take your wealth into your grave. Enjoy, but enjoy responsibly. Because when it is time to go, it is time to go without delay!
Sure, sounds good. YOLO right?
But how do you define affordable? What is your metric? I’m always open to hearing what other people think in the personal finance realm.
I’ve been driving my 2015 Range Rover Sport since December 2016 and it’s been a great ride. Nice to have a bigger car for family too versus my Honda Fit.
FS. The definition of affordable is not clear cut, I totally understand. But let’s take a look at it from this stand point: You have an excellent retirement plan from your employer, you have a 15 year mortgage (not 30), you have 6 months worth living expenses in the bank and you have a solid health savings account. You have no credit card debt or student loans. This won’t make you a millionaire, but for sure you will be reasonably well of. Now if driving a nice car is something you really enjoy, then I don’t see anything wrong in spending a little extra if you are going to enjoy every ride for the next many years to come. Look, our handy man whom we have known for over 10 years, was always living frugal. Then one day, he bought a Dodge Charger. He said that this was his dream car. Within a year he got cancer and last week, he died. How sad! He barely enjoyed his purchase. You can’t take your money with you when the Higher Authority thinks your time is up. I once needed an MRI for a standard procedure, but I did not know how to read the medical report. The MRI was “tested” against couple of neurological diseases, but the way the report was written, it looked like the conclusion was that I had MS. I felt my life was completely up side down. After I frantic call to the office I learned the truth that I was fine. No disease. I can tell you that my perspective on life and money has changed quite a bit after that experience. My advice: Safe as well as spend both within REASON. Life is short.
If buying an expensive car makes you feel happy and satisfied. then go for it.
I find it hilarious that people would actually threaten to stop reading your blog over something so trivial.
“You have the money to buy an expensive car, and now you’re going to buy an expensive car!? Looks like all that advice you gave me about my 401k is bullshit now.”
If you wanted to waste half a mil on a funny-looking car, go ahead. I still wake up in the morning LOL.
That is funny. I almost quit reading your blog forever until I read the last sentence.
My $220k Mercedes SLS actually costs me less to own that your Honda fit lease. I bought a 2012 model a year ago for about $150k cash and it’s still worth the same amount I paid for it, probably even a little more. SLS prices bottomed out around 2014 and have increased between 10% to 20% since then. Appreciation rate slowed a bit this year but they have showed no sign of going down in price.
If you play your cards right, you can drive an awesome car and make money on it, or worst case, not lose too much.
Bro, you’re having a midlife crisis and this car won’t help you solve the underlying issue. But it’ll feel good for a year, so there you go, enjoy.
Your case studies are a mixed bag. #1 is just a plain trainwreck, #2 not very smart, but – good for her! sounds like she knows how to have fun, #3 sounds a bit like you, financially, actually, but… hates his wife? hope you’re not in that kind of crisis, it must be horrible.
Here’s my take on what “living it up” by buying a car that feels nicer than your house, in which you hopefully spend more time, accomplishes:
1. Jolt of joy. We all like buying shiny new things. This joy is not durable, though.
2. Signaling wealth, in general. If you feel like you need this, your money will probably be better spent on talking to a qualified clinical psychologist.
3. Getting girls. Yes, it absolutely works, and anyone saying otherwise is lying. It has very limited utility if you’re in a stable and satisfying relationship already. If you’re single, the kind of girls this will attract… well, not the best kind for your long-term well-being. Fun for a short time though.
4. Self confidence. This is tricky, because long term this will ruin your self-confidence because you’ll depend on this thing, externalizing your self-worth. This happens all the time. Women identify with their beauty or youth, men with their wealth or strength. Or Mazerati. When it goes away, so does self-confidence. Henrique, 26, $8,000 net worth, will do much better if he works on his self perception. If he respects himself a little more, he’ll get the girl, get the job, won’t spend $985/month on a pretty piece of tin, and still will feel like a million bucks. Best of all, he’ll get the right girl, the right job, and this feeling will stay with him regardless of what happens. Continue on the current path, and he’ll probably be pretty miserable when his girl dumps him because he can’t afford a {vaction, nice place, diamond ring}, or when his car gets repossessed because he definitely lives above his means.
When I got ~150k salary, I bought a used Toyota for $12k. Next time I already earned ~300k and I bought… a new Subaru. For $30k. A practical kind, not a BRZ. A few times I was contemplating “living it up” (I can easily afford a nice Audi or Tesla, and not have to take out a loan), and looking back – it was always during a time of personal crisis that I thought it could improve my quality of life.
So, my friend, it sounds to me like you’re in a minor crisis, whether you want to admit it or not. Hope this jolt of joy will help you go through the pain of resolving your crisis a bit easier.
It’s really great that you’re following my 120 rule for car buying: https://www.financialsamurai.com/the-110th-rule-for-car-buying-everyone-must-follow/
Happy April Fools’ Day.
Yeah, I’m not good at reading the last sentence in the post :)
Don’t be so harsh,
I know of one guy who drives one of those, Mesut Ozil the footballer currently negotiating a $450,000 USD a week salary with current club Arsenal. SO yes I’m sure Mr Ozil will agree with Rearden
I see a lot of young kids driving around in $70,000 cars similar to Henrique. I always wonder how they can afford it. I always chalk it up to them having rich parents. I am saving for a nice used 2012 911S, but will be giving my M3 to my son. Congratulations on your new purchase!
I read your article many years ago, about your car being 2% of your salary. That wisdom kept me grounded for a long time.
Stats:
Age 29, Networth $370K, Salary $210K, Drives 2010 Used Prius $10K
This is an April Fool’s joke, right? Just about the dumbest purchase ever, and horrible advice for anyone other than the Sanjays of the world. Anyone with less than $1M net worth should be trying to use all their cash to fund an early retirement, so they can use their most precious asset – time – on the people they love and the things they love doing. Driving a “baller” car may seem cool, but it’s only cool to shallow people who will just want to spend your money, suck you dry, and leave you broke. To anyone who actually takes this advice I wish you luck.
What if you want to spend your time enjoying driving a car that brings you joy? Should you not be spending money on hobbies? Are you supposed to hate your life while stashing away for old age?
I’m sure there are plenty of things you spend money on that I’d think are dumb, too. ;)
Nice! Once you have gamed out all the consequences, and are sure you won’t later regret blowing this money, go for it.
I paid off our mortgage just before my wife’s 50th birthday 3 years ago; we already have kind of too much in a college 529 for our 6th-grader ($350K); we have enough in IRA/401(k) plus taxable accounts ($4.5M total liquid) that we could live on 3-4% without invading principal; and total net worth is just over $6M.
So 2 years ago I bought a BMW M6 4-door with cash ($135K MSRP but I paid $120K before sales tax). We picked it up in Munich and wrapped a family driving vacation into the experience. It is awesome, and I keep cars for a long time (I bought my first for cash at age 40 and kept it for 11 years, and the M6 is my second car). I am a car guy, so I was buying it for my own pleasure, not because other people like it or care. (In fact, people don’t usually recognize how super fast this dark blue sedan is. It is kind of stealthy.) So this car is the one reward I allow myself.
I didn’t want to be the guy who says — or of whom people say — “Boy, looking back, that M6 was too much.” So I made sure all my other finance boxes were checked, as explained above. You have all those boxes checked, so go for it!
OK! You were kidding. I just figured your income from this blog (undisclosed) was higher than I pictured. But I wasn’t! I even followed your 1/10 rule. You do need a new car with a kid, just maybe not the Crazy G.
Ha! If you were going to get a G-Wagon, at least be man enough to get the 6×6 ;)
You can make money when the market goes up, goes down or goes side way.
Sam does this every year.
Last year in April he quit.
This year he buys a sh%t car.
Funny!
Hi Sam,
A little late to the party on this one but your output has been legendary this year so I’m behind a post or two!
The three examples listed above were easily identified as sarcasm and the Mercedes jeep is ridiculous, but part of me was happy for you to get a safer vehicle. Either way, I’m even happier to see it was an AFD post that you had me fooled :)
Take care,
Alan
If you want safety, ditch the convertible and go for the hard top.
I can’t imagine the amount of wealth someone would need to justify a $500k car. I know this is a joke, but I think someone like you would rather invest that in real estate than a car!
Personally, my dream car is that new Chrysler Pacifica Hybrid minivan. Holds all the cargo and people and gets great gas mileage! Although at 60K, I’ll be waiting a few years for a used lease-return before pulling that trigger.
I absolutely would rather invest in something like real estate or stocks to potentially make more money, than buy a car. It’s how I’ve felt for so long, and what I’ve done. But now, at almost age 40, with the real estate market slowing and the stock market getting pricey, I’m no longer inclined to invest. I’m inclined to live it up!
It’s actually pretty good timing.
“my dream car is that new Chrysler Pacifica Hybrid minivan.”
Some things we will only hear once in our entire lives.
“handles better than the 991” haha #tilted
Sam,
Since the G650 is not available in the United States, I’m afraid I sniffed out your joke then.
As a car guy, I was hoping you would finally let your hair down a bit. With your business income a significant lease would not be harmful to your finances IMO.
Despite AFD joke or not. If life is good, you made it, enjoy it and live alittle. Nothing last forever! You don’t really have to justify your BIG purchase to anyone. Besides,
what’s the use of having FU money if you can’t say FU
I read this days after AFD, not realizing it was posted on that day. It was like the most incredulous thing I thought you’d write….I mean “sunny San Francisco”??? But then realized it was fake when said you’d for go buying a Hawaii property. No a chance in hell that was going to happen
My blood pressure continued to rise as I read this. Higher, higher, higher until I read the words “Happy April Fools!” at the end. Great piece Sam.
Wow, reading this days after April Fools, I was about to come here and seriously question your judgment until I read the other comments. Glad it’s a joke, that thing for half a million is insane!
And I have to say, who is Enrique kidding saying $1,000 a month for that car is worth it, only for his confidence? He earns $48,000 a year, so probably less than $40,000 after tax, and hes blowing $12,000 a year on something he’ll never own (excluding gas, insurance, parking etc.)? That car costs almost twice his net salary, probably above that once you add all other costs of car ownership. I’m sure the ladies will quickly see he is actually abhorrently poor after getting to know him.
At least the other two examples are high earners/net worth individuals.
There are many, MANY Henriques I’ve encountered over the years who justify their massive purchases, relative to their income and net worth. In 10 years, things many not look so good. The joy of the car fades, the opportunity cost of lost investments mount, and there’s often times a look back, asking whether it was all worth it.
But it takes time to realize our mistakes. Can’t tell anybody to do anything they don’t want.
Hi Sam!
This article made me think that I should share my experience. It may help someone who is in a bind as I was to make the correct decision and learn from my mistake.
A few months ago, my Scion TC that I had bought as a rebuilt title back in 2013 died on me early January 2017. I had just driven it up from Florida to Chicago, the car made the journey just fine which is the silver lining of the story, the sad part is that the engine blew as I was on the 290 highway in 10 degree weather a couple of days after I had arrived in Illinois.
I had been dealing with less than able mechanics who charged me an arm and a leg to perform subpar maintenance on my car. Before I made my trip, I took my car to the mechanic to have the water pump replaced and antifreeze coolant placed into the car in preparation for the artic temperatures I would be driving in. Instead, the water pump was installed incorrectly and the coolant was not anti freeze. This wasn’t the first time I’d received terrible service from so called “mechanics” and as a result, my engine blew since the coolant was frozen and wasn’t circulating to cool my car’s engine properly.
This led me to think that I should get a new car, to avoid having to go to any third party mechanic anymore since I was tired of getting ripped off. Just when I thought I was done getting ripped off…
I ended up paying 29,000 dollars for a 2016 Nissan Sentra that was worth 11,000 dollars as soon as I drove it off the lot… talk about the mother of all rip offs. Since I wasn’t in the correct state of mind, I allowed the 0% interest for the life of the loan cloud my judgment and think that the car was a good deal. My wife and I have very good credit and the salesman told us that we wouldn’t have to pay a cent in interest charges.
Unfortunately, I realized after that all the interest charges were simply added to the sticker price of the car, with an MSRP of 19,000 dollars for a 2016 Nissan Sentra (over budgeting, it’s actually a bit less), the other 10,000 that they ended up charging me for the “features” of the car (heated seats, rear view camera, and remote start) were simply hidden fees. It’s easy for a salesman to tell you that you’ll have 0% interest on your loan if the price of the financing is already included in the inflated sale price of the car.
The moral of the story being, don’t believe anything that people tell you. Do your own research, use Kelly Blue Book and Google, Auto Trader, anything to gain the informational advantage on those that are trying to take advantage of you in your panicked state of mind. Also, be present, don’t get upset when life punches you in the face, take the hit and prepare to hit back even harder.
I’m currently stuck paying 29000 dollars on a car that is worth 11,000… but don’t let this happen to you. Take heed of my warning, be present, see the opportunity rather than the
(cont) negative situation. If I was going to end up paying 29000 dollars for a car, I wish I had purchased a used Subaru BRZ, or a Mustang, or anything that would’ve given my car enthusiast self some validation… But you live and learn, this, hopefully, will never happen to me again.
Never discuss financing and price together.
Just say wait it’s to confusing (they already assume you’re an idiot)
Get the price as low as you can and walk away if it’s not what you want to pay…
The. Talk financing or just pay cash.
I realize that now. I also realize that if you’re going to get yourself into a new car, the best possible option is to find a car that depreciates less than other cars in the market. Aka Subarus or Jeeps.
Or, if depreciation is inevitable, find a car that will satisfy another one of your criteria, say if you’re a car enthusiast and you appreciate performance as a measure of value.
April 1st? I’m a bit late to the post so you got me there for a second. Wow, that ridiculous Mercedes is expensive.