Most high-dollar mass-market luxury cars get pretty close to that. And that’s the market OP is shopping in.
On average a car will lose around 50% over 4 years, but when you start talking cars like BMW you run into a problem:
if you can afford a $45,000 used BMW, you can afford a $45,000 brand-new Acura. You get almost the same level of luxury, almost as good of a driving experience, and much higher reliability for the same money.
Meanwhile, the BMW is halfway through its bumper to bumper warranty and if you can afford to keep a BMW around after BMW stops paying to fix everything that breaks, you can probably afford a brand new BMW and won’t be shopping used.
So used BMWs can be kind of hard to sell unless there’s a very steep discount over new, because people who can afford a non-steep discount are shopping new luxury cars, and people who aren’t shopping new aren’t interested in paying $40,000 for a used car that will cost them a lot of money just to keep on the road.
This is interesting thinking. I am in similar situation as I make a little less yearly than what you posted. If you do not mind going into debt and having car payment, then it might be worth it. however if the thought of debt bothers you, then it may also be worth it to check out cars that are a couple years old coming off of a lease. They are still in great shape but not as expensive. The other option is to look at new cars but look at ones with less bells and whistles. This might save you a little money and still get you the new car. As far as selling it, the issue is that when you sell it, you will need another car. This means that whatever money you get from selling car is going to go to new car plus you still might have to take loan out on new car which means you would still be in debt.
Actually, high priced cars, on average, depreciate as much, if not more, than cheaper cars. One reason is that the folks buying them new have no interest in them used, and they are still expensive to maintain, insure, etc.
You’re looking at this backwards: buying an expensive car because it will be worth more when you sell ignores the huge cost of depreciation you’ll be paying. Sure, a $50k car might be worth $25k, but you’re still out $25k. Had you bought a $25k car, and sold it for $12.5k, you’d only be out $12.5k.
Tell us how much you can afford to pay per month (reasonably), and we can make some rough estimates about the price of car. I’ve never bought a car more than half my yearly salary. (not anywhere close).
I can’t tell you what to do with your money but this is just 100% crazy to me.
Assuming you have excellent credit, the payments on a $50K car for 60 months would be $883 per month. Insurance on this car is likely at least a $100 per month but depending on your driving record, credit score, and profession, it could be much more. You make $35K on the high side so after payroll taxes and income taxes, you are likely taking home about $27,500 or about $2,300 per month. So your $2,300 monthly income less car payment you will only have $1300 per month to cover rent, food, gas, health insurance, entertainment, student loans, etc. You can pretty much forget about saving a nickle for retirement. You will be one small hiccup away in your budget to financial ruin.
I would have a hard time recommending any spend more than 50% of their annual income on a vehicle. Oh course everyone’s priorities and personal finances are different. I just purchased a new vehicle for my wife and we ended up at 12.5% of our annual income.
You are trying to justify a car that you can’t afford with the planned proceeds from a resale. You are going to get burned with the most expensive cost per mile as being the first owner. You justify that it is only $25K for about 48K miles of use. The simple math works out to be $0.52 per mile in depreciation. That does not include gas, insurance, and maintenance. Your cost per mile could end up north of 0.75 per mile. Your math really breaks down when you calculate your per mile cost. Yes you may spend $25K in depreciation but if you compare this to a Toyota Camry your cost per mile would be less than half.
Cornflakes2 (Who calls their selves cornflakes) state he save 60 to 70 % of his 35000 annual salary. Assuming that is take home amount after taxes and every thing else that leaves about 1750.00 a month. Take rent, groceries, utility bills away just does not leave much to buy an expensive vehicle with.
Well, on that, we don’t know the rest of the financial picture. There’s a guy at my office who probably makes about what OP does, and who went out and bought himself a $40,000 car because (and yes, we all think this is weird) he still lives at home with his mom at 40 years old, and so he has no housing payments, very little food payments, no utility bills…
Hay, don’t knock living at home at the age of 40. When I wasn’t much younger than 40, I lived with my mother. I moved in to help take care of her since I wasn’t living with anyone and she needed the help. It did make dating awkward, but I’ve been back on my own since 2010. Now my good-for-nothing siblings can do their part.
I’d propose that there’s a difference between living at home at 40 because your mom needs you to take care of her, and living at home at 40 because you want your mom to take care of you.
One of my cousins lived with my aunt and I’m sure he was in his 50’s. It worked well because he was able to take care of the house and her, who was in her 90’s. He didn’t seem to have a regular job anyway. Come to think of it my uncle always lived with my grandfather until he died at 85, then he was homeless.
Look for a 3 or 4 year old, low mileage car in excellent condition. You can get a loan if you need it for a used car, and even if the interest rate is higher than for a new car, it will cost less in the long run since it will cost 2/3 to 1/2 what an identical new model will. I am near the end of my working career, and make a lot more than you do. I never spent more than $25,000 for a car and I have been satisfied with everything I have owned in the last 30 years. Decide what features you need and look for cars that fit the description. You can find a nice compact or midsize car at $15,000 if it is 3 or 4 years old.
One thing that worked for me was to invest in myself, but not spend money on myself. When I got my first full time job as an instructor at a university, there was the temptation to buy a fancy car, expensive high fidelity equipment, etc. I decided instead to invest in myself. I had not taken any statistics on my master’s degree, so I paid the tuition and signed up for a.year long statistics course sequence while teaching a full load of courses. The next year, I paid the tuition and took a year long course sequence in probability. Along the way, I got married and my wife taught in the public schools. We lived in a small apartment and put her checks into savings.and saved as much as we could from my pay check. The fourth year my position, I had enough hours beyond a master’s degree to qualify as an assistant professor. My salary was increased from $6700 to $8300 (remember, this was 1969). I had decided to go back to school. My department head called me in the summer before I was headed back to school and assigned me all the probability and statistics courses in the department. The professor I had taken the courses from was on a grant and requested that I teach the courses. When I got to the next round of graduate school, the work I had done took a year off my doctoral program. When I finished my coursework, the institution where I had taught offered me a job which I accepted. I had a colleague whose son earned an undergraduate degree in business and took a job with a big company in Cincinnati. He decided to invest in himself and flew to Chicago every weekend to take a class at the University of Chicago. He was so valuable a company in Chicago hired him away from the Cincinnati firm.
I always advised my students to invest in themselves. I tell them when they get a job, look around and see what your employer needs and then equip yourself to fill that need. Once you establish yourself in a job, It’s easier to move to a better job. Buy a new car and in a year or two it is out of date and loses a good portion of its value. Keep up and expand your skills and you become more valuable.
Kelly Blue Book shows a 2013 Camaro SS coupe 2D w/45,000 miles, standard options, & good condition, as a used car, is currently priced at $16.8K to $19.5K. A 2016 of the same car, new, they say goes for around $35,000. You can get some idea of the depreciation rate of the Camaro by that.
I can strongly recommend the rental agency route. You can get a great car, often less than a year old, for far less than it would cost to buy a new one.
As far as “but rental cars”, my first car from a rental agency is now 11 years old and I just did my first non-trivial repair: replaced the starter. Our other car has been driven cross-country twice and is still happily chugging along.
This may be more a function of the cars we chose (a 2004 Pontiac Vibe, bought in 2005 and a 2009 Hyundai Elantra bought in 2010), but it should be noted that we could buy good cars for a lot less than we’d have paid new.
@pemungkah has given good advice IMHO on purchasing a car from a rental fleet. In the fall of 1988 we purchased a Ford Taurus that had been a rental. It had 8800 miles on the odometer when we bought the car. It was very reliable transportation. It had gone over 100,000 miles when it was totaled in an accident. In 2006, we purchased a 2006 Chevrolet Uplander for about $15000. The van had 16000 when we bought it at the Chevrolet dealer. The price was far less than the selling price of a new Uplander. My son now has the Uplander and it has gone 200,000 miles with no major problems. The dealer listed the van as a “program” vehicle so it could have been a rental. I suppose it could have been used by the railroad to drive up and down the tracks checking for spikes that weren’t fully pounded down. At any rate, it has worked out very well.
Yeah I bought a one year old rental too and have been very happy with it. Our fleet manager some years ago bought a new car every year. I asked him once about rental returns and he said the only issue was that they sold them for more than they paid for them in the first place after getting a year and 20-30K out of them. Still we aren’t buying a couple thousand cars at a time so can’t command the same discounts. And with so many people now thinking they can extend oil changes and other maintenance, I’m not so sure a rental is the only way to insure buying a well maintained used car.
Back in 1964, the university where I was working on my master’s degree traded in some Checker automobiles from its fleet at the local Ford dealer. The price was right on the used Checkers, but I didn’t have the money to buy one. The mileage was high, but I knew that these vehicles had been well-maintained. Most of the miles on these Checkers were road miles. Had I had the money, I would have traded my 1947 Pontiac in for one of the Checkers.
My father used to wax nostalgic about those old Checkers, lamenting that he would have liked to have bought one. Similarly, I wish I could have afforded to keep my father’s old 1969 Dodge Dart running, but when my older brother offered it to me in 1998, I didn’t have the resources to maintain such a car. Even in 1998, finding someone who could do the work to keep it running was a challenge. Heck, finding someone who can do carburetor work on my 2003 Honda Nighthawk 750 is a challenge. My favorite Honda dealer doesn’t do carb work anymore, and my least favorite Honda dealer wanted $600 for a simple carb rebuild and sync. Eventually, I found a local mechanic who would do the work for a reasonable price, but it wasn’t easy. The guy works out of his garage at his home, and he only takes cash.
Paying cash for your car is a good thing, but I personally don’t see why you’d want to trade it away after only a few years. Get some enjoyment from your hard earned money.
And both of your choices are light years apart from each other- one, a sports car, the other a 4 door hatchback- it’s like comparing apples and gorillas. An alternative to the A class would be the Mazdaspeed 3 or Ford Focus ST, and be a lot cheaper, too.
