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-   -   When did you decide you can afford a luxury SUV/Car? (http://www.bimmerfest.com/forums/showthread.php?t=662065)

Smj14420 12-03-2012 08:13 PM

When did you decide you can afford a luxury SUV/Car?
 
Hi guys, new to the board...

So, I am tossing around the idea of buying an X5 but haven't talked myself into it yet. Just curious what helped others bite the bullet. Couple questions for you.

1.At what point in life did you make the determination that you can afford an upscale vehicle?

2.How much monthly discretionary income would be advisable prior to taking on a BMW?

3.Also, how do most people go into the deal on a 40-70k purchase? Minimum down/high payment, Max down/small payment on a purchase to be held 5-7yrs.

My situation is this:
31yrs old, married, no kids. 1 child planed 2 yrs out. New house within 5 yrs
150k household income
8500 take home
No current car payment/debt
1yr reserve in the bank
401k maxed at match
5500 discretionary/savings at the end of the month
Current car: 350z which is not childseat friendly, but will keep as I enjoy driving it.

Personally this would suggest room for somewhere between a 500-1500 car payment/insurance, which would allow for a variety of nice vehicles new or used, but I'm having a tough time justifying the additional expense vs something more economical. I am drawn to the x5 as a driving enthusiast and I think I would enjoy the performance/utility tradeoff.

I'm currently eying the x5d used for ~40k or new for ~65k.

This might be unconventional laying it all out there, but I'm curious how current owners came around to the idea of owning a luxury vehicle.

Thoughts?

alexmish 12-03-2012 08:27 PM

In my books you can afford it, life is too short - go for it.

I'd put some money down (~10K) on new one to keep payments reasonable - you dont spend a lot up front, you keep your monthly savings still in similar ballpark. It really depends on how personal view on parting with lots of savings .

macming 12-03-2012 08:37 PM

You should be able to easily afford one :) In terms of payments, it all depends on what you're earning on other investments vs. what you can get on the loan. Otherwise, enjoy the X5! We got ours anticipating our first born and it's been a great decision!

We ended up trading in the Maxima for the X5, and I like the engine/driveline in the X5 much more than the Nissan!

rodnjen 12-03-2012 08:40 PM

I knew when I had a reason to. She turns 8 years old this week and she has a 5 year old baby brother. We moved from a Camry to an ML 350 shortly after my daughter was born. There were other choices but none better for our needs. I have an 11 yo Silverado because we have older homes and younger kids. The extra money goes for my wife to be able to drive a safe, solid, comfortable vehicle.

We bought an Acadia shortly after my son was born but it just wasn't as solid and safe feeling as the other choices. I paid more for the Acadia than the ML, if that matters. It also spent more time in the shop than all other vechicles I have owned, COMBINED.

We now have a 2012 X5 35d and could not be happier. It gets 25% to 32% better mileage than the last vehicle and is MUCH more fun to drive.

I leased the last two vehicles but chose to buy this one. The plan is to keep it for at least ten years or more. If you are buying, more down is great depending on the interst rate. Leasing, there is alot more math and other varibles involved, move slowly.

Put more money in your 401k, alot more. You currently don't have many right-offs and you should get used to living off lower income givien your future plans.
Edit:
The difference in $65K new and $40k used is probably much closer than that given incentives and dealer flexibility. I tried to go used but it just didn't pencil out.

RPsX5d 12-03-2012 09:31 PM

OP, good post . . . you did not beat around the bush, just asked it the way you saw it!

My approach - I admit I am very very conservative financially speaking . . . and probably doesn't fit the norm.

I never buy things I cannot afford to pay cash for. I then finance it - hate to leave money on the table. We even applied this rule to our Bay Area house.

All monthly cash needs should be met by one person's income . . . i.e. ~half family take-home income.

I have never bought used cars - for "me" the factory warranty is worth a lot of peace of mind. I HATE unexpected repair expenses. During the warranty period I watch the car like a hawk. Even as a student I had a new car - I admit a very very small one!

I typically keep our cars for ~10 years, 200K+ miles, so lease never made sense for us.

Regarding SUVs - I always liked the way the driver sits on these vehicles, so had one even when I was single.

Current 2011 X5d is my first BMW - absolutely love it . . . only regrets (as mentioned in my various posts) - did not get AD.

GL

twizzleraddict 12-03-2012 09:33 PM

First off, great financial responsibility! I wish more folks would follow this, and as a result, can weather the storm in the economy a little better. You can adjust your 401K contributions should you need more cash upfront. And you guys don't meet the dreaded AMT so you're safe on income taxes. Because of the take home amount, I'm guessing you either have a low mortgage (you're in Phoenix after all and housing prices a tad better than out here in the Bay Area) or you're renting a really swanky place.

Either way, since you're young, you might as well enjoy it and it's well within your affordability range. I'd look at a 2012 with all the dealer and factory incentives being piled on top of it. A fully loaded X5d can run around $55K after discounts/rebates from what I've been reading recently. $10-$15K down and you'll be pretty comfortable making the monthly payments.

Kar Don 12-03-2012 09:37 PM

In general, great advice on this thread. Looks like you can afford an X5. I think you can get a really well equipped new one for 65k. Mine stickered for over 72 with AD... I would definitely order with AD again but save on other items (skip premium sound and tech pkg). After all incentives car was well below 65k.

ard 12-03-2012 10:11 PM

"affording" it is different that 'wise financial move'

If you do not own a home, THAT would be my top priority. IMO the market is at or near a historic low. (You say 'no debt' so I assume no mortgage?)

(My first luxury car was a new Infiniti Q45..paid cash. I was in a start up company that was doing well. And ultimately went public)

I tend to buy high performance/quality/feature items and hold them a long time. If you lease cars for three years, you are paying 50% of the cost and will never own it. I can buy a car, hold it for 10 years, put 200k on it- in that calculus, the annual cost of owning an X5 over say a pathfinder is much less...AND the enjoyment higher. In your situation, with an X5, after 4 years it will be the kid/family hauler- then you buy a new 4 dr sedan..then in 4 more years you replace the X5. Car will be 8 years, 120k miles(?) and you'll have extracted maximum value. And you could even make it a few years without car payments if you had to. IMO having one car paid for is essential for a working family.

GL

A

PS Also like the idea of buying lightly used cars- allow people that MUST have the new toy pay the 50% depreciation!

Smj14420 12-04-2012 07:00 AM

Thanks for the honest feedback everyone! I wasn't sure what to expect! I'm probably small fish in this market...:dunno: Lol

I forgot to mention the housing, for clarity, we own a home. Bought 3yrs ago. 1400 mtg. Probably have somewhere around 60-80k in equity as of today. We don't plan on paying it off anytime soon.

We haven't come into a pile of money to be able to pay cash, which would obviously be preferred. We are typical working folk however our goal is to keep the monthly obligations under 1 persons monthly take home salary, so figure 4250.

I'm feeling pretty good about it, but may wait a few more months to be able to put more down. I'd like to be in the 50% range.

Thanks for all the input, it's alway good to learn how others do it/see it!

ND40oz 12-04-2012 07:24 AM

If you haven't refinanced your home in that 3 year time, I'd also look at doing that. Rates are so low right now, you should be able to get a 15 year loan with payments a hundred or two over what you're paying now if you have a 30 year.

I wouldn't worry about putting 50% down either, not with vehicle loan rates where they are at. My biggest thing is just not being upside on the vehicle when you drive it off the lot, usually the trade takes care of that and more, but if you don't have one, put down enough to make sure you're never underwater, small down payment plus taxes and tags.

ndabunka 12-04-2012 10:41 AM

Quote:

Originally Posted by Smj14420 (Post 7229479)
Hi guys, new to the board...

So, I am tossing around the idea of buying an X5 but haven't talked myself into it yet. Just curious what helped others bite the bullet. Couple questions for you.

1.At what point in life did you make the determination that you can afford an upscale vehicle?

2.How much monthly discretionary income would be advisable prior to taking on a BMW?

3.Also, how do most people go into the deal on a 40-70k purchase? Minimum down/high payment, Max down/small payment on a purchase to be held 5-7yrs.

My situation is this:
31yrs old, married, no kids. 1 child planed 2 yrs out. New house within 5 yrs
150k household income
8500 take home
No current car payment/debt
1yr reserve in the bank
401k maxed at match
5500 discretionary/savings at the end of the month
Current car: 350z which is not childseat friendly, but will keep as I enjoy driving it.

...I'm having a tough time justifying the additional expense vs something more economical....

ughts?

You are going to find all kinds of responses and some are financial nuclear bombs (Some guys on here put over 50% of their take home into a car which is INSANE!).

However, your income is exceptionally high for a 31 year old so I take it that both you and your wife work to make that $150K income ($75K each). Regardless, the math is the same & you already know to fund your retirement and address savings. If you have $5,500 in discretionary income at the end of a month...what are you spending all of that on.. today? If you buy your home right you will be putting 20% down on it which may explain where huge chunks of your discretionary income is going. That may help us answer your question but isn't required. As long as you have $500 to a thousand in cash available to cover the vehicle you can buy pretty much ANYTHING you want.

One thing you present is a trade off of performance vs. fuel economy. I am 19 years older than you and have been the gammut. You CAN have BOTH with an X5 diesel. These puppies have HUGE torque which equates to VERY FAST performance when you want it (40 to 80 on ramps in a blink of an eye) & economy (26-29MPG interstate) when you want that.

Remember also that all BMWs include all service and maintenance costs for the first 4 or 5 years in the price of the car. With other options (Porsche Cayenne Diesel for example), you may have additional costs in those same years (which you could also afford).

Current car... you will discover that keeping the 350Z will be pointless in the future. You will find yourself driving it less and less and it will simply continue to loose value. My recommendation is to roll the equity from that vehicle into the next in order to get what you want (new X5) rather than settling for a used Toyota Highlander (PS - we have both but I came to this X5d from a used low-mileage '06 750Li)

ND40oz 12-04-2012 12:35 PM

Quote:

Originally Posted by ndabunka (Post 7230472)
You are going to find all kinds of responses and some are financial nuclear bombs (Some guys on here put over 50% of their take home into a car which is INSANE!).

However, your income is exceptionally high for a 31 year old so I take it that both you and your wife work to make that $150K income ($75K each). Regardless, the math is the same & you already know to fund your retirement and address savings. I am a bit concerned that you only have $1K cash reserves with such a high income and few current debts. If you have $5,500 in discretionary income at the end of a month...what are you spending all of that on.. today? If you do your home right, you will be putting 20% down on it which may explain where huge chunks of your discretionary income is going. That may help us answer your question but isn't required. As long as you have $500 to a thousand in cash available to cover the vehicle you can buy pretty much ANYTHING you want.

Current car... you will discover that keeping the 350Z will be pointless in the future. You will find yourself driving it less and less and it will simply continue to loose value. My recommendation is to roll the equity from that vehicle into the next in order to get what you want (new X5) rather than settling for a used Toyota Highlander (PS - we have both but I came to this X5d from a used low-mileage '06 750Li)

I think you're reading 1 year reserve in the bank as 1k reserve in the bank, at least that's how I read his initial statement.

As for keeping the other vehicle(s), it all depends on if you want to keep your fun car, for some people that's important, even if they don't get a lot of miles. Plus, a 350z probably has taken the biggest depreciation hit already and isn't loosing much per year at this point.

Penguin 12-04-2012 01:16 PM

I'm pretty conservative financially; however, since you asked, I decided I could afford a luxury SUV when I could comfortably pay cash for it without having to cut spending in any other areas.

BimmerX5D 12-04-2012 01:23 PM

every situation is different but if you can afford to pay cash (not that you should but finance instead) and still be able to do all your bills including mortgage, investments to retirement saving with more than 60% monthly income left over - you are in for a $70+ car treat! enjoy.

kanar200 12-04-2012 02:18 PM

When my wife and I moved 1,5 yrs ago to the US from Europe and realized that X5 here is approx. 50% European price, we decided to buy it. I was 32, with two mortgages in Europe... the payments were huge, because we got the financing only for two years, but paid it off a few months ago... I would not worry in your financial situation to buy X5

We are pretty active: diving, skiing, hiking, biking, etc. I am not into Japanese or American cars…. X5 is the only BMW to accommodate our needs (we would buy F11, if it was available in the US).

0428 12-04-2012 02:21 PM

For me it was the combination of a new baby, a business that allowed me to write of the lease expenses, and the aging Prelude SH that gave me 8 good years of stick shift fun.

Never regretted the move, as others have said, you only live once... BUT, I would certainly prioritize the house before the X5. 30 year loan at 3.5%? You will never see that again!

:bigpimp:

Whippa 12-04-2012 02:56 PM

Two rules...

1. if this vehicle will see less than 15K/year and its your first SAV.. ..lease ....a general rule is to use other peoples money on items that depreciate. when you run the actual "cost" of ownership over time you cannot beat a lease for reliability and pleasure of operating a fairly new vehicle. Leasing also gets you out without much damage if you decide the vehicle is not for you.

2. If you go over $20K/year you might want to buy..but either way I would go new..better interest rates and keep most of your own money out of the deal. I would grab an inventory 12 35D if you could..best deal out there of all the Lux SAVs....missed mine as I have to have AD..

ductman 12-04-2012 03:59 PM

I am fortunate enough that my employer reimburses me 100 percent on my lease payment, insurance, maintenance and I have company fuel card which I can also use on any personal roadtrips .

finnbmw 12-04-2012 04:08 PM

I have a simple rule that has worked very well for me: If I can't afford to pay it with cash, I can't afford it. Buying real estate (home, 2nd home etc) is excluded from the above rule.

Lot of people finance their cars, I would never do it myself. Why pay the bank interest when you can pay yourself the interest. Plus I enjoy living debt free...

BimmerX5D 12-04-2012 04:58 PM

Quote:

Originally Posted by finnbmw (Post 7231071)
I have a simple rule that has worked very well for me: If I can't afford to pay it with cash, I can't afford it. Buying real estate (home, 2nd home etc) is excluded from the above rule.

Lot of people finance their cars, I would never do it myself. Why pay the bank interest when you can pay yourself the interest. Plus I enjoy living debt free...

very different perspective :thumbup: There is no right or wrong answer. It is all specific to individual situation. Some would say why pay your own money when you can borrow for 0.9% apr. Almost free money for a depreciating asset. But at the end of the day dont break your bank to buy an expensive pile of metal. Do it only if it does not impact your important priorities in life (home, family, retirement saving etc..) :angel:

RPsX5d 12-04-2012 06:57 PM

Quote:

Originally Posted by finnbmw (Post 7231071)
I have a simple rule that has worked very well for me: If I can't afford to pay it with cash, I can't afford it. Buying real estate (home, 2nd home etc) is excluded from the above rule.

Lot of people finance their cars, I would never do it myself. Why pay the bank interest when you can pay yourself the interest. Plus I enjoy living debt free...

Not sure I follow the logic . . . assuming you are very disciplined with your purchases, why pay cash if you can borrow at 2.5% and your investments returns are around 10% . . . you pocket the difference.

Yes, living debt has an intrinsic value . . .

Penguin 12-04-2012 08:28 PM

Quote:

Originally Posted by RPsX5d (Post 7231400)
why pay cash if you can borrow at 2.5% and your investments returns are around 10% . . . you pocket the difference..

The 2.5% is 100% assured, the 10% return is not, and can easily be negative, as many people who took home equity loans for investment money found out a while back...

RPsX5d 12-04-2012 09:35 PM

Quote:

Originally Posted by Penguin (Post 7231563)
The 2.5% is 100% assured, the 10% return is not, and can easily be negative, as many people who took home equity loans for investment money found out a while back...

Point well taken . . . I should have mentioned long term returns . . . done right and without emotions ~10% return long term is very doable . . . true for me over the last nearly 30 year period - which inclued all the modern day downturns.

As far as taking out home equity to fund long term investments - I call that DUMB! Funding long term investments with relatively short term loans . . . well you get the picture . . . I like such folks - they are what allows the rest of us to make the ~10% returns! :)

finnbmw 12-05-2012 04:42 AM

I bought my first car in mid 80's and had to finance about half of it. Since then, whenever I bought a new car, I started saving for the next one by putting in monthly amounts in to a savings account (so rather than sending payments to the bank, I send those payments to myself). I tend to need a new one every 4-6 years as we keep our cars 8-10 years (a two car family), so this system has worked pretty good. These savings represent at the same time a part of our emergency funds, which everybody should have IMO.

I realize that I might get better returns investing in stock/bond market, but those are not guaranteed in the short term horizon (4-6 years) when I need the money. Plus, I am concerned about the long term fiscal health of not only USA, but the rest of the Western world. However, that's another story :eek:

Like it was said, there is no right or wrong way. This system works for me and that's all that matters for me. I enjoy my BMW's more knowing that I own them fair and square, not the bank.

UncleJ 12-05-2012 07:20 AM

Everyone makes good points! You are in a depressed real estate market there and great houses in good areas are -- dare I say it -- "cheap" now and at a level you may never see again. Forget the car, get a house! Then, after you have the house you and your wife have dreamed about in Scottsdale or other high end neighborhood start looking at SUV's again. By that time the new X5 will be out with (probably) a more useable third row (remember the new baby) and more room inside. While you are looking around be sure to shop some other brands. The VW T-egg diesel has the same drive train as the Audi Q7 and new diesel Cayenne at a much lower price. The Jeep Grand Cherokee will be out soon with their diesel as well, and there is the Mercedes GL and ML to consider as well. Lots of choices out there now. I would probably lose the Z and get a nice king cab Tacoma instead. You are going to need a truck when you get a house and start moving stuff -- and afterwards as well. Unless you had a 911, NSX, S1000 or '57 'vette fuelie in the garage its not worth keeping the Z, you could probably trade it straight across for a Frontier or Tacoma. Good luck and you are doing just fine!:thumbup:


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