# Saving up for an expensive car

Let's say I have a salary of \$80,000 after tax.

My goal would be to buy a \$100,000 car.

I've read online that 20% is a reasonable amount to pay for a car each month.

20% x \$6,666 monthly pay = \$1,333 towards the car each month.

This means I can save 16,000\$ towards the car each year.

If I wanted my \$100,000 car I would have to save for about 6.5 years.

Is my logic reasonable? Is there anything I'm missing?

This 20% is purely for saving for the car. 30% goes towards everyday expenses like gas and food, 20% goes towards morgage and the other 30% goes towards emergency fund and retirement

• Note that this much money would buy a house in many areas. Also check what it's going to cost you to insure that monster. Dec 20, 2015 at 18:24
• I didn't work through the math, but I can tell you right away: If you make \$80k/yr in salary, then you should not be buying a car that costs \$100k. Economically that cannot make sense. If you want to do it anyway, that's up to you but it's not really on topic here anymore because it's in the category of frivolous spending.
– user32479
Dec 21, 2015 at 0:00
• Are these amounts in U.S. dollars? Dec 21, 2015 at 6:05
• @Ben Miller Yes Dec 21, 2015 at 20:59
• 20% of salary for car? That seems... high.
– Joe
Dec 21, 2015 at 22:21

The question is how does \$16,000/year for 6.5 years fit into your budget. Or to put it another way, what won't you be spending that money on? Housing, food, vacations, retirement fund, investments (though you can invest your car fund in the meantime), building a hefty emergency fund, kids college funds, saving for a down payment on a home, charity, etc... are all other places that money could go. I don't know what your needs are today let alone 6.5 years into the future, but I'd encourage you to consider all your financial goals and evaluate where this expense would fit.

It seems your plan is to save up to the total cost of the car and then buy it in cash. That's a valid strategy, but it means you'll have no car (unless you already own one) for 6.5 years.

Do you need a car? If so, what will you drive in the meantime (and even if you already own another car outright, you'll have gas and maintenance expenses)? If you don't need a car, then \$100,000 is a rather extravagant purchase for something we just established you don't need. Would you be happier having this expensive car in 6.5 years, or having a series of less expensive cars starting now? Or buying a used model of the expensive car sooner? Or having no car at all?

Also, a lot can change in 6.5 years. Cars will evolve and there'll be different models and options available. Maybe your salary will have doubled, or maybe you'll be unemployed. You could be living in a different city, have a different commute, and maybe you'll need a minivan to haul kids around or live in a place with bad winters and want a 4-wheel-drive. You'll also need to be prepared for the additional expenses that generally come with expensive cars, such as higher insurance and maintenance rates, and parking could be costly if you live in an expensive city.

The other option, of course, if the car is truly something you need, want, and can afford, would be to save up a sizable down payment and finance the rest so you can get the car sooner.

Finally, there's nothing wrong with saving your money for 6.5 years, building up that fund, and then reevaluating what makes the most sense for you at that time. Maybe it will the car, maybe something else, but the nice thing about having savings is that it gives you more options.

"I've read online that 20% is a reasonable amount to pay for a car each month" - Don't believe everything you read on the internet.

But, let me ask, does your current car have zero expense? No fuel, no oil change, no repairs, no insurance? If the 20% is true, you are already spending a good chunk of it each month. My car just celebrated her 8th birthday. And at 125,000 miles, needed \$3000 worth of maintenance repairs.

The issue isn't with buying the expensive car, you can buy whatever you can afford, that's a personal preference. It's how you propose to budget for it that seems to be bad math. Other members here have already pointed out that this financial decision might not be so wise.

• Happy Birthday, @JoeTaxpayer's Car... Mine just hit her 6th birthday as well :)
– Joe
Dec 21, 2015 at 22:26

If you can afford to put \$1,333 towards saving for a new car each month, then there is nothing wrong with your logic You should be aware that your car will probably cost around \$110,000 in 6.5 years, but other than that the logic is fine. However...

1. Check that you really can afford to save this amount of money. Just because some website says it's a reasonable amount in general doesn't mean its a reasonable amount for you.
2. Don't forget that expensive cars usually have higher running costs, like maintenance and insurance. Can you afford those?
3. What are you going to be driving for the next 6.5 years? Can you afford to buy, maintain, insure etc. your current car as well as putting \$1,333 away in savings?

Any way you look at it, this is a terrible idea.

Cars lose value. They are a disposable item that gets used up. The more expensive the car, the more value they lose.

If you spend \$100,000 on a new car, in four years it will be worth less than \$50,000.* That is a lot of money to lose in four years.

In addition to the loss of value, you will need to buy insurance, which, for a \$100,000 car, is incredible.

If your heart is set on this kind of car, you should definitely save up the cash and wait to buy the car. Do not get a loan. Here is why: Your plan has you saving \$1,300 a month (\$16,000 a year) for 6.5 years before you will be able to buy this car. That is a lot of money for a long range goal. If you faithfully save this money that long, and at the end of the 6.5 years you still want this car, it is your money to spend as you want. You will have had a long time to reconsider your course of action, but you will have sacrificed for a long time, and you will have the money to lose. However, you may find out a year into this process that you are spending too much money saving for this car, and reconsider.

If, instead, you take out a loan for this car, then by the time you decide the car was too much of a stretch financially, it will be too late. You will be upside down on the loan, and it will cost you thousands to sell the car.

So go ahead and start saving. If you haven't given up before you reach your goal, you may find that in 6.5 years when it is time to write that check, you will look back at the sacrifices you have made and decide that you don't want to simply blow that money on a car.

Consider a different goal. If you invest this \$1300 a month and achieve 8% growth, you will be a millionaire in 23 years.

* You don't need to take my word for it. Look at the car you are interested in, go to kbb.com, select the 2012 version of the car, and look up the private sale value. You'll most likely see a price that is about half of what a new one costs.

• The problem here is we don't have any other details from OP. If he rents with a roommate, and saves 20% for retirement but still has this money to burn, who are we to judge? People have a pool of discretionary income, for some, it's a \$10K vacation every year. Others, it's a \$500 dinner and night out every Saturday. This guy wants a car I wouldn't care to own. Dec 21, 2015 at 17:12
• "If you spend \$100,000 on a new car, in four years it will be worth less than \$50,000." Heck - the average car loses a significant chunk of its value literally the second you purchase it. Dec 21, 2015 at 19:15
• The car would be a 2006 Lamborghini Gallardo so it would have already done the bulk of its depreciation Dec 21, 2015 at 21:00

This seems really simple to me.

1. Don't sell current car
2. Save the amount you have planned to save to reach \$100,000 in 6.5 years
3. Re-evaluate in 6.5 years