When is it financially acceptable to buy a dream car?

Linton

When you can pay for it in cash without significantly impacting your long term future. Never buy a dream anything, except a house, on borrowed money. This is especially true of cars which will cease to match your dreams well before you pay off the loan.

bowlhead99

robatwork wrote: »

27/10/2024

While it might be financially acceptable to buy a dream car on that date, your choices might be more limited.

Some people don't work on Sundays, and for example the seller might not be able to verify the validity of a bank transfer, and be unwilling to let you drive away until the next morning...
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To the OP: the time to get yourself a dream anything (buy the dream car, the dream house, a dream watch, afford to take the low paying dream job, go on a dream holiday, a luxury yacht, top of the range inflatable girlfriend, etc etc...) is when you can afford it without sacrificing too much of everything else.

If you have to live in a studio flat in a dodgy neighbourhood and subsist on pot noodle and baked beans to afford the £500 a year car tax and the £1,500 insurance and the £5,000 maintenance and the £15,000 a year depreciation on the Lambo parked outside, you're probably doing it wrong.

But if you take a choice to spend £35k on a 2004 Bentley Conti GT or 2007 Maserati GranTurismo or a 2009 Porsche 911 or a 2010 Jag XKR - rather than upgrading your house from a 3-bed to a 4-bed ; then that's probably fine. Some people prefer to be able to blat across the autobahn at 170 mph in comfort, than have an extra bit of storage space or a guestroom at home.

As others point out, cars go down in value as you use them while other assets like houses or investment portfolios can go up. So when looking on what to spend your first spare money on, you'll probably improve your overall lifetime wealth if you focus on the house and retirement fund first, rather than get the car and have it drop in value at the same rate as you can save towards the house and pension.

According to ONS, the median salary of a UK full-time employee who's been in their job at least a year is £27k. That gives take-home pay of over 21k. So any of those 170mph+, 4-seater coupes I mentioned: secondhand but in very nice condition with only 40k miles on the clock at most, would not take much more than a year and a half's net pay. You'd get there in 20 months if you could avoid spending on anything else.

Doing the simple maths - if you're 20 now and will work to 70: you have 50 years in which to juggle your finances to set aside that money. It's quite a bit less than 5% of what you'll earn over your working life. Maybe 2% or less if you're looking at your finances as part of a couple. Maybe 1% or less if you're hard working/ lucky enough to earn a good chunk more than the median salary. And half the workers in the country will indeed earn more than the median salary.

So, a dream car would be realistic for a lot of people. The reason a lot of people don't do it, is simply their personal preferences and priorities.

YoungBusinessman

kteara wrote: »

I really appreciate your reply. Can I ask how you managed to buy a house at age 24, hats off to you. Thats really impressive but I can't help but believe that its almost impossible for that to happen today. I would love to get some advice from you though?

I bought my first property at bottom end of ladder December 2012. Age is just a number. Next is a buy to let then my dream car. Which by the time I save the money for it, I will probably not even want to spend it all on a car.

YoungBusinessman

What I meant to add in was bought at 21. Age is just a number, hard work and dedication gets you on the ladder, not your age.

CKhalvashi

bowlhead99 wrote: »

If you have to live in a studio flat in a dodgy neighbourhood and subsist on pot noodle and baked beans to afford the £500 a year car tax and the £1,500 insurance and the £5,000 maintenance and the £15,000 a year depreciation on the Lambo parked outside, you're probably doing it wrong.

But if you take a choice to spend £35k on a 2004 Bentley Conti GT or 2007 Maserati GranTurismo or a 2009 Porsche 911 or a 2010 Jag XKR - rather than upgrading your house from a 3-bed to a 4-bed ; then that's probably fine. Some people prefer to be able to blat across the autobahn at 170 mph in comfort, than have an extra bit of storage space or a guestroom at home.

This is the way I've looked at it for the last few years.

I worked my backside off to pay off the mortgage in full, and in the last 3 years we've bought about 4 new cars, because everything is paid and I can afford to. My latest car has a list price of about £55k, OH's about £31k (although we paid significantly less for both), but the money was in the bank, and we liked the look/drive/practicality of what we've bought.

If I was renting small apartment, in the conditions above, I certainly wouldn't spend that sort of money on a new car, but that's just me. In the conditions above, bangernomics (we own a 2002 Focus ST, despite having 2 much newer, better cars) would be my advice.

So, a dream car would be realistic for a lot of people. The reason a lot of people don't do it, is simply their personal preferences and priorities.

Brilliantly put.

atush

You can afford it when

A you have no debt apart from mtg debt
B you have savings for emergencies
C you have a pension in place
D you have no upcoming spending plans such as buying a house
E you have stable employment
F you don't have dependants at home you have not saved for

bigadaj

Surely this is what a pension is for if you believe George Osborne.

dealer_wins

I would say when you net income is twice the value of the car you want to buy, or your cash savings are 4 times the value of the car!

grey_gym_sock

atush wrote: »

You can afford it when

A you have no debt apart from mtg debt
B you have savings for emergencies
C you have a pension in place
D you have no upcoming spending plans such as buying a house
E you have stable employment
F you don't have dependants at home you have not saved for

you left out the most important point: when you have the cash to pay for the car without taking out finance.

(or was that implied by the "no debt apart from mortgage"? ... but it's worth spelling it out.)

but IMHO, having the cash is the one vital point. so start saving for it, if that's really what you want. that includes:
a) cutting out unnecessary spending
b) earning more (getting into higher-paid work is usually more effective than just working longer hours)
c) (possibly, depending on time scale) investing savings, so they grow faster

yes, it would probably be silly to buy an expensive car for cash, while still living in a grotty bedsit. but that kind of thing would probably be obvious by the time you've saved up enough for the car.

racing_blue

kterea - I am your mirror opposite. My dream would be to conjure up a lifestyle in which I never had to waste time or money sitting in a car.

Having said that, if you know and love such cars, then perhaps you could cross the bridge from consumer to dealer & make a 2nd career out of it?