Play Suze Orman - Can I Afford It?

[canigetacar]

Pretend you're Suze Orman (or don't - I don't care) and tell me if I can afford it.

Want: Tesla Model S at $88,000 before tax credits
Cost: $1,300/month for 72 months at 1.99% (yes I can get a loan at that rate for this car)

Income: $165,000 pre tax and about $107,000 after tax ($8,900/month).
Cash Assets: Basically nothing, like $5,000, but that's only because I just started my job.

Expenses:
Rent: $2,200
Student Loans: $85,000 total, and about $1,000/month for 10 years at 6.8%

Bonus:
My income for the year in which I buy the car will be $117,000 after tax because of the combined state and federal tax credits.

[HappySaver]

You're kidding, right?

She'd be screaming DENIED before you finished saying "student lo..."

[canigetacar]

Haha. Ya, you're right. Then play your own financially-guruish-selves. SO is too strict with money advice anyway.

[bjl584]

Denied

You have no savings. If your savings and investments were higher, then maybe you could afford it. Not that you probably should buy a car that costs close to $90K, but you probably could swing it.

[Petunia 100]

You want an expensive car. You need an adequate emergency fund, a savings plan for future expenditures, and adequate retirement account contributions on a regular basis.

Take care of your needs first.

Congrats on the new job.

[disneysteve]

You're kidding, right?

I certainly hope so.

[riverwed070707]

Sorry but no one on this forum is going to tell you this is a good idea. You got a great paying job and your expenses are low in comparison -- make the most of it by making good financial decisions (paying down debt, funding retirement, creating an emergency fund), not skyrocketing your spending to match the pay increase.

Once your essentials are in line, then start saving for the car. IMO a luxury car should never be finances, especially not for 72 months.

[kork13]

a luxury car should never be financed, especially not for 72 months.

This.

WOW, so many things wrong with your picture right now. I assume you're fresh out of college, between 22-24 years old?

So completely DENIED it's not even funny. Holy smokes.....

1) You have no savings, emergency fund, retirement savings, investments, NOTHING.
2) You have a high debt load from your student loans already, and you want to DOUBLE your debt load to buy this car?? Heck no.
3) Nobody should EVER finance ANY car for 72 months. If you can't afford it on a 3-year (36 month) loan, you can't afford it.
4) More troubling than anything is your apparent attitude that because you will be earning a very healthy income, you can blow your money. This is dangerous, my friend.

We're all trying to help you. So on that strain, some initial advice for you.

1) Save. First and foremost, save. 15% of your gross income should go immediately to retirement savings. At least another 5-10% should be saved in either cash savings accounts or low-cost investments (preferably both).
1a) Prioritize a cash savings account dedicated as your Emergency Fund, holding at least 6 months' expenses. As your expenses grow over time, expand your EF to match.
2) Keep your expenses as low as you reasonably can. I understand that you'll grow into your income somewhat, especially being fresh out of college, but do yourself a favor and keep your spending well under control.
3) Avoid debt to the maximum extent possible. Never carry a balance on credit cards. Borrow only for a reasonable home mortgage. Pay cash for new vehicles whenever possible, otherwise finance for no more than 3 years. Pay off your debts as quickly as is practical.
4) Learn how to smartly manage your finances. You can learn alot by hanging around here on these forums, you can learn even more by reading quality books about finances, investing, taxes, and a wide variety of other topics.

Honestly, give yourself a couple years of healthy savings, and we would all probably have VERY different answers. Pay down (or pay off) your student loans, get a good chunk of money in the bank & in retirement, and you probably could easily afford to buy your Tesla.

[JulieAlbright]

So to summarize. You have a decent job. No savings. and $88k in Student Loans.

and again. No money saved up.

I have to ask --- do they even MAKE loans like that? I'm not being sarcastic, I'm truly curious. Is there really somebody out there who is going to loan you $88,000 for a car? With no down payment? Is that like, a 5 year or a 7 year loan or do we stretch it out like a mortgage for 15/30 years?

[gabby169kitty]

Are you kidding me?

Don't you know about Suze's emergency fund rule? 6 months minimum! You are DENIED!!

Even if you had the money I'd personally wait until more is known about the overall performance of the cars in a few years. Too new and too risky in my book. Plus getting repairs done can take a long timr and be very expensive.

[Permanent Temp]

I would kill to make that kind of money, I could really met all sorts of financial goals with it. I get that your making a lot of money right now but this a great opportunity to set yourself up for live not double your debt so that it equals your take home annual pay.

So you want the car then what, Caribbean vacations, designer clothes and sheets and so on and so forth? I know a lot of people who make as much as you and are miserable because they make that much but are for all intensive purposes broke.

If I were you I would buy something much less expensive like I dunno I used Lexus in cash or something if you want a luxury car. As far as I know they don't depreciate much and last forever.

I would then do as others have told you. Pour money into your retirement fund, emergency fund, student loans etc. Once you get rid of that 86000 debt you could consider getting that car if you wished.

I'm just not sure what the logic in adding on that much debt for a car when you have an equal amount of student loan debt. Even with your income you have a sizable amount of debt now. It makes absolutely no sense to double it. Eliminate what you have and build a foundation and then you could more than likely own the Tesla comfortably within a few years.

[neatdesign]

Nope.

[siggy_freud]

IMO a luxury car should never be finances, especially not for 72 months.

Why not? When he can get a rate of 1.99% he could potentially make a lot more money by taking the cash and investing it elsewhere.

[disneysteve]

Why not? When he can get a rate of 1.99% he could potentially make a lot more money by taking the cash and investing it elsewhere.

Assuming he could afford it - which he can't - this is a valid point. If I have a million dollars invested in stock mutual funds that are earning 8%/year or more, would it make sense to pull out $88,000 to pay cash for a car or would it be better to borrow at 2% and keep the money invested? One could argue either way about things like risk and such.

I think the point is that you shouldn't be financing a luxury purchase if that's the only way you can afford to get it.

[Reggie]

Holy crap! No way. You cannot afford it! I have more money and less debt than you and I'm freaking out to save even more money. Save save save! Buy a car in another year after you have an emergency fund.