I’m rapidly becoming the ‘Dear Amy’ of personal finance blogs (don’t let this stop you, I actually love receiving these types of e-mails!); Tam asks:
I am working to pay off my expensive debt which should be paid off in the next six to eight months. However, my dilemma is I LOVE cars. I want to finance (w/ a sizable down payment) a new car after my debt is paid off. I’m trying to talk myself out of it because I know I should be putting that money toward my financial goals but I just keep saying that if I can get this car, then I won’t want anything else and will be satisfied. Deep down, I know this is not true because three years later, they’ll be another new car that I will want. What can I do to stop myself from buying this new car (Nissan 370Z Roadster)?
Man, what can I say?!
I could point Tam to the post that said not to buy a new car, or to the one that said not to finance, or even to the one that said not to spend more than 5% of your net worth on ‘stuff’ (including your car).
I’m guessing that any one of these would be reason enough not to buy the car … instead, I just offered Tam the following advice:
Don’t!
Can you eat a car? 😉
Can you eat your car, thats funny. Of course you can if you buy a chocolate one 🙂
@Tam. Find your local car dealer for this model and decide on the route you want to take the car on a test-drive.
Take a camera on the test-drive and get the salesman to photograph you in the driver’s seat.
Go to a toy shop and order a model car of the same type.
After the drive, get the salesman to detail the repayment schedule given your down-payment. When you have the figures, breezily stand up and say: “I’ll get back to you”.
At home, display the model car and the photo from the test-drive.
Setup a savings account, pay the down payment in, and setup regular payments into it for the same value as you would give to the car dealership.
Get books, and start to fill a scrapbook with the things you want to do when you achieve your Number – re-inforce why you are denying yourself the car.
Put a quarterly reminder on your online calendar to send you an e-mail to remind you how much richer you are because you haven’t bought the car, and also to remind you to check the current secondhand price of that model. Buy it when its under $500.
KC
I think Tam asks a great question, but I will ask it differently.
How much money should someone spend on a car given their savings?
Let’s say I’ve been able to save $30K and now it’s time to get a car. How much of that “saved” money should/can be used for a car?
JD
@ Steve / KC – Chocolate cars? Toy cars? I love it 😛
Great advice, to boot!
Commit to spending the money on something else – something that has at least some chance of increasing your net wealth. Collect art, coins, timberland, beanie babies or whatever you find appealing as a hobbie with at least investment portential. Buy top name wines if you want something you can consume. These sorts of things may or may not be the best investment – but they have to be better than a depreciating asset.
Alternatively, buy a house with a mortgage so you don’t have the cash flow to spend on car payments. At least the principal will represent a form of forced savings.
JD says “How much money should someone spend on a car given their savings?
Let’s say I’ve been able to save $30K and now it’s time to get a car. How much of that “saved” money should/can be used for a car? ”
Well, this depends on may things,but a key couple questions might help you decide this answer. First ,whats your number and when do you wish to achieve it? Second, is it necessary to have a brand new car, or could you do with a used car for a few years?
If you can do with a good used car, I think that can be achieved with $ 5,000 or less,then use the rest to help you grow your nest egg further. Some sort of investment, say stocks, or real estate.
But certainly, I wouldn’t use more than 5 or 6 grand for a car. Just my Own Opinion.
Tam. Find your local car dealer for this model and decide on the route you want to take the car on a test-drive