[5LEEPR_G01]

Originally Posted by goldfz8

Similar boat as you but I drive a 2016 x6 that i will be trading in. I live in nyc and drive from queens to downtown every day for work. my car is coming out to about 100k after everything. Does it make sense.....absolutely not. Can i spend my money on something 1/4 of the price or just keep my x6 yea...but I choose happiness over money. I love motorsports and ive had the cold feet multiple times while I await my delivery which should be due at the end of this month. I also work in hotels which at any moment can shut down due to covid and out gov being terrible.

In the end im getting the car because Its what will make me happy.

PS also found out im having a kid a few weeks ago and my wife and mom both suggested i cancel my order.....they got a firm NO. Im not worried about being broke or not being able to provide...If all else I sell the car in a year and take a 10k hit or more. I am just trying to live for today.

Hope this helped with making your decision.

As a new parent myself… I think you should reconsider this decision tbh. My son is 23mo and I've found myself naturally evolving into a more conscientious spender. This was not who I was 30 months ago, when I had just moved to OR for a brand new career change (semiconductor to tech), and decided that I made enough to justify another vehicle. Two weeks into my move my partner (who stayed in Texas for school) called to let me know we were expecting! I was super ecstatic and immediately moved her out to OR to stay with me, but I had no intentions of a change in heart about the extra vehicle and told her that we'd need two now lol I had my heart set on the ultimate family friendly supercar esque daily driver and somehow thought that was a low mileage (8,500) used 2018 Stelvio QV (fully loaded MSRP of 91k) for $56,500… was a smoking deal in the midst of a pandemic market and I drove it for 17k miles over a year. Gave me a shit ton of issues and had 7 dealer visits over that time, but I was hooked on the driving experience when it ran (11.79 in the 1/4 bone stock and handled like a 911). During this time my son had been born and I was able to provide everything we needed, but it was easily $10-15k over just the FIRST 10 mo's in baby expenses. I didn't realize the effects of these costs until I started to look at homes in the PNW and realized I couldn't afford it with a kid and my toys. So I took my family in the QV and moved us back to Texas (both our families live here). I justified trading my QV in for a new 2021 because I made $5k on trade in over what I paid originally, I was able to get 12% dealer discount and I was living with my in-laws for pennys on the dollar. So I custom ordered in 01/2021 and the MSRP on my 2021 QV was $94k 🥲 I paid $64,500 OTD… with $8k down, but was still self centered and spent $15k in mods because I could "afford it" and it made me happy. Thing is it didn't (for various reasons really) and I knew that allowing my passion for vehicles could easily devolve into something that could become a blocker for me achieve other things in my life (ie another home, traveling, more kids, etc.). Not saying any of this is relevant to you, but I did resonate with how you felt in regards to living for the moment and sacrificing monetary success for happiness.

[chimp]

Originally Posted by SearsTurnSix

OK - Serious gut check time.

I thought I was committed to spending this much ($94k after taxes, license/registration), but I must say I'm feeling cold feet. This purchase is an expensive toy / luxury item that makes zero financial sense, objectively.

My alternatives would be to buy a new Outback ($40k) or just continue driving the GTI. I can afford to make the purchase. But will I regret it?

In my opinion that seems like a significant gap between what you want (94K) and the alternatives (40K or keeping the GTI). It is impossible to give solid advice without knowing your full financial picture but if the roughly $1,000 difference per month assuming ($1,500 to $1,600 payments for the X3MC versus $500 to $600 per month for the Outback) is meaningful to you I think you have your answer. Undoubtedly, there are far better uses for that 94K. At the same time though you have to live a little.

[goldfz8]

Seems like we may be on a different place and I don't mean to offend in any way. Tough to understand financial decisions through forums lol. I am 30 and have spend majority of my adult life working on a career and even got my wife in it. So both of us are well established with work. On another note our monthly expenses are probably around 20% of our income. That includes her 2021 Jetta lease As well. My brother has 3 kids so i have hand me downs as well as eager grandparents ready to baby sit lol. I am very grateful and fortunate. Most things in my life are well planned including children. My choices to this point were relatively smart which is why a decision to buy a 100k suv hurts the soul. Not because its difficult to afford but because it is unnecessary.

Originally Posted by 5LEEPR_G01

As a new parent myself… I think you should reconsider this decision tbh. My son is 23mo and I've found myself naturally evolving into a more conscientious spender. This was not who I was 30 months ago, when I had just moved to OR for a brand new career change (semiconductor to tech), and decided that I made enough to justify another vehicle. Two weeks into my move my partner (who stayed in Texas for school) called to let me know we were expecting! I was super ecstatic and immediately moved her out to OR to stay with me, but I had no intentions of a change in heart about the extra vehicle and told her that we'd need two now lol I had my heart set on the ultimate family friendly supercar esque daily driver and somehow thought that was a low mileage (8,500) used 2018 Stelvio QV (fully loaded MSRP of 91k) for $56,500… was a smoking deal in the midst of a pandemic market and I drove it for 17k miles over a year. Gave me a shit ton of issues and had 7 dealer visits over that time, but I was hooked on the driving experience when it ran (11.79 in the 1/4 bone stock and handled like a 911). During this time my son had been born and I was able to provide everything we needed, but it was easily $10-15k over just the FIRST 10 mo's in baby expenses. I didn't realize the effects of these costs until I started to look at homes in the PNW and realized I couldn't afford it with a kid and my toys. So I took my family in the QV and moved us back to Texas (both our families live here). I justified trading my QV in for a new 2021 because I made $5k on trade in over what I paid originally, I was able to get 12% dealer discount and I was living with my in-laws for pennys on the dollar. So I custom ordered in 01/2021 and the MSRP on my 2021 QV was $94k �� I paid $64,500 OTD… with $8k down, but was still self centered and spent $15k in mods because I could "afford it" and it made me happy. Thing is it didn't (for various reasons really) and I knew that allowing my passion for vehicles could easily devolve into something that could become a blocker for me achieve other things in my life (ie another home, traveling, more kids, etc.). Not saying any of this is relevant to you, but I did resonate with how you felt in regards to living for the moment and sacrificing monetary success for happiness.

[5LEEPR_G01]

Originally Posted by goldfz8

Seems like we may be on a different place and I don't mean to offend in any way. Tough to understand financial decisions through forums lol. I am 30 and have spend majority of my adult life working on a career and even got my wife in it. So both of us are well established with work. On another note our monthly expenses are probably around 20% of our income. That includes her 2021 Jetta lease As well. My brother has 3 kids so i have hand me downs as well as eager grandparents ready to baby sit lol. I am very grateful and fortunate. Most things in my life are well planned including children. My choices to this point were relatively smart which is why a decision to buy a 100k suv hurts the soul. Not because its difficult to afford but because it is unnecessary.

No offense taken. I really didn't even consider that this wasn't your first rodeo (with kids lol). It definitely takes a village and a big factor for us moving back to Texas. Does that 20% include a mortgage? I want to grab another property before it gets any crazier in my market (Austin) and a $1,500 car note would have me over 35% debt to income per mo. Which I'm sure I could qualify for, but I'd be stretching myself and with my partner not working yet (she has one year left on her BSN), it just makes sense to wait. Congrats on the new addition and God bless you and the fam 🙏🏽

[goldfz8]

I actually own my APT out right. I got a deal about 7 years ago from a guy who was unfortunately terminally ill. 2bedroom. Personally living in nyc I enjoy the APT life. Its a great apt community with a park and all kinds of things so im kinda set for living. I also have my family home that I airbnb for my mom close to me as well. I was looking into getting multi family home a year ago but the properties that i saw were all shit. Another reason i decided to get a car instead. Just want to get something that puts a smile on my face every morning.

Originally Posted by 5LEEPR_G01

No offense taken. I really didn't even consider that this wasn't your first rodeo (with kids lol). It definitely takes a village and a big factor for us moving back to Texas. Does that 20% include a mortgage? I want to grab another property before it gets any crazier in my market (Austin) and a $1,500 car note would have me over 35% debt to income per mo. Which I'm sure I could qualify for, but I'd be stretching myself and with my partner not working yet (she has one year left on her BSN), it just makes sense to wait. Congrats on the new addition and God bless you and the fam 🙏🏽

[SearsTurnSix]

Originally Posted by chimp

It is impossible to give solid advice without knowing your full financial picture...

I'd pay cash for the Outback.

My financing plan for the X3MC is $45k cash + $50k 401k loan. I'm looking at it as a 4 year bond that pays out at 4.5%/yr with zero default risk. Such a bond seems like a good investment in the current market where bonds are crashing. I'm nearly 100% invested in equities for that reason. My pre-tax 401k contributions are easily max'ed on my income, so this strategy allocates some of my after tax contributions as 401k loan interest.

I have around $200k in cash. This is mostly proceeds from my house sale in 2016, when I moved in with my wife (now separated). Had I kept the house, I'd be sitting on $800k in equity. That hurts.

My monthly cash flow can handle the 401k loan repayment, especially if I can down-size my current house rental at $3400/mo. About half of my take-home pay goes into rent. It was about the right size for two people, but too big for just me. Finding a house with a 2-car garage for less right now is an impossible task in my area. Honestly, I have no idea how people who make significantly less than I make can survive in the Bay Area. The cost of living is outrageous. An area where someone making $150k+ must live frugally.

I'd love to buy another home, but prices are in a bubble right now. I'm waiting for the crash, having been waiting for that crash for 6 years. With mortgage interest rates doubling, and on there way to tripling, I don't see how the current pricing can be sustained. A 25-50% correction seems inevitable, depending on how hard a recession hits the economy over the next 2 years.

Because I intend to buy another home when I sold in 2016, I hadn't invested the $200k. Obviously in hindsight, I wish I had. My wife came from the mid-west and she couldn't get past the California house prices. We never could agree on what to do, hence the separation. We have no children.

I plan to invest the half of the remaining $70k in equities. I have my eye on SPYD ETF, SPDR® Portfolio S&P 500 High Dividend ETF. I'm bullish on equities simply because there's no where else to put your money. Haven't drank the Crypto cool-aide.

I'm almost 40, been working since I was 14, saver and never a big spender. My wife and I spent a lot of our disposable income on travel, which was fun (no regrets), but I don't think I'll be doing as much while single. If I'm ever going to enjoy the fine things in life, I'd better start now. Expect the X3M to retain half of its value over 5 years. When you look at that way, the cost is around $10-12k per year, which I can afford. When I was in my early 20s, I lusted after a 3-series BMW (couldn't afford an M3). Now I can. I mountain bike, hike, and ski, so the X3M makes more sense for my lifestyle.

[chimp]

Originally Posted by SearsTurnSix

I'd pay cash for the Outback.

My financing plan for the X3MC is $45k cash + $50k 401k loan. I'm looking at it as a 4 year bond that pays out at 4.5%/yr with zero default risk. Such a bond seems like a good investment in the current market where bonds are crashing. I'm nearly 100% invested in equities for that reason. My pre-tax 401k contributions are easily max'ed on my income, so this strategy allocates some of my after tax contributions as 401k loan interest.

I have around $200k in cash. This is mostly proceeds from my house sale in 2016, when I moved in with my wife (now separated). Had I kept the house, I'd be sitting on $800k in equity. That hurts.

My monthly cash flow can handle the 401k loan repayment, especially if I can down-size my current house rental at $3400/mo. About half of my take-home pay goes into rent. It was about the right size for two people, but too big for just me. Finding a house with a 2-car garage for less right now is an impossible task in my area. Honestly, I have no idea how people who make significantly less than I make can survive in the Bay Area. The cost of living is outrageous. An area where someone making $150k+ must live frugally.

I'd love to buy another home, but prices are in a bubble right now. I'm waiting for the crash, having been waiting for that crash for 6 years. With mortgage interest rates doubling, and on there way to tripling, I don't see how the current pricing can be sustained. A 25-50% correction seems inevitable, depending on how hard a recession hits the economy over the next 2 years.

Because I intend to buy another home when I sold in 2016, I hadn't invested the $200k. Obviously in hindsight, I wish I had. My wife came from the mid-west and she couldn't get past the California house prices. We never could agree on what to do, hence the separation. We have no children.

I plan to invest the half of the remaining $70k in equities. I have my eye on SPYD ETF, SPDR® Portfolio S&P 500 High Dividend ETF. I'm bullish on equities simply because there's no where else to put your money. Haven't drank the Crypto cool-aide.

I'm almost 40, been working since I was 14, saver and never a big spender. My wife and I spent a lot of our disposable income on travel, which was fun (no regrets), but I don't think I'll be doing as much while single. If I'm ever going to enjoy the fine things in life, I'd better start now. Expect the X3M to retain half of its value over 5 years. When you look at that way, the cost is around $10-12k per year, which I can afford. When I was in my early 20s, I lusted after a 3-series BMW (couldn't afford an M3). Now I can. I mountain bike, hike, and ski, so the X3M makes more sense for my lifestyle.

Understood now. I am not a financial professional at all. I never looked into a loan against my 401K so I am unfamiliar. I assume there is some type of interest involved during the repayment period and if that rate is less than an auto loan rate maybe that makes sense? I cannot say for sure because I don't know if there are other long term tax consequences to consider. The other component is being out of the market (partially) on the 50K while it is paid back although that is offset if you put that 70K referenced above in the market. However, I think that it will be difficult to invest all of that 70K in any tax-advantaged account given the ridiculously low annual amounts allowed. And taxes will eat you alive long term if you dump into a straight up brokerage account.

You have definitely put some thought into this. The 401K loan to buy a car is something I cannot recall anyone I know doing. I am not saying that it is wrong I simply haven't run across anyone who has done it that way. But if you are comfortable with that, by all means, go for it! It would be hypocritical of me to advise strongly against it because, well, I have 2 X4M's depreciating in my garage right now. Ha.

[SearsTurnSix]

Originally Posted by chimp

I never looked into a loan against my 401K so I am unfamiliar. I assume there is some type of interest involved during the repayment period and if that rate is less than an auto loan rate maybe that makes sense?

I actually bought my 2002 SVT Focus using a 401k loan back in 2008, something like $10k. It worked out great. I used a traditional car loan at 1.99% for my GTI back in 2015 and paid off the car in 2016 when I sold my house. Cash + 401k loan allows me to hold title of the vehicle from day one.

Essentially, you can use your 401k balance as a bank to take out a loan up to $50k. It must be repaid in 5 years and you must pay yourself interest. Currently the interest rate is 4.5%, it's something like PAR+1%. If you do not repay the loan on time, you must pay the IRS early withdraw penalties of 20% plus income tax. If you're going to do this, you better have the ability to cover the loan in full at a moments notice.

No financial planner would advise you take out a loan against your 401k to purchase a car, nor would I unless your income and 401k balance is relatively large and well on track with your retirement investment goal.

The interest I'll be paying myself is after-tax dollars that I would have been contributing toward my 401k anyway. Essentially, the only "opportunity cost" I am potentially missing out on is any positive returns that could be accrued from the loaned funds. However, the funds I am taking out as part of the loan is normally invested in bonds which I am betting will have a negative total return over the next several years.

Taking out a car loan would actually be a more aggressive strategy, because it would allow one to invest the car loan funds in the stock market and make a return on them. There is a risk that those funds could lose value if the market crashes during the loan repayment. That makes it more risky.

The same argument can be made for the 401k loaned funds and any equity investment made on cash on hand. However, these are investments I would have made even if I hadn't purchased a car. If the investments return 4-5% dividends over the loan period these returns would cover the interest I'm paying myself. Capital appreciation would be a cherry on top. I'll be happy with no net change in capital value.