Saving for a Luxury Car
Disclaimer: This article is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney or other professional to determine what may be best for your individual needs.
A guy over on reddit asked for feedback on how to save for a $100k car on his $80k per year salary. Reddit users slammed his plan to buy an expensive car as irresponsible and advised him to spend his money on more expensive pursuits. I on the other hand believe people should choose how to live their lives, so let’s tackle the issue of saving for a $100k car on an $80k salary.
How to Save for an Expensive Car?
To save for an expensive car, determine the monthly cost of car ownership you are willing to spend. This includes, maintenance, insurance, parking fees and car loan payment. You then need to determine the amount of money you need for down payment on the car. Finally come up with a plan to save for the down payment.
Saving for an Expensive Car: Mercedes-AMG C63
The guy over on reddit did not mention exactly what type of car he intended to buy. He did mention, that after his living expenses were accounted for, he wanted to save $1333 a month. He estimated that after 6.5 years, he would have the $100k needed to buy his car.
Buying the car upfront with cash is one approach. I looked at it from a different angle. He could purchase the car 3 years sooner than he anticipated if he follows this approach.
I needed a car to use as an example to get an estimate for maintenance cost and insurance costs. I used the Mercedes-AMG C63 as an example it currently costs $75K. I will assume by the time our friend on reddit is ready to purchase it, it will cost $100k.
Saving for an Expensive Car: Get the Car Three Years Sooner
Our friend on reddit assumed he needed to have all the cash up front to buy his car, but he doesn’t. He could put a large down payment and put the money that he was saving toward a car loan payment.
According to repairpal.com the annual maintenance cost for a Mercedes-AMG C63 is about $1100 per year or $91 per month. According to cheapcarinsurance.net, the Mercedes-AMG C63 is currently $200 per month to insure. If he purchased the car cash with no loan the cost of ownership would be $291.
Our friend on Reddit was saving $1333 a month for his dream luxury car. Let’s assume he buys the car sooner, and instead of saving puts the $1333 per month toward the cost of car ownership.
Reviewing the table below, if he puts a $50k down payment on the car his cost of car ownership will be $1192 per month, this is less than the $1333 that he is currently saving.
| Down Payment | Loan Amount | Monthly Loan Payment | Maintenance & Insurance | Cost of ownership |
| $0 | $100,000 | $1,802 | $291 | $2,093 |
| $10,000 | $90,000 | $1,622 | $291 | $1,913 |
| $20,000 | $80,000 | $1,441 | $291 | $1,732 |
| $40,000 | $60,000 | $1,081 | $291 | $1,372 |
| $50,000 | $50,000 | $901 | $291 | $1,192 |
| $75,000 | $25,000 | $450 | $291 | $741 |
| $100,000 | $0 | $0 | $291 | $291 |
The table below shows that by month 42 (or after approximately 3.5 years he would have enough saved to put a $50,000 down payment on a car. As an added bonus, he would have an additional $6000 by the 3.5 yr mark.
| Month | Total Savings |
| 1 | $ 1333 |
| 6 | $8000 |
| 12 | $16000 |
| 18 | $24000 |
| 24 | $32000 |
| 30 | $40000 |
| 36 | $48000 |
| 42 | $56000 |
The reddit guy could purchase his car at the 3.5 year mark with $50,000 down. At the 6.5 year mark the point where he could have purchased the car cash, he would have a car loan with approximately 25k left to go. He would payoff the car at the 8.5year mark. He could buy the car 3 years sooner, but he would not own the car free and clear until 2 years later.
This timeline could be accelerated further by putting money in to an interest bearing account, such as a money market account.
Saving for an Expensive Car: It’s Not an Investment
Cars depreciate fast, expensive cars depreciate faster. Purchasing an expensive car that costs more than your yearly salary is not a sound investment. Traditional financial talking heads would completely advise against it. It is not a move I would ever make, but it is not my life. I like to buy organic meat and produce, some consider that wasteful. It is up to everyone to determine what is best for their individual rich life.
I like Ramit Sethi, because he is different from most financial talking heads. I recently listened to his book “I Will Teach You to be Rich” on audible and I truly enjoyed it. The premise is to define what your rich life means to you. Most finance guys would tell you that drinking coffee is the reason why you are broke. This guy says buy the coffee and focus on the bigger things.
In his book he outlines steps that everyone can take to put their finances on autopilot. There are a few basic step everyone should take before living life lavishly like maxing out a 401k and paying off debt. After that he advocates choosing how you define a rich life. For reddit buy that is clearly driving an expensive car.
I think if he followed the steps in “I Will Teach you to Be Rich” he would find that he did not have $16k per year to put towards a car. Ramit advices considering , earning more income to reach your rich life. So reddit guy could negotiate with his current boss for a higher salary. Reddit guy could look for a new job with a higher paying salary. Reddit guy could find a side hustle to generate extra income.
At a very minimum, reddit guy could put his savings in a high yield saving account to grow his savings at a faster rate. Reddit guy could also negotiate a lower or zero interest rate on the car. He could negotiate free oil changes for the first few years to reduce the cost of maintenance on the car.
The point Ramit makes in his book is that everyone’s rich life looks different. If you are willing to eat ramen, live with a roommate, and wear in-expensive clothes in order to live your rich life. Then you should go for it with no regrets.
I truly enjoyed listening to “I Will Teach You to Be Rich” on Audible. I gained some great insights and best of all it was free, when I signed up for an audible trial. Visit the Audible website to see if Ramit Sethi’s book is still available with an audible trial.
Reddit guy seemed like a young guy with no family or real responsibilities as of yet. As his life goes on, his priorities may change, and he may decide that an expensive car is not what he needs to live a rich life. He may instead want to save for a house, or meet the girl of his dreams and save for an engagement ring or a wedding.
As we grow our dreams, goals and priorities change. As long as we find the balance and weigh the options and stay focused, we a are in good shape.
Related Questions
How much should I save to buy my first Car?
You should save a minimum of 20% of the cars sale price to buy your first car. If you are in the market for a $15,000 used car, you would need to save $3,000.
