How much of your budget should you commit to a car? Many people consider this detail before purchasing an automobile, especially when it comes to high-end cars that are a bit over the top. The question made its way to Reddit, and several high earners revealed the key calculations they make before purchasing a dream car like a Porsche 911.
Only Buy Luxury Cars With Cash
The top comment came from a Redditor who suggested buying a luxury car with cash. Getting deep into debt for a high-end vehicle and being stuck with an auto loan payment that takes up an uncomfortable percentage of your total budget can hinder your ability to cover expenses and make investments.
Don't Miss:
- Your Last Chance to Invest in Pacaso Before Their Global Expansion — Offer Ends Sept 18
- Kevin O'Leary Loves ‘Wonderful Recurring Cash Flows' — These Small Industrial Assets Deliver Just That
That's why the high earner with the top-rated comment suggested using cash, but there was another stipulation. Buying a luxury car with cash should not disrupt your emergency fund in any way. Your emergency fund is for emergencies. It is not for buying luxury vehicles and other non-essentials.
Wealthy drivers also shouldn't have to pull deep from their stock portfolios to buy a luxury car. While you may have to sell stocks since it's typically better to invest than keep all of the money in the bank, it shouldn't be a substantial setback for your long-term portfolio goals to buy the car.
Be Flexible With The Type Of Luxury Car You Buy
Some Redditors suggested being flexible with the type of car you want instead of buying the newest and greatest luxury vehicle. One Redditor bought a 996 911 C4S for $25,000 three years ago and drives it daily. This individual wanted the driving experience that a Porsche 911 offers without the Porsche 911 price.
Trending: ‘Scrolling To UBI' — Deloitte's #1 fastest-growing software company allows users to earn money on their phones. You can invest today for just $0.30/share.
Another high earner buys slightly used sports and luxury cars. That way, the car is still in great condition, but the Redditor still scores a meaningful discount.
"Try to drive them for [about] 10 years before major repairs are needed," the Redditor said. "I currently work from home a lot, so I typically don't put a lot of miles on them."
This same high earner also suggested financing the car to get a better deal and then paying it off in cash the next month to avoid interest. The common theme for many high earners is paying for the vehicle in cash without disrupting their emergency funds or long-term financial goals. The Redditor said they would spend no more than one-fifth of their salary on a car.
See Also: Kevin O'Leary Says Real Estate's Been a Smart Bet for 200 Years — This Platform Lets Anyone Tap Into It
Think About Where Your Money Could Go Instead
One high earner bought a new Porsche and spends $2,000 per month on the loan payment. It's about 10% of their take-home income, and it hasn't stopped the Redditor from achieving their savings goals. Although it sounds good on the surface, the high earner has admitted to being eager for the day when the loan payments are over.
"Sometimes I think about what vacations or other things I could have [gotten] instead. I think if it were 5% [of my take-home income], [it] would have been much easier. Although I love my new Porsche," the high earner said.
The high earner then said that buying a Porsche is never a good financial decision. It's something you do because you want the vehicle, but you shouldn't put yourself in a vulnerable financial situation just to get a luxury car.
Read Next: 7 Million Gamers Already Trust Gameflip With Their Digital Assets — Now You Can Own a Stake in the Platform
Image: Imagn Images
