Guidance aimed at those in the medical field, when financing while in Res/Fellowship.

[JohnSnowNW]

About a year ago I had a similar question, but now we've got a bit more detail. This concerns anyone in the medical field who bought a Tesla while they were in Residency, or Fellowship.

My wife is currently in Fellowship, which will end mid-2017. As such, she has to supplement her salary with moonlighting, which obviously isn't something that is considered "stable" income...as it's variable. She has been offered a job that she plans to take at the end of her Fellowship, so we'll have a signed contract when we go to get financing (we plan to lease through Tesla). Her salary will be roughly 3x the total cost of what we plan to configure. We will also have saved up enough to cover 2 years of lease payments (on top of the down payment).

Obviously, the amount of debt she has is relatively high, Medical School, house, vehicles...but the total amount of debt is only about $50k more than her starting salary.

So, the question, is any of this taken into consideration at financing...or is the determination criteria more rigid? Is there anything we need to do/bring to make the simplify/expedite the process.

I appreciate the help.

 

[MikeC]

I got mine about eight months after finishing residency. I think having a signed contract is reassuring enough for the loan company, my student loans did not seem to be a significant issue. I used Alliant, for the record.

 

[JohnSnowNW]

I got mine about eight months after finishing residency. I think having a signed contract is reassuring enough for the loan company, my student loans did not seem to be a significant issue. I used Alliant, for the record.

Thanks, that's what I was hoping.

 

[ghbmd]

OK.. this is alot more than you asked. Sorry.

I am a doctor 11 years out of fellowship making a very good living. Took me 6 years after I started working to pay off all my student debt. I could not have imagined the added burden of an auto loan for $100,000+ car right out of training. Also, that period after training was financially challenging with the purchase of a new home and the arrival of kids. Either starting salary is MUCH higher where you live than it is here in the Northeast or cost of living is MUCH lower where you live. Either way I would suggest re-thinking the purchase of such an expensive car at this point in your life. Two years down the road you and your wife may be in much more stable positions professionally (on partnership tracks, etc) and the Model X will still be there.

 

[JohnSnowNW]

OK.. this is alot more than you asked. Sorry.

I am a doctor 11 years out of fellowship making a very good living. Took me 6 years after I started working to pay off all my student debt. I could not have imagined the added burden of an auto loan for $100,000+ car right out of training. Also, that period after training was financially challenging with the purchase of a new home and the arrival of kids. Either starting salary is MUCH higher where you live than it is here in the Northeast or cost of living is MUCH lower where you live. Either way I would suggest re-thinking the purchase of such an expensive car at this point in your life. Two years down the road you and your wife may be in much more stable positions professionally (on partnership tracks, etc) and the Model X will still be there.

I appreciate the suggestion. We already have the house, and the kids. So, this would be the only foreseeable large purchase (though we're going to lease it) for several years. Our total cost of living is $50k/yr...and isn't likely to change within the next several years. Her starting salary will be >$300k.

Moreover, the reason we have been saving over the last couple years was to create padding in the event that unforeseen expenses should crop up. We are on target to hit all of these numbers.

We both realize that waiting would be the most financially sound thing to do, and we are constantly reassessing our position. Again, I truly appreciate the advice.

 

[efusco]

gotta say, you know your financial situation better than anyone else, but I agree with ghbmd. That $100k would go a long way toward becoming debt free sooner and allow you to start saving for retirement that much faster. If you're living on $50k now, you're in a perfect situation to set yourselves up for an early retirement in comfort if you can maintain that conservative lifestyle. I managed to pay off my student loans from college and med school about 3 years after residency and my wife's (also a physician) just a couple years later. We're now well situated to retire at 55 when our last child heads off to college. I can't over emphasis the importance of packing away as much savings as early as possible. Hell, even consider a CPO Tesla if that's really what your heart is set on and put the extra $40k or so directly toward your loans.

Best of luck in this brave new world of medicine.

 

[JohnSnowNW]

gotta say, you know your financial situation better than anyone else, but I agree with ghbmd. That $100k would go a long way toward becoming debt free sooner and allow you to start saving for retirement that much faster. If you're living on $50k now, you're in a perfect situation to set yourselves up for an early retirement in comfort if you can maintain that conservative lifestyle. I managed to pay off my student loans from college and med school about 3 years after residency and my wife's (also a physician) just a couple years later. We're now well situated to retire at 55 when our last child heads off to college. I can't over emphasis the importance of packing away as much savings as early as possible. Hell, even consider a CPO Tesla if that's really what your heart is set on and put the extra $40k or so directly toward your loans.

Best of luck in this brave new world of medicine.

Thanks, we've already developed a budget that allocates a considerable portion of her salary to retirement. Though, at least currently, she has no plans to retire early.

I realize we could save even more without purchasing the Model X. There will always be reasons not to spend money, but we feel the Model X is one area that has innumerable benefits for us...even though it will add a considerable financial cost.

We are pretty financially frugal, and the Model X is an exception that we're currently willing to make.

Thanks again for the caution and suggestions. I grew up not too far from Nixa.

 

[dsm363]

Sounds like you have a good plan in place. Congrats.

 

[efusco]

Thanks, we've already developed a budget that allocates a considerable portion of her salary to retirement. Though, at least currently, she has no plans to retire early.

I realize we could save even more without purchasing the Model X. There will always be reasons not to spend money, but we feel the Model X is one area that has innumerable benefits for us...even though it will add a considerable financial cost.

We are pretty financially frugal, and the Model X is an exception that we're currently willing to make.

Thanks again for the caution and suggestions. I grew up not too far from Nixa.

Sounds like you've got a good vision. Though just because you CAN retire at 55, or whatever, doesn't mean you have to. But life has a way of screwing with your best laid plans, and having options is never a bad thing. We plan to 'semi-retire' and will work locums around the world enough to let our investments grow while working just enough to offset our cost of living and traveling.

 

[JohnSnowNW]

Sounds like you have a good plan in place. Congrats.

Thanks!

Sounds like you've got a good vision. Though just because you CAN retire at 55, or whatever, doesn't mean you have to. But life has a way of screwing with your best laid plans, and having options is never a bad thing. We plan to 'semi-retire' and will work locums around the world enough to let our investments grow while working just enough to offset our cost of living and traveling.

Oh, I know. I think we've replaced all of our major appliances, but the HVAC, in our 10 year old home... A minor expense, but certainly not planned for.

I agree, my wife gets on to me for my multi-year financial planning...she thinks I consider too far into the future. We're actually meeting with a financial planner in Jan., so we'll see how much my budgeting meshes with a professional's recommendation. This may also affect our Model X purchase in some way, but it would take a serious oversight on my part for us to push it past a Fall delivery.

 

[Kandiru]

OP I hope that you earn double six digits.

My fellow resident future wife and I drove 2-4k cars and were happy as a German
called Rudy had a garage next to our condo and did a decent job, milked those
jalopes another 2 years after residency was over. I sold my Isuzu Impulse Turbo
when the footboard caved in with rust.

 

[GoTslaGo]

My two cents. Get out of debt first. You never know when things can go south (no insult intended for southerners). First job after fellowship can be a crap-shoot. To add in extra debt (esp 100+k car) on top of student loans, home loans, etc... means that you and your wife will have no options to change if you don't like things or things don't work out.

 

[JohnSnowNW]

My two cents. Get out of debt first. You never know when things can go south (no insult intended for southerners). First job after fellowship can be a crap-shoot. To add in extra debt (esp 100+k car) on top of student loans, home loans, etc... means that you and your wife will have no options to change if you don't like things or things don't work out.

Thanks for that angle. The job offer is at one of the places she already works, and wanted to work after Fellowship. I'm not minimizing the concern or anything, just that it's unlikely that she'll decide it's not what she wants. If this scenario were to play out, she has the option to pick up shifts at a hospital she moonlights occasionally...and would potentially make a very similar salary to the one she's been offered. We're not really considering this as a possibility, it's just A possibility. Of course, the economic climate could very well change, sure.

Again, though, that would be one of the reasons we'll have 2 years worth of lease payments saved up, on top of our other savings, before next fall. That's our padding in case things head "south." It's not as foolproof as waiting until the debt is paid off...but I feel we're doing everything we can to mitigate potential issues while getting the Model X next year.

Thanks again for the input.

 

[eye.surgeon]

I've been in private practice for 13 years. My advice would be to wait. I generally don't buy a car unless I can afford to pay cash for it. Now it's rare that I do pay cash because I can usually get great financing ( financed 100% of my Tesla @ 0.65%), but I could have paid cash had I needed to. Another thing to consider--you risk stigmatizing yourself with your colleagues in your new job if you show up in a $100k+ car as a new doctor. Just my opinion.

I finished my fellowship driving a 10 year old integra with 200k miles on it. I waited a year and then bought a 325i. After another couple years I bought a 545i. Even now I wince at paying over $100k for a car even though by conventional debt to income ratios I can easily afford it. And my wife drives a new Range Rover so I'm not advocating a vow of poverty, just patience

 

[MikeC]

Tough crowd here. Yes, it's incredibly expensive but I think everyone here that drives a Model S understands the car is actually worth it. While not the financially optimal thing to do at this stage, there are some things in life you can't put a price tag on, like health and safety. Only you know all the details of your financial situation, and only you can make the decision of what is best for you and your family.

 

[grichard]

This is a really complicated question.

I kinda see residency as mortgaging your 20's for the sake of the rest of your life. There's an immense temptation to take a big step up in lifestyle right after training ends. After all, it's been at least 7 years of frugality up until then.

Objectively, most people will say this is a bad idea. When I see a resident who springs for a jumbo mortgage on a massive house in the first year after fellowship, I think to myself "That poor guy just closed out all his options. He'll be chained to the clinic/OR/whatever until he's 70." I think most people would be better off with lighter financial obligations and the option to work less hard.

On the other hand, medicine also teaches you--vividly--that there are no guarantees in life. Too many people with nasty diseases and traumas, too young. Don't make your life a grind for an always-deferred future pleasure; try to arrange your life to be as fulfilling as it can be,*now*, without doing overtly dumb things to your future.

Is it a smart move to finance a $100K car one year out of fellowship? Definitely not.
Should you do it anyway? Sure, if this is what you're passionate about. Sounds like you've thought the consequences through.

Best wishes.

 

[JohnSnowNW]

I've been in private practice for 13 years. My advice would be to wait. I generally don't buy a car unless I can afford to pay cash for it. Now it's rare that I do pay cash because I can usually get great financing ( financed 100% of my Tesla @ 0.65%), but I could have paid cash had I needed to. Another thing to consider--you risk stigmatizing yourself with your colleagues in your new job if you show up in a $100k+ car as a new doctor. Just my opinion.

I finished my fellowship driving a 10 year old integra with 200k miles on it. I waited a year and then bought a 325i. After another couple years I bought a 545i. Even now I wince at paying over $100k for a car even though by conventional debt to income ratios I can easily afford it. And my wife drives a new Range Rover so I'm not advocating a vow of poverty, just patience

Tough crowd here. Yes, it's incredibly expensive but I think everyone here that drives a Model S understands the car is actually worth it. While not the financially optimal thing to do at this stage, there are some things in life you can't put a price tag on, like health and safety. Only you know all the details of your financial situation, and only you can make the decision of what is best for you and your family.

This is a really complicated question.

I kinda see residency as mortgaging your 20's for the sake of the rest of your life. There's an immense temptation to take a big step up in lifestyle right after training ends. After all, it's been at least 7 years of frugality up until then.

Objectively, most people will say this is a bad idea. When I see a resident who springs for a jumbo mortgage on a massive house in the first year after fellowship, I think to myself "That poor guy just closed out all his options. He'll be chained to the clinic/OR/whatever until he's 70." I think most people would be better off with lighter financial obligations and the option to work less hard.

On the other hand, medicine also teaches you--vividly--that there are no guarantees in life. Too many people with nasty diseases and traumas, too young. Don't make your life a grind for an always-deferred future pleasure; try to arrange your life to be as fulfilling as it can be,*now*, without doing overtly dumb things to your future.

Is it a smart move to finance a $100K car one year out of fellowship? Definitely not.
Should you do it anyway? Sure, if this is what you're passionate about. Sounds like you've thought the consequences through.

Best wishes.

Thanks for the input, all. We are quite aware that this isn't the smartest financial decision...I think that should be glaringly obvious to most people. However, my wife and I aren't really they type of people to needlessly spend money, and we don't really have any long term goals of "moving on up." "Things" just aren't that important.

If not for Tesla's mission statement, the emphasis on safety, and the fact that nothing comparable exists, we wouldn't have considered leasing the Model X. We are purchasing the vehicle for practicality and safety, full stop. The most expensive vehicle we've purchased as a couple has been $22k, and we would never consider purchasing a luxury ICE vehicle. Our mortgage is <$1000/month, we eat out maybe 3 times a month, and save money by making practically all our food from scratch. Most of this isn't done for the purposes of saving money, it's just how we choose to live and raise our kids.

Point being, I appreciate all the words of caution concerning maintaining frugality in the face of a substantial increase in salary, but fear not...we just aren't "big spenders."

Again, though, I do appreciate all of the suggestions, and I don't want it to seem like I'm just brushing them off. Many are concerns we have visited, and revisited, over the course of the last year. Hearing how others have handled their finances in a similar situation is very helpful, as not having experience with it ourselves leaves us open to making possibly obvious blunders.

Thanks again.

 

[GasDoc]

You only live once. Two salaries, no other big purchases planned...

Do it. Congratulations!

 

[bonaire]

My two cents. Get out of debt first. You never know when things can go south (no insult intended for southerners). First job after fellowship can be a crap-shoot. To add in extra debt (esp 100+k car) on top of student loans, home loans, etc... means that you and your wife will have no options to change if you don't like things or things don't work out.

Lot of questions but most are subjective.
- Any plan on kids? would the wife drop the job if it "stunk" and stay at home w/ kids?
- Is $300K after residency "guaranteed"? I've been in IT for 30 years and just might go back to medical school....
- Someone working as a young doctor may not have that much time for fun and a big, expensive and fun car may sit idle much of the time.
- Have you considered other EVs? How about the range-extended plug-ins?
- Do you need the acceleration and size of a Tesla? Would something like a BMW i3, Volt or even (gasp) Leaf do the trick?
- Could you wait 1.5 years and try to get the lower-priced Tesla Model 3 at half the price?
- Other models come out in the sub $35K range very soon if cash considerations are still there.

If I could do it all over - I would simply work as hard as possible to be mortgage free as early in life as possible. Car debt is also a drag on most people but if you really think you have clear sailing with the big "guarantee" of post-residency income and can handle the stresses of life together living a DINK moderately stressful lifestyle then the Tesla is for you. Of course, if you just want the T badge, consider a CPO? Some well under $50K by now and I suspect $40s later in 2016 in the CPO program as many leases come due. If you must have new - order up on the web but if you must have T (without regard for new or used) then consider a CPO and bank that extra cash. I think the biggest things to worry about are the unknowns. How your marriage will hold up with the work stresses, whether you have kids or not and what size home is required for your lifestyle. Some doctors are virtually broke and just maintain a big house and cars to "look like they have means". I do see that the OP post is for a lease so I do believe that it is a sign that you are already trying to cut corners in terms of long term product ownership and will have to "do it all again" after the lease is up. How about buy a CPO for $50K and keep it 7-8 years and drop your total cost of ownership? Do whatever you can now to establish a strong, sustainable income with a very strong investment goal with all the income. It is very attractive to spend now what you make now but honestly if you are not saving/investing 80K-100K a year with your generally large combined incomes, you're going to have a harder time long-term. Even if it is simply buying US Gov i-Bonds or other safe keeping - it is important for you and your kids that you think smartly now. Those who say "you only live once" are mistaken.

 

[ChadFeldheimer]

Since OP mentioned they plan to lease:

I have a lease on an S through Tesla (in my particular case, US Bank). The application form was very basic: SSN, current employer (job title, gross income, number of years), previous employer (same details), other income. There was no space on the form to provide any other details: source of other income, other debt, assets, future planned income, etc.

Your mileage may vary. I'm happy to provide the form so you can see for yourself.

My two cents: Lifestyle inflation is a real thing. $300k/year (or whatever) might sound like a lot now, but spending it is a whole lot easier than earning it - especially when the government is helping! Instead of a car, I'd be inclined to spend my fun money on travel - the kids will likely remember and appreciate that a lot more than an X. But maybe I'm biased since my parents didn't have a Model X!