Help Justifying my purchase

[Engineer1971]

Hello Everyone,

I am new to the forum but have been following Tesla since the roadster. I'm looking to order a Model S 75D later this year (About September for hopefully November delivery) but I'm trying to justify the purchase. This will be the most expensive vehicle I have ever purchased. When I was much younger and did not value money as I do now I purchased Audis and BMWs for usually around 30-40K (Certified). I drive about 600 miles a week for work and put alot of miles on my car. I currently drive a 2010 Acura TL AWD (really like the car) and was going to purchase the Model S when the car is paid off (Approaching 95K miles and owe 14K.

My thought process was that I trade in the car now since it's actually worth what is owed and put the 14K towards the Model S. My financial situation is as follows:

Salary: $170K+ (Household $270k+)
DTI: 30% without car 38% with car (Household 20% with car)
I pay a $400 note & $400 in gas per month. The additional cost for the car will be an additional $500 a month (which is not a problem)
We have solar panels which should offset some of the cost for charging the car (Especially utilizing TOU rates at night)
The car cost is $93250 (including fees).
I would prefer that it is financed 100% since the rates are so low.

I already have a mortgage and typically keep cars for 8 years (When they last that long ) What do you think?

Also if yo can chime in regarding financing with Alliant I would appreciate that as well (Auto Fico Score in Mid 700s).

Thanks

 

[harrismoe]

Seems to be a no-brainer to me. Especially after seeing some of the other justification scenarios on here...

 

[Xenius]

I went for it, albeit a 60D, with a household about 100k less. That said I apparently have less debt than you by a decent amount, but looks like you have more than enough to cover.

Shameless Plug for YNAB (you need a budget) if you don't already use a budgeting tool. Makes even the poor feel wealthy.

 

[Max*]

Your DTI is pretty high, I don't remember what the cutoff was for my credit union, but you might not qualify for the best APR out there.

 

[buckerine]

How much do you have in emergency funds? And how much monthly disposable income do you have left over after all expenses are factored in (loans, living expenses, etc.)? I think those are more important questions than just simply DTI and total income.

 

[Xenius]

Your DTI is pretty high, I don't remember what the cutoff was for my credit union, but you might not qualify for the best APR out there.

Which credit union? So far Alliant hasn't asked me about DTI (that I recall). Just credit score and income.

 

[Max*]

Which credit union? So far Alliant hasn't asked me about DTI (that I recall). Just credit score and income.

I went with my local credit union (Apple). They didn't ask for DTI upfront, but when they ran my credit history they mentioned that I qualified for their best rates. When I asked the criteria, they told me credit score and DTI. I don't remember offhand what it was, each CU is different.

 

[Morristhecat]

Three and a half years ago I was in a very similar situation and was going through he same dilemma, but I pulled the trigger anyways and don't have a single regret.

 

[Engineer1971]

I went for it, albeit a 60D, with a household about 100k less. That said I apparently have less debt than you by a decent amount, but looks like you have more than enough to cover.

Shameless Plug for YNAB (you need a budget) if you don't already use a budgeting tool. Makes even the poor feel wealthy.

We do not have much revolving debt (We pay in full on a weekly basis so the minimum payment may appear when the statement genereates but it's usually @ $25 per card). The majority of out debt is the house (The taxes are combine with my mortgage and appear that way on my credit report (@3K per month but Mortgage by itself is 1700 per month. Welcome to NY ) and my wife's car is @$700 per month. The rest of the debt is student loans which will actually be paid off within 6 months (@$550 per month).

 

[Engineer1971]

How much do you have in emergency funds? And how much monthly disposable income do you have left over after all expenses are factored in (loans, living expenses, etc.)? I think those are more important questions than just simply DTI and total income.

We have @ 2000 per month available after all expenses (food, utilities, etc) are paid. Put away @ 35-40K per year towards retirement, and we @ $400K+ in retirement fund. We are in our mid-forties. We have one kid going to college in 2 years but that fund is separate and is funded well for a good state school. Our last son will be 3 year after him and he is covered as well.

 

[Xenius]

Ugh NY prices. Now, again, you've got a lot more to work with than I, but I'd be wary of adding another 1k/mo (for 7 years!) car payment on top of an already 700/mo car payment.

You'll know more about your own situation than I, but if you have doubts, listen to them. If you run the numbers (don't cheat!) and think you'll be fine, then do it!

 

[Max*]

Gotta love this forum. People ask all sorts of personal questions. OP - my unsolicited 2c, just do it.

I'm not going to go into my personal finances with people here, but I was able to afford the car without adjusting my standard of living. My issue was justifying the cost of the car as compared to what I used to drive, not whether I can make the payments and have a comfortable buffer. It took me months to justify it, with my wife constantly telling me to "shut up and buy it already".
I pulled the trigger a year ago. Love the car, so does my wife.

 

[Engineer1971]

Ugh NY prices. Now, again, you've got a lot more to work with than I, but I'd be wary of adding another 1k/mo (for 7 years!) car payment on top of an already 700/mo car payment.

You'll know more about your own situation than I, but if you have doubts, listen to them. If you run the numbers (don't cheat!) and think you'll be fine, then do it!

Thank you for your input. I don't really have doubts per say. I'm just a little taken back by spending such a large amount of money on a car. It's not an asset that will appreciate in value but I can't overlook the numbers when I consider the distance I drive. Now if I drove only 100 to 300 mile per week I would not even consider this car. We even though about moving closer to our Jobs by the additional amount we would have to pay between mortgage and property tax would be about $1200 to $1500 more per month. Not to mention the house would be older and not have solar panels. It would just be closer to our jobs.

 

[omarti]

Your DTI is not that bad IMO. a DTI of 38% allows you to get your mortgage on your own, let alone a car loan. Not sure if they'll discount your taxes from your payment but you can show mortgage statement to lender and indicate the actual P&I. Any loan that will be paid off in 6 months can also be deducted from your DTI ratio by the lender, just be sure to point out that those loans are paying off soon. If your applying for joint credit and have good credit ratings a combined 20% DTI would be excellent.

 

[omarti]

Oh yeah, between cost you are paying now and gas savings I also say go for it. To clarify one thing if you owe 14k on it and it's worth 14k, your not really putting that towards the S your putting that towards paying of your loan. To get that actual value you may also need to do a private sale as well because if it's worth 14k you may not get that in a trade.

 

[Engineer1971]

Oh yeah, between cost you are paying now and gas savings I also say go for it. To clarify one thing if you owe 14k on it and it's worth 14k, your not really putting that towards the S your putting that towards paying of your loan. To get that actual value you may also need to do a private sale as well because if it's worth 14k you may not get that in a trade.

I understand that. But my reasoning is that since the loan is paid off and the 14K I would have spent on the old car will now go towards the MS. The value I quoted for the car was actually the trade in value. It's no big deal if I have to 1K to 2K extra during trade in to make up the difference.

 

[omarti]

Cool, I thought that may be the case, just wanted to be sure you understood. I've seen many times where folks have thought that the value of the vehicle was applied towards the purchase price when in fact it went to payoff an outstanding loan.

 

[CapeOne]

We do not have much revolving debt (We pay in full on a weekly basis so the minimum payment may appear when the statement genereates but it's usually @ $25 per card). The majority of out debt is the house (The taxes are combine with my mortgage and appear that way on my credit report (@3K per month but Mortgage by itself is 1700 per month. Welcome to NY ) and my wife's car is @$700 per month. The rest of the debt is student loans which will actually be paid off within 6 months (@$550 per month).

Your housing debt ($3K/month) is actually very low for your household income.

If you and your wife were able to justify her $700 car payment on her $100K income, I would assume you could justify a similar payment percentage for the Tesla on your income especially given that the only other notable debt (student loans) are being eliminated within 6 months.

I'm assuming the housing debt is in both you and your wife's names and her car payment is in her name or both of your names and the Tesla loan would be in your name or both of your names. Is that correct?

 

[AB4EJ]

A few thoughts -

• It is hard to justify a Tesla on financials. When you consider depreciation and the recommended service (which I think you should plan for), it is still on the high end for transportation, even considering gas savings. Don't forget the cost of electricity in NY.
• Having said that, there are plenty of intangible justifications, such as:
• Tesla is one of the safest cars on the road. You can't put a value on this if it saves your life of the life of a family member in a major crash.
• You can reduce your fatigue considerably on trips by using Autopilot on interstate roads. This takes the tension out of your arms and shoulders due to reduced steering effort.
• You can reduce your carbon footprint (how much depends how your power is generated).
• You can power the car (at least partially) by putting up solar panels.
• The car is a tremendous kick to drive. So some joie de vivre.
• Your friends will be jealous. Some people will think you're driving a Maserati.

Regarding financing: you'll be paying a lot in non-deductible interest using a 0% down loan, I'm not sure I would do that unless with a home equity loan (Ii.e., tax deductible interest). Your family income suggests that you can afford it, especially if you are willing to economize in other place.

 

[Engineer1971]

Your housing debt ($3K/month) is actually very low for your household income.

If you and your wife were able to justify her $700 car payment on her $100K income, I would assume you could justify a similar payment percentage for the Tesla on your income especially given that the only other notable debt (student loans) are being eliminated within 6 months.

I'm assuming the housing debt is in both you and your wife's names and her car payment is in her name or both of your names and the Tesla loan would be in your name or both of your names. Is that correct?

I would prefer to put it just in my name (We may want to use her income one day to pickup some investment property just in her name). All of the other debt is in both of our names (Excluding student loans). And to be honest we did not go through this exercise when picking up her vehicle (We probably should have since she also drive 600 mile per week to get to work). Living in the woods is great but getting to work can be a pain sometimes. That is the price one pays if the want to work in the city and not pay city prices.