How Young is too Young for a Model S?

[SittingMoose]

Hi Folks,

This is a bit of an introduction as well so please bear with me...

I've been following Tesla since 2009 when I first learned that the Tesla Roadster had the body structure off of one of my favorite auto makers...After learning more about the company (and falling in love) and graduating college in 2010, I promptly took part of my sign on bonus and purchased some Tesla stock. I purchased a bit more, not with the goal of making some short-term money (or even making considerable long-term money) but for being RIGHT. I became a believer in Tesla and a believer in the Model S.

When initial pricing came out, I was a bit dismayed because I was holding out hope that I could potentially afford one (regardless, I couldn't help myself and placed a reservation). I have been wrestling with the idea of purchasing a Model S.

Here are some facts:

1. I'm 23 years old.
2. I live in San Diego, CA with my family but recently moved to Chicago for a one-year assignment (I come back in the summer...potentially for good).
3. I don't expect to receive a Model S until April 2013, and I'm not sure if that affects the production schedule for my specific vehicle (or if it follows the schedule for whichever battery pack I choose). Regardless, I expect to have around $25K of my own money to put down for the vehicle ( including the $5,000 reservation)
4. I drive maybe 20 miles per day in San Diego because everything is so ridiculously close by. My workplace is about 5 miles away from my home. I plan on using this as a daily driver. I do not take long road trips, and if I do, I'm too paranoid to be driving in a $50K beauty.
5. My parents seem to be unsure about the lifespan as well as the kinks that the first wave of Model S vehicles may have. I completely understand that, but I was hoping that the signature editions would provide enough data to calm them. And I'm really really impatient. If their concerns are quelled, they're fine with paying the difference.
6. I currently don't have a car in Chicago, so when I move back to San Diego, I'll have to find a temporary solution. I was planning on picking up the cheapest and shortest term lease I could find (most likely using a website like Swapalease.com | Get Out of A Car Lease or Take Over A Car Lease
).
7. I'm REALLY impatient. I don't want to wait for the $30-40K 3 series competitor that is supposed to hit the streets in 2015 or whatever.
8. I fully expect myself to pay the majority back to my folks for the vehicle.
9. I fully expect myself to keep this car for as long as I can.

I know I probably come off as some spoiled brat but I assure you, I don't live out of my means. I have a stable career plan. My previous car was a Toyota Camry, and I try to save wherever I can...including living at home with my folks (especially since it's more convenient).

Do you think this is viable for a 23 year old like me or am I reaching too far? I don't care about perception, just actual dollar amount.

The way I see it is that the Model S, in a way, is the biggest bang for the buck. It seems that most of the physical cash outflow on a car (I use the term physical cash outflow so that people don't consider depreciation in this equation) is maintenance and fuel consumption. For the most part, it seems that Tesla vehicles are not supposed to have high maintenance costs because of the lack of a combustible engine. In fact, I read somewhere that the average Roadster maintenance per year was $675 (I'm not 100% sure on this figure). That mainly included tires and brakes...on a roadster, I would imagine it's a bit more expensive to maintain than just a daily driver that probably has more cost efficient parts to manufacture.

My plan was to either purchase a 2013 Ford Fusion Titanium/Sport or a Tesla Model S. I compared the two cars from a physical cash outflow perspective to see what the costs would be to fuel, maintain, and insure the vehicles. I was pleasantly surprised that after 5 years, the Model S did not do as badly as I thought it would...or at least it didn't seem like that.

I have never done this type of analysis so I'm sure my calculations were incorrect but it seems like the ownership cost (again from a physical cash outflow perspective) seemed around 10-15K higher with the Model S than the Fusion. This did not take into consideration that the Model S is considered a premium car, has the super cool and unique factor, is far more green, and has better performance.

So again, I ask. Am I living out of my means? I know that's a tough question to ask because every person is different blah blah but I'd like to see what complete strangers think. I won't be basing my entire opinion off of what you guys say.

***Take into consideration the 40 kWh battery purchase vs. the 65kWh battery. Also, I'm assuming I'd be able to somehow cash in on the $4k rebate that Illinois is offering before I move back to California (I have family in Chicago that I could put the purchase under). This puts the cost at $45,900 (40kWh) and $55,900 (65kWh).***

Thanks again guys, and regardless of my decision, I look forward to chatting all things Tesla!

 

[Todd Burch]

Hi Moose,

As you say, every person and situation is different, but here's what I think:

I didn't see you mention your income, but unless it is pretty high (and also a stable job) I wouldn't go for a Model S right now if I were you. Not because of your age, but because of where you likely are in life financially.

Do you have student loans to pay off?
Would you like to own a home in the future?
Have a significant other? If not, would you like to?
I assume you live on your own (not with family).

I don't mean to discourage you...I'd love to get everyone to buy a Tesla, but based on what I hear, you may just not be in the financial position for it at this point in your life. (don't feel bad--only a lucky few are at your age, such as entrepreneurs who have had the good fortune to start a successful business). If you drop $25k on the car, will you have 6 months to a year's worth of reserve cash on hand for emergencies?

Will you be paying a car loan off for the next 10 years instead of (perhaps) saving up for a down payment on a home?

Also, $45,900 is much less than the car will cost, even if you include the federal and Illinois credit. You have to add in taxes, registration, etc...easily adding thousands to the car. Not to mention that you don't receive the federal tax credit until tax time....so that $7500 is needed up front.

Then you've got insurance, which will be pretty hefty.

 

[Dan5]

I would say 23 is a good age to start with the car.
The insurance is going to be kind of high-you didn't hit the 25 year benchmark

There's a few things you have to consider
1. Maturity level, as long as you are not going to race it or do anything reckless you should be good
2. Finances- student loans, job, etc, etc. . Priority should be house savings then car, but getting the car first could be better because you will NOT be able to get it when you are married and have kids. You should really be making around 60 K/year to afford the car
3. If you are worried about the lifespan, 100,000, 8 years- you really don't drive that much, you should be fine
4. You have to keep in mind there is not that many kinks compared to a normal car- less things to break.

More or less, if you are putting 25 K down, your loan should be around 600 to 800/month, if you can afford that you should be fine.

Take the Illinois rebate off your post- not something you really want to post on a forum

 

[Todd Burch]

You should really be making around 60 K/year to afford the car.

Again, every situation's different, but I'd consider ths income too low to get an S for a 23 year old. I was making about that when I graduated college in 2002, with a car (2000 Saturn) paid off and no debt.

It's taken me about 10 years (with a significant increase in income) to get to the point where I feel I can buy it.
-I now own a home (~40% paid off)
-I now have a wife (not a cheap hobby :wink and a kid (an even more expensive hobby :tongue

But as Dan said, your priorities at this point in your life should be:
-Get an emergency cash reserve stored up (6 months to a year).
-Pay off any student loans and other debt.
-Don't rack up credit card debt.
-Save up for a house.

If you're OK living in an apartment for a long time (possibly with roommates), have little to no debt, have cash reserves saved, and are making Dan's $60k number, then it's certainly doable.

 

[gg_got_a_tesla]

But as Dan said, your priorities at this point in your life should be:
-Get an emergency cash reserve stored up (6 months to a year).
-Pay off any student loans and other debt.
-Don't rack up credit card debt.
-Save up for a house.

Echo all of these. They might seem silly to you (ah, the early twenties! ) when contrasted with owning a super-cool car but, it's good to establish that roadmap for your twenties and thirties. Play around with a calculator such as this to see what your comfort level would be with income/various expenses/debt in your life.

And, not sure how long living with your parents in San Diego would be practical once you move back?! Especially, when you find a partner and/or have kids. Home ownership (or renting a home) may be a significant factor when it comes to EVs as there's the issue of overnight charging - apartment parking ports may not work on that front.

Having said all that, if you do come into a fair bit of money (say, via stock options - I had some luck there in my early twenties and was able to afford a BMW Z3 while saving up to buy a home soon after - or a successful business a la the young Dutchman, Wido, or AnOutsider on this forum!), then, you could reconsider getting the Model S.

Also, don't know if buying in Illinois is a good idea; you'll have to pay California sales tax anyway when you move the car here and register it. Atleast till the funds run out, CA has a $2.5K rebate too so, you might be better off buying in CA rather than in IL.

 

[bonnie]

Also, don't know if buying in Illinois is a good idea; you'll have to pay California sales tax anyway when you move the car here and register it. Atleast till the funds run out, CA has a $2.5K rebate too so, you might be better off buying in CA rather than in IL.

Why would he pay California sales tax, too? Afaik, he'd only pay the registration fee. I thought sales tax would only be paid once, not every time you move from one state to another. When I moved to CA, I only had to pay registration fee for my cars, not sales tax.

 

[efusco]

I'm in agreement. A car is a depreciating asset, period, bottom line, no debate. I think that if you start making smart financial choices now it'll pay huge dividends later. Invest the Extra $40k you'd spend on a Model S and, instead, get a Nissan Leaf-it's more than adequate for your little commute, gets you a taste EVing (albeit not nearly as nice, fast or cool), and starts your life as an investor off on solid footing. Starting out that young with big debt in a sketchy economy is just begging for trouble, IMO.

But look, I'm not going to call you an idiot if you decide that this is your reward for a hard earned college education. I also think $60k/yr is WAY too low to be buying a car in the price range of a S...My income is at least 5 times that and I consider the S a huge stretch for us.

 

[Robert.Boston]

+1 Evan (and others). Even though your parents have generously offered to help you out, and despite the obvious allure of a car that is both beautiful and practical, my counsel would be to live lean. A car can be stolen, totaled, etc. -- if the risk of its loss undermines your financial future, it isn't a wise investment.

 

[Trnsl8r]

I'm with Todd, Evan, & co. on this one too. I have only borrowed money twice in my life - to get an education and to get a house. Both loans that have and will pay off. As for cars, I have owned 17 of them, all bought used, mostly junkers, but I never borrowed a dime to get them. When you buy a car, you have to consider that money gone. (That said, I may borrow money for the S, not sure, but if I do it will be for a minor portion and some upgrades. If I only had $25k to spend, I wouldn't even consider it.)

I think deep down you already knew what the answer here would be, that's why you made this posting and didn't just go ahead. "If there is doubt, there is no doubt." So listen to your inner reason, invest the money, live within your means. Your time will come.

 

[Dan5]

I also think $60k/yr is WAY too low to be buying a car in the price range of a S.

60 K is low, and that is the minimum you should be making and it would be a stretch

Rule of thumb: your car + maintenance + insurance should be no more than 1/8 of your net monthly income.

If you have no debts, no kids, no other responsibilities, you could in theory go up to 1/4 of net income- not advisable. 60 K gross, is probably net like $900/week.

rent- say $1000, food $300, TV phone internet- $200, G&E + water, $300, clothing + misc probably $300-$500. They good part is that you would only be putting out 30 K for the loan, but still looking at a $600 minimum payment. It would be a struggle, but you could do it.

Personally, I had the same chance to buy 50K special edition firebird when I was your age and decided against it was living with my parents and paying a few hundred a month for rent, I decided not spend the money and got a 25 K car instead- banked the rest of the money instead- nice house down payment.
That firebird would have a trade-in value of around $6,000 now, the 25 K car traded in for 4 K.

Another thing to consider is that you should have enough money in the bank to cover living for at least 6 months (1 year is better) in case you lose the job

 

[Zextraterrestrial]

So age has nothing to do with it...

 

[Zextraterrestrial]

And my mom called me insane when I told her I was going to get one. I am 36 but 'finished' college 6 years ago and will be making ~ 100k in 2 yrs (85K now) so I am planning on getting the performance S.
I do have a wife and dogs and chickens (easier than kids) a house and a rental house both with mortgages~ $1800/mo but rent for the house alone gets back $1300

Insane?

 

[Andrew Wolfe]

Originally, I was going to try to do a financial analysis, but I realized that this is not the right issue.

At 23 - you should be starting to think about living on your own. That, most likely, means an apartment or condo - not a house. Having an electric car and living in an apartment doesn't make sense in 2012 or 2013. Maybe some day it will.

At 23 - with no responsibilities - you should be able to spend 25% of your take home pay on a car if you want to - but a Tesla makes little sense unless you permanently (or semi-permanently) live in a place where you can charge it.

 

[qwk]

I also think $60k/yr is WAY too low to be buying a car in the price range of a S...My income is at least 5 times that and I consider the S a huge stretch for us.

Nothing personal, but this statement is just ridiculous. If you make $300k a year and can barely afford an S, you have some problems.

 

[SittingMoose]

Echo all of these. They might seem silly to you (ah, the early twenties! ) when contrasted with owning a super-cool car but, it's good to establish that roadmap for your twenties and thirties. Play around with a calculator such as this to see what your comfort level would be with income/various expenses/debt in your life.

And, not sure how long living with your parents in San Diego would be practical once you move back?! Especially, when you find a partner and/or have kids. Home ownership (or renting a home) may be a significant factor when it comes to EVs as there's the issue of overnight charging - apartment parking ports may not work on that front.

Having said all that, if you do come into a fair bit of money (say, via stock options - I had some luck there in my early twenties and was able to afford a BMW Z3 while saving up to buy a home soon after - or a successful business a la the young Dutchman, Wido, or AnOutsider on this forum!), then, you could reconsider getting the Model S.

Also, don't know if buying in Illinois is a good idea; you'll have to pay California sales tax anyway when you move the car here and register it. Atleast till the funds run out, CA has a $2.5K rebate too so, you might be better off buying in CA rather than in IL.

All,

Thanks for the quick and candid responses. I think deep down I knew all along that I would end up waiting. It's better to drop the dream now rather than later.

Even though I have no debt I can understand the need to save up (especially for that damn house) so...bluestar it is! I'll make sure to be first in line for that :wink:

 

[ElSupreme]

Well age isn't really an issue. It is a big car for a young person, but that is more personality. Plus there arent really any competitors to the Model S in any other form factor. Calculate out what your payments will be when you finance the car (add in some extras) and pay yourself every month into a savings account. You can adjust this number slightly if your cost of living will go down or whatnot. If you can make your payments by all means go for it. I am starting my 'payments' in April (saving for a wedding till then). Hopefully I will have 12-14 payments in the bank before I get my S, and will either put that ~12k down, wait for my tax breaks and refill my bank account when they come around.

 

[rlawson4]

Age is not relevant. Taylor Swift could afford it. The issue is your income, your savings, and your debt. Most will disagree with me, but I don't think you should borrow money to buy a car because it's a depreciating asset. I generally don't believe in borrowing at all unless it's for your primary residence. If you cannot pay cash for the vehicle, then don't get it. You should get a Leaf, a Volt, or a Fusion Hybrid.

 

[SittingMoose]

Age is not relevant. Taylor Swift could afford it. The issue is your income, your savings, and your debt. Most will disagree with me, but I don't think you should borrow money to buy a car because it's a depreciating asset. I generally don't believe in borrowing at all unless it's for your primary residence. If you cannot pay cash for the vehicle, then don't get it. You should get a Leaf, a Volt, or a Fusion Hybrid.

Again, I meant age in terms of income. Generally the average is around 45-50k for my profession and I make a little more than that. I am still leaning towards "No" however...


The enticement was the performance combined with the need of no gasoline...I would probably end up waiting for the next lower model or wait until I could afford the Model S.

 

[dsm363]

The other thing to consider is the most people don't downgrade their next car. People usually start out with cheaper cars and go towards their dream car later on. Some get there faster than others of course. Would you be happy getting a similar car in 8 years or so or would you want something nicer?

If you're able to afford it, don't have any debt and aren't borrowing a majority of the car then it's possible. Have you thought about buying a used Leaf of something to get into the EV game and setting aside a fund for your Model S to pay for most of it with cash? It might take you an extra year or two but might be worth it.

 

[onlinespending]

Age is not relevant. Taylor Swift could afford it. The issue is your income, your savings, and your debt. Most will disagree with me, but I don't think you should borrow money to buy a car because it's a depreciating asset. I generally don't believe in borrowing at all unless it's for your primary residence. If you cannot pay cash for the vehicle, then don't get it. You should get a Leaf, a Volt, or a Fusion Hybrid.

+1. My feeling is if you have to borrow money, then you really can't afford it. The over use of loans and people living beyond their means is what got us into this financial mess in the first place. Now if you elect to borrow money because you believe your ROI on that money will be greater than the interest paid on the loan, well then that's a different story.