Should I buy? (Financial)

[Koryin]

100% agree with this. It's what I'm waiting and relying on. Also return on TSLA investment.

While the used car market could be true, there are less than 1000 Model S' in Canada IIRC, that makes the used car market extremely small, competitive, and likely to go fast. I shouldn't rely on it. Also since Tesla Motors has restricted importing a US model, I can't go down south. I also don't really like purchasing used things. Too many unknowns in the object's past make me uncomfortable.


And the whole "waiting for announcements" idea never ends, there is always a new announcement you could be waiting for. Sooner or later, you'll have to bite the bullet and jump in.

Basically, the Model S of now and the Model S of next year doesn't mean much to me. There are no features I would hold out for.

 

[Amped-Up]

While the used car market could be true, there are less than 1000 Model S' in Canada IIRC, that makes the used car market extremely small, competitive, and likely to go fast. I shouldn't rely on it. Also since Tesla Motors has restricted importing a US model, I can't go down south. I also don't really like purchasing used things. Too many unknowns in the object's past make me uncomfortable.


And the whole "waiting for announcements" idea never ends, there is always a new announcement you could be waiting for. Sooner or later, you'll have to bite the bullet and jump in.

Basically, the Model S of now and the Model S of next year doesn't mean much to me. There are no features I would hold out for.

Koryin,

As a Tesla shareholder, I enthusiastically urge you to buy your dream car. (sort of kidding!)

Now that said, a few things you might want to think about, if you haven't already. The bonus you target for payments is a gross number presumably - not net after taxes? No sure what the rates are in Canada but here in the States, and NJ, as a single person, depending upon annual gross, that bonus could shrink by 40% or more. Also a bank may look at your total debt load vs gross income and not be comfortable with the loan size. I've also heard some comments about the Model S performance in snow - not on the level, but rather on grade. You might want to suss this out a little further - i don't plan on driving mine in snow so it wasn't an issue.

Everyone has their own level of comfort with risk. I'm in the pay cash for cars school of thought but that's not for everyone. As a young guy, with a good job, and some assets to fall back on, now is the time to take chances, rather than when or if you've got kids and all sorts of other responsibilities that cost money. And if you get into trouble, the lack of Teslas in the market, and the demand and high resale value can afford a relatively painless exit if necessary.

Good luck with your decision.

 

[Crispix]

Sounds like you have good financial sense, OP. Priorities are living expenses and saving for retirement. Since you asked for advice, consider this: don't buy a new Model S if you will ever be upside-down on the loan. And with a 10-year loan, you'll be upside-down from day one.

Think about saving your entire $1k/mo raise for a year or two as your car fund. Then either buy a used MS or use it as a downpayment on the Gen 3 Tesla. The anticipation of getting your dream car while saving up is part of the fun.

 

[karmamule]

From the way you're sticking up for buying it in the face of arguments against it, I think your direction is clear: you should get it! While I think we should all be saving responsibly for retirement, i think we also shouldn't 100% count on reaching it. I've had a serious health issue that (fortunately for me) is 100% resolved now, and a couple friends of mine have had very close brushes with death that could have easily gone the other way. I'm not going to put all my eggs in the retirement basket, so to speak, I want some big ticket items while I'm still (relatively) young and healthy.

I think the question is will you get enough satisfaction out of it to make the payments feel worthwhile to you? Will you be getting your money's worth?

If you think so, go for it!

 

[Koryin]

From the way you're sticking up for buying it in the face of arguments against it, I think your direction is clear: you should get it! While I think we should all be saving responsibly for retirement, i think we also shouldn't 100% count on reaching it. I've had a serious health issue that (fortunately for me) is 100% resolved now, and a couple friends of mine have had very close brushes with death that could have easily gone the other way. I'm not going to put all my eggs in the retirement basket, so to speak, I want some big ticket items while I'm still (relatively) young and healthy.

I think the question is will you get enough satisfaction out of it to make the payments feel worthwhile to you? Will you be getting your money's worth?

If you think so, go for it!

Hah, not entirely true. I'm still gunning for it, but I rethinking my 10 year loan plans thanks to some of the posts here. I'm exploring all my options.

I'm already saving money for retirement anyway but I agree with you entirely.

 

[llngoc]

My 2 cents. If this is a "normal" ICE luxury car, taking out a long term loan may be okay. (Although 10 years still seem to be excessive, my mortgage is 10 years) And for the same reason which excites you because of the technology, it should also be the reason you should think carefully before you commit to it. Remember that the 2007 iPhone does not look that great now and for the same reason, the 2014 Model S may look very aged in 2020 when you can get 1k miles out of a 5 minutes charge at half the price. (exaggeration here but who knows) For the same reason, my car is on a 3 years lease only. This EV technology will be evolving so fast once the mass market is adopting it that a 5 year old EV from today may feel like a Model-T very soon.

 

[Koryin]

My 2 cents. If this is a "normal" ICE luxury car, taking out a long term loan may be okay. (Although 10 years still seem to be excessive, my mortgage is 10 years) And for the same reason which excites you because of the technology, it should also be the reason you should think carefully before you commit to it. Remember that the 2007 iPhone does not look that great now and for the same reason, the 2014 Model S may look very aged in 2020 when you can get 1k miles out of a 5 minutes charge at half the price. (exaggeration here but who knows) For the same reason, my car is on a 3 years lease only. This EV technology will be evolving so fast once the mass market is adopting it that a 5 year old EV from today may feel like a Model-T very soon.

I hear you. Alas, the only leasing option available here actually has higher payments than a loan.

 

[bonaire]

Did you ever take a 10 year loan for an expensive car before? If so, what was that like? If not, why would you do it now?
It is a fast, big electric car. There are also smaller, cheaper electric cars. If the goal is simply to drive without gas, what are your physical car requirements and do you need it now or could you perhaps look at new models from all vendors in the coming year or two?

What do you drive now? Fast and large car? Small economy car? What is your "statement" you are making in choosing the car?

Talk to yourself like your parents would talk to you when thinking through a big decision. A 10 year loan for a depreciating car is a troubling financial decision. It will be worth 1/2 its original value after say 3-4 years but you will owe much more than half.

In my teens I thought "when I get older, I want to buy a Lamborghini Countach". That was the 80s when that car was cool. Today, Lambos are cool and I would never buy one. Things change over time and financial regret is a tough one to get over. Buying the wrong house for the wrong reasons, making a rough stock trade and losing a bundle, buying a depreciating car and paying it for 10 years. Tell yourself "is this right?" Fun is expensive and ideology is also expensive because you are paying a premium for that. If your BMW 740iL just broke down and you need something new for client meetings - sound like a plan. If your Prius is breaking down and your house is paid off and you have no other disposable income needs - it could also work. But if it is just to appease others online to show you are also "in the club" or if you are trying to impress anyone other than yourself, think again. Sometimes, doing the right thing is a boring choice. This is why dating wild and crazy people sounds like a fun time but usually ends badly.

Do this - for yourself. Go drive every electric car out there. Focus EV, Leaf, Volt, Fusion Energi, Tesla S, BMW i3, etc. They are all technical. I know a few Tesla owners who also have Volts and they love them both. Go through the whole list. Only then will you see "all the technology" and fit what works for you into your budget. Some US buyers, using the tax credit, can drive a Leaf or Volt for 1/4 that of a Model S. I don't know if you get all the variant cars in BC but give it a shot. Be fair to your budget and don't get caught up in buying "more car" than you need. Even if one car is better than others - is it critical to get "the best"? It is not a compromise to limit your spending, work harder at work and build a stronger income and then use that higher income as a base for higher spending for even more fun.

 

[Koryin]

Did you ever take a 10 year loan for an expensive car before? If so, what was that like? If not, why would you do it now?
It is a fast, big electric car. There are also smaller, cheaper electric cars. If the goal is simply to drive without gas, what are your physical car requirements and do you need it now or could you perhaps look at new models from all vendors in the coming year or two?

What do you drive now? Fast and large car? Small economy car? What is your "statement" you are making in choosing the car?

Talk to yourself like your parents would talk to you when thinking through a big decision. A 10 year loan for a depreciating car is a troubling financial decision. It will be worth 1/2 its original value after say 3-4 years but you will owe much more than half.

In my teens I thought "when I get older, I want to buy a Lamborghini Countach". That was the 80s when that car was cool. Today, Lambos are cool and I would never buy one. Things change over time and financial regret is a tough one to get over. Buying the wrong house for the wrong reasons, making a rough stock trade and losing a bundle, buying a depreciating car and paying it for 10 years. Tell yourself "is this right?" Fun is expensive and ideology is also expensive because you are paying a premium for that. If your BMW 740iL just broke down and you need something new for client meetings - sound like a plan. If your Prius is breaking down and your house is paid off and you have no other disposable income needs - it could also work. But if it is just to appease others online to show you are also "in the club" or if you are trying to impress anyone other than yourself, think again. Sometimes, doing the right thing is a boring choice. This is why dating wild and crazy people sounds like a fun time but usually ends badly.

Do this - for yourself. Go drive every electric car out there. Focus EV, Leaf, Volt, Fusion Energi, Tesla S, BMW i3, etc. They are all technical. I know a few Tesla owners who also have Volts and they love them both. Go through the whole list. Only then will you see "all the technology" and fit what works for you into your budget. Some US buyers, using the tax credit, can drive a Leaf or Volt for 1/4 that of a Model S. I don't know if you get all the variant cars in BC but give it a shot. Be fair to your budget and don't get caught up in buying "more car" than you need. Even if one car is better than others - is it critical to get "the best"? It is not a compromise to limit your spending, work harder at work and build a stronger income and then use that higher income as a base for higher spending for even more fun.

My range requirements is just over 200km per charge. I want to be able to drive to my home town and back on a single electric charge and the Model S is the only one capable of doing so. I've already looked at alternatives and its either a Model S or nothing. I'm not trying to impress anyone either, I *love* software mixing with hardware and the Model S is the climax of that (At the moment at least). I'd love for Tesla to open up the sdk so I can write apps for the car but right now, I just liking having everything controlled by software.

Your's and other's comments about the 10 year loan have indeed made me rethink my options. I still want the car but I'm becoming convinced that the 10 year loan isn't the way to go.

 

[Clprenz]

Honestly- The Auto loan market is in a bad place right now. If anything save up for 4-6 months and lower the term of the loan to at least 72 months and get an inventory car when one comes up! We have had a great market for the past 5 years, why chance that you will be in good place in 10 years? The BMW i3 looks pretty nice, don't pass it off like a lot of people on here!- It's a remarkable car with some cool tech

 

[seanahan]

I'm getting a 72 month loan at 1.79% from Alliant, is that a "bad market for auto loans"? It seems pretty good to me.

 

[karmamule]

I'm getting a 72 month loan at 1.79% from Alliant, is that a "bad market for auto loans"? It seems pretty good to me.

Yeah, I remember when 60 month auto loans in the 5-6% range was quite good. We're actually spoiled by several years of low interest rates. A few years from now who knows what it might be like.

 

[Clprenz]

I'm getting a 72 month loan at 1.79% from Alliant, is that a "bad market for auto loans"? It seems pretty good to me.

I'm referring to the market of loans as a whole... people taking to long of loans and not wanting to finish them or becoming unable to pay them. I'm still not understanding where the OP is getting a $950 a month, how in any case would that be a 10 year loan- the financials seem fishy to me. Being strapped to a car loan is the worse thing you can do- you are going to being paying off car that is depreciating faster than you can pay off the loan... meaning- If par say you lose your job in 3 years, you have made about $34,000 in payments on a car that has depreciated more than $45,000 (Guaranteed resale value). You would have to pay off $11,000 and sell the car to exit the loan.

No offense but this a super bad idea.

 

[LonghornDub]

I'm getting a 72 month loan at 1.79% from Alliant, is that a "bad market for auto loans"? It seems pretty good to me.

It's a great market. Rates have come up a bit since the valley a year or so ago, sure, but the past few years have been arguably the best loan environment in U.S. history for prime loan candidates (meaning the people who may not necessarily need a loan, but who realize that it's smart to use someone else's money instead of your own at these incredibly low rates). Frankly, anybody paying cash above the minimum down payment who isn't super wealthy is making an emotional decision, not the financially sound decision. You can beat 1.74% by several basis points by just throwing the money into risk-free T-bonds.

As to the OP, taking a 10-year loan would be really silly. Figure out a way to get into a 5 or 6 year loan before you get the car. I'm no financial advisor, but that's my advice.

 

[Koryin]

It's a great market. Rates have come up a bit since the valley a year or so ago, sure, but the past few years have been arguably the best loan environment in U.S. history for prime loan candidates (meaning the people who may not necessarily need a loan, but who realize that it's smart to use someone else's money instead of your own at these incredibly low rates). Frankly, anybody paying cash above the minimum down payment who isn't super wealthy is making an emotional decision, not the financially sound decision. You can beat 1.74% by several basis points by just throwing the money into risk-free T-bonds.

As to the OP, taking a 10-year loan would be really silly. Figure out a way to get into a 5 or 6 year loan before you get the car. I'm no financial advisor, but that's my advice.

Already talking to my bank about a 6 year loan instead. I did a couple of budget sheets and I can afford the higher payments easily enough.