Subjective Question: Minimum Annual Salary to Buy Perf 85kWh w/options

[kevincwelch]

While in principle I agree with this, it may make sense to finance in some circumstances. In the US it is possible to obtain financing for a vehicle at an interest rate of around 1%. It may make sense to finance at these low interest rates, as it is cheaper than using your own money.

But only if you are using your money and investing it in something that gives you a return on something higher than that 1%. Otherwise, you still are spending more money on something that will ultimately depreciate and lose you money. Whether you spend it up front or over five years, financing at 1% results in spending more money.

Of course, most Americans cannot outright purchase their cars and they do have to finance a portion of it. The Model S doesn't fit that bill, and unless you planned on buying a similarly priced gasoline vehicle, the Model S doesn't save you money in many cases.

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[jerry33]

The one thing that hasn't been mentioned in this thread yet is that you're not purchasing a $80,000 car, you're purchasing a $40-$50K car and pre-paying for fuel.

 

[Kevin Harney]

The one thing that hasn't been mentioned in this thread yet is that you're not purchasing a $80,000 car, you're purchasing a $40-$50K car and pre-paying for fuel.

That fits in with your total auto costs being 10-15%. Less on gas and maintainence equals more on the car itself.

 

[kevincwelch]

The one thing that hasn't been mentioned in this thread yet is that you're not purchasing a $80,000 car, you're purchasing a $40-$50K car and pre-paying for fuel.

Well...not for me. I spend only $1200 annually in gas. Even if I kept the car for 10 years - and I probably won't - that's only $12000 in gas. I can't imagine with the inflated cost of gas that I would even approach $40000 in gas.

At least over the next 4 years, the Model S certainly won't be cheaper to maintain - we've had that thread!

Maybe for others. ..

This purchase is for me: reduce dependency and promote alternative fuels. (And get something cutting edge.)

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[dsm363]

Not for me. I spend only $1200 annually in gas. Even if I kept the car for 10 years - and I probably won't - that's only $12000 in gas. I can't imagine with the inflated cost of gas that I would even approach $40000 in gas.

Maybe for others. ..

This purchase is for me: reduce dependency and promote alternative fuels. (And get something cutting edge.)

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Me too. This car will never pay for itself, not even in 30 years but I got it for other reasons as well. Still a great car.

 

[stopcrazypp]

It's a loaded question because it depends on your other expenses (do you also have a mortgage, how much you spend on living expenses, your spending on recreation, etc.). Obviously the amount you spend on financing the car must be such that you have money left over after all your other expenses. But the suggested 10-15% to auto expenses seems to be a safe amount.

From bosgig's calculation for the $95k version of $1750/month or $21k/year that corresponds to $120k-210k per year. Basically you must be able to safely fit $21k/year extra in spending into your current budget.

 

[richkae]

The one thing that hasn't been mentioned in this thread yet is that you're not purchasing a $80,000 car, you're purchasing a $40-$50K car and pre-paying for fuel.

I made this chart to illustrate a similar point.
It shows which EV would be the same or less monthly cost ( fuel + monthly payment ) as an ICE based on the ICE sticker price. Financing is assumed to be 4% for 5 years, and ICE fuel cost is $4 per gallon and 20mpg.
( Nobody would compare a Leaf to a 20mpg premium burning car , but the focus of this chart is the Model S, and thats a valid comparison for the S. Also note that the Model S cost considered is unoptioned and I have factored the $7500 credit into the price. )
The short answer: drive more!

 

[jerry33]

Well...not for me. I spend only $1200 annually in gas. Even if I kept the car for 10 years - and I probably won't - that's only $12000 in gas. I can't imagine with the inflated cost of gas that I would even approach $40000 in gas.

At least over the next 4 years, the Model S certainly won't be cheaper to maintain - we've had that thread!

Maybe for others. ..

This purchase is for me: reduce dependency and promote alternative fuels. (And get something cutting edge.)

I've spent $6,475 over the last 143,000 miles in fuel (9 years and 1 month, $719.50/year) so the Model S won't be saving me any money either. Maintenance is equal to the Model S so that's a wash.

Supporting the technology and U.S. manufacturing, having something that's cool, not going to a gas station, and not going to the dealer for service are the drivers for me. Also driving will be fun again when you don't have to worry about fuel costs.

- - - Updated - - -

...a 20mpg premium burning car

Are we talking Fisker here?

 

[richkae]

Are we talking Fisker here?

No, I was thinking other "premium" sedans.

 

[jerry33]

No, I was thinking other "premium" sedans.

I didn't realize there were other premium burning cars.

 

[richkae]

I didn't realize there were other premium burning cars.

LOL.
"premium" both as in luxury - and premium burning - as in the gasoline that costs 30 to 40 cents per gallon more than regular.
But I guess the Fisker gets all 3.

 

[yobigd20]

Me too. This car will never pay for itself, not even in 30 years but I got it for other reasons as well. Still a great car.

Geez. For me, it will definitely pay for itself. I was driving a Range Rover, averaging 19mpg, and I drive approximately 30000 miles a year. RR's require premium fuel, which is about $4/gallon. (probably be up over $5 next summer). By my calculations, 30000miles/19mpg=1578 gallons per year. At $4/gallon, that's $6315 a year I'll be saving (it's probably more than that actually, because my monthly credit card statement shows between $600-$700 at the gas station each month). If I keep the car 10 years that's $63k in fuel savings, lol. For me, the choice is a no-brainer. I'll never drive an ICE vehicle again.

 

[Omer]

Geez. For me, it will definitely pay for itself. I was driving a Range Rover, averaging 19mpg, and I drive approximately 30000 miles a year. RR's require premium fuel, which is about $4/gallon. (probably be up over $5 next summer). By my calculations, 30000miles/19mpg=1578 gallons per year. At $4/gallon, that's $6315 a year I'll be saving (it's probably more than that actually, because my monthly credit card statement shows between $600-$700 at the gas station each month). If I keep the car 10 years that's $63k in fuel savings, lol. For me, the choice is a no-brainer. I'll never drive an ICE vehicle again.

You drive a RR averaging 19mpg 30,000 miles/year? Even before the Model S, there have been plenty of cars you could have purchased that would have been free due to the fuel savings.

 

[PRJIM]

The one thing that hasn't been mentioned in this thread yet is that you're not purchasing a $80,000 car, you're purchasing a $40-$50K car and pre-paying for fuel.

The big elephant in the room is the possible battery replacement cost- due to diminished capacity. A good chunk of your pre-paid fuel costs may have to go towards this future cost.

 

[Sousaphil]

I find it interesting to read this thread.

Money means a lot of different things to different people.

To me a car is not an asset, but a liability. It does not put money in my pocket, nor does it appreciate in value (ok maybe very log term, but for the moment).

It is a liability because it takes money out of my pocket.

So - I will not borrow to buy liabilities. I borrow ONLY to buy assets. More rules apply.

My three rules for buying cars (take this a little tongue-in-cheek)

1 never finance, save up first
2 never spend more than 6 months of your net income on a car
3 its perfectly ok to get a Model SP as long as you stick to rules 1 and 2

I have seen so many people get into financial difficulties because of too much spending - not worth it. Not for a motor vehicle - not even a tesla.

I largely agree with your conservative approach to car buying, but not completely.

1) A car is an asset. Depreciating, for sure, but still an asset. It gets me to work where I generate my income. Furthermore, the Tesla brand halo helps the personal brand (I'm the guy at the office who has foresight now), so it's more than just transportation.

2) There's nothing wrong with financing a vehicle, especially with rates as low as we see now. If I had the cash to buy a Model S outright, I'd still finance a significant portion of it, because I feel like I can invest it and have a bigger return than the interest rate I'd be paying. Instead of sinking $100K into the car, I'd put $40 into the car and use $60 as a down payment on a rental property.

3) 6 months of income isn't a bad rule of thumb, but it doesn't take cost of living into account. If someone has a very inexpensive mortgage (or has their house paid off), they can afford much "more" car.

Those 3 quibbles aside, one definitely should do some "Worst case scenario" calculations to see what could reasonably happen to your monthly finances.

 

[dhrivnak]

I too subscribe to the belief that one should not spend more than 1/2 their salary in cars. I believe that is Dave Ramsey's rule. Dave Ramsey wrote the "Total Money Makeover" and had a daily radio talk show about finances. Because cars go down in value, yes even Teslas, it is not a good idea to borrow money to buy a depreciating asset. You come out ahead by saving up first. Of course there can be exceptions and with today's low interest rates financing part of the car can make sense but I would never consider 100% financing a depreciating asset.

I wanted a Tesla well before they ever went into production. But I knew I could not afford one. Then used ones came on the market and I could swing a lightly used one. It took some patience and delayed gratification, but also save me a lot of money.

 

[kevincwelch]

Also driving will be fun again when you don't have to worry about fuel costs.

+1 on this sentiment.

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[GenIIIOwner]

I made this chart to illustrate a similar point.
It shows which EV would be the same or less monthly cost ( fuel + monthly payment ) as an ICE based on the ICE sticker price. Financing is assumed to be 4% for 5 years, and ICE fuel cost is $4 per gallon and 20mpg.
( Nobody would compare a Leaf to a 20mpg premium burning car , but the focus of this chart is the Model S, and thats a valid comparison for the S. Also note that the Model S cost considered is unoptioned and I have factored the $7500 credit into the price. )
The short answer: drive more!
View attachment 11862

This is a nice chart, but you may drive 25,000mi/year mostly on the freeway where the infrastructure is not yet there.

 

[Arnold Panz]

There are so many factors beyond income, with cost of living being the biggest IMHO. I'm at a point in my life where the kids are through college, the mortgage is paid off, I have good retirement savings and pension plans in place, a second income propery and so forth. My salary is good, but probably not even close to what some on these forums make, but with my cost of living expenses so (relatively) low, buying a Model S is easily do-able.

Right on. The thread topic question is based on a faulty premise, and its a common misperception to focus on income instead of wealth. Who is "wealthier", someone who makes $100,000 a year and saves $20,000/year, or someone who makes $500,000/year and spends $600,000/year (ie, is in debt)? The person spending $600k probably has a lot of cool stuff, or takes great vacations and eats at nice restaurants, but the first person is in a much better position to afford anything (including an 85kWh Model S) than the second person.

In other words, the most important factor is whether or not you are living below your means (whatever your income) and can afford the payments, not what your income is. I know people making six figures who definitely can't afford an expensive car, and others who make much less who live frugally and could much more easily afford the car.

 

[Johann Koeber]

Thanks for discussing, this is an emotional decision, but prudent finances help keep you out of trouble in good times and in bad.

I largely agree with your conservative approach to car buying, but not completely.

1) A car is an asset. Depreciating, for sure, but still an asset. It gets me to work where I generate my income. Furthermore, the Tesla brand halo helps the personal brand (I'm the guy at the office who has foresight now), so it's more than just transportation.



2) There's nothing wrong with financing a vehicle, especially with rates as low as we see now. If I had the cash to buy a Model S outright, I'd still finance a significant portion of it, because I feel like I can invest it and have a bigger return than the interest rate I'd be paying. Instead of sinking $100K into the car, I'd put $40 into the car and use $60 as a down payment on a rental property.



3) 6 months of income isn't a bad rule of thumb, but it doesn't take cost of living into account. If someone has a very inexpensive mortgage (or has their house paid off), they can afford much "more" car.

My answer to 1

Ok, in many areas of the US public transport is not an option, unlike most of Europe. But low cost cars would be. It gets you to work, lets you make money and save up. You could be the guy at the office who the foresight not to be caught in consumer debt and keeps more of his paycheck.


My thought on 2

So you are suggesting an arbitrage, like a credit swap. That would be ok, if you know what you are doing.
Good thought. With my (you call it conservative, I call it prudent) system, monthly finances don't take a big hit.


My opinion on 3

They can afford much more savings and the quicker they will have saved up the purchase price of the car.

By my rules, I would not buy a bigger house for myself than I can afford, i.e. pay outright. Rental properties is a different question.
Those 3 quibbles aside, one definitely should do some "Worst case scenario" calculations to see what could reasonably happen to your monthly finances.

I never subscribed to the idea of taking out loans for consumption purposes. Income producing assets is another thing.