The Wrong Way to Drive a Porsche
Two years ago, I took part in the process of purchasing a car…
We wrote the downpayment in form of a check, signed our papers, and drove the car off the lot. We just purchased our car — the 2014 Porsche Cayenne S.
The car cost $75,000 before taxes and options.
Our monthly payment came about to be $700, which includes the remaining principal and interest. Today, we still have exactly $7,372.10 of the remaining principal left to pay off. With this, we will be able to free ourselves from this debt in the next three months. We are sick of making these monthly car payments.
So as the title states, what’s the worst way to drive a Porsche (or any other luxury vehicle)?
- You cannot afford it.
This answer may seem like a no brainer, but for most it is not.
A $78,000 Porsche Panamera is not an easy feat with an annual income of $30,000. Please do not do it.
You will dig yourself into a hole that you do not want to be in. As obvious as it seems, choose a vehicle that falls within your budget.
2. You lease it, and then purchase it.
I may be biased against leasing a car, because I do not believe in paying for an item that you do not own.
Ownership should be the key factor in how you spend your income.
Most luxury cars are leased today. Namely, 74% of all the Maserati’s on the road are leased and respectively, 64% for the Infiniti’s.
In the case that you tend to switch cars every few years, leasing can be the better option. However, most choose to lease, because they believe that cars depreciate quickly in value and leasing is actually cheaper.
Unfortunately, people believe this misstatement, because leasing requires the least money upfront.
On the Porsche website, the cheapest offer is the 2016 Porsche Boxster.
Let’s do some 5th grade math. In this scenario, you will be leasing the car for 36 months and exercising the purchase option at the end of the lease.
First, the manufacturer’s suggested retail price (MSRP) is $62,650 for this car. The lease requires $5,299 upfront payment and $599 monthly payments for 36 months.
$5,299 downpayment + ($599 monthly payment x 36 months) =
$26,863.20 for the total lease (probably more due to taxes and interest)
What this means: You are driving the car and paying $26,863.20 for the car’s depreciation, interest, and taxes.
After all that, you are (negative) $26,863.20 with no car. You decide to purchase the car after the lease.
This particular lease has a purchase option for $38,843 after 36 months (excluding taxes).
$26,863.20 total lease + $38,843.00 purchase option = $65,706.20 total payment for car
A brand new Boxster, including the packages and options in this lease, will cost $61,730 in 2016. You will essentially be paying $65,706.20 in total for a car that’s 3 years old.
If you are like me who used to care about impressing others and driving the latest car, then you may not find interest in this post.
If you are a car lover and always wanted that new sports car, you will do what you love. There is nothing wrong with that. Make sure that it’s within budget and you are not eating beans and rice over this car.
As for me, I will not be owning another car that requires monthly payments. I am over owning depreciating assets.
The next car I buy will be 100% paid in full.
Originally published at Smart Income Club.
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We are a couple in our early twenties who’s about to start our life together. We graduated college about a few years ago and have joined the working world since then, one working at a startup and one working at a corporate bank. We decided to start this blog in 2016 as a way to share our experiences relating to personal finances and life decision choices. Follow us at www.smartincomeclub.com and Twitter!