How can you afford the cost of a new SUV?

[DarthStig]

To the OP, you’re raising great questions. I’ve often wondered this myself. I’ll be precise and open about our financial situation to help you assess your own. At 53, retirement isn’t that far off. My wife and I earn $350K/year between us. We’ve been maxing out our 401K’s for many years and hope to retire at 65 with no mortgage or other debt but we have 2 kids to put through college between now and then.

When I was 44, I didn’t sweat spending $55K on a new BMW. It lost $35K in value in 5 years. If I had instead spent $25K on a car, that extra $30K would be worth $78K now based on what I’ve earned on my IRA accounts over that time. And that’s without factoring in the interest I paid on the note, or the higher insurance and property taxes on it in that time. With that, it would be upwards of $90K in my pocket now. Just for the privilege of owning a BMW instead of a Nissan for 5 years.

Now, I drive a 2007 Yukon XL Denali that I bought in 2018 for $9500 out of Arizona. It’s in showroom condition and I maintain it fanatically. I keep records and have spent less than $2000 in parts for repairs to keep it reliable over 40K miles. I do all of my own work on it so there is no labor cost. We take long road trips in it with 4-7 people including our 2 kids several times a year. It’s comfortable and I’d drive it anywhere.

We can technically afford a new Yukon, but in my view, knowing what I know about money now that I didn’t in my 30’s, the cost is far too high to justify. Today, I can haul 6 people and their stuff in comfort and safety with no worries. If I spent $85K on a new one, I could haul 6 people and their stuff in comfort and safety with some worries. The key was separating my sense of identity from what I drive, and reassessing what I need to feel like I’m doing well. That, and no longer comparing what’s in our driveway with what’s in our neighbor’s driveway, or at least looking at it through a different lens.

I seem to be following in your footsteps, just 20 years behind. We max our Roth IRA contributions for ourselves and kids. That's #1 on our list. I maintain all of my cars as well. Not only do I enjoy it, but I also get to spoil myself with nicer tools to help myself out because the two times my wife took her car in for an oil change she was offended by the cost.

If I could find a decent SUV at $10k with low-ish miles I'd be ecstatic. Nowadays I bet a Yukon like the one you're describing would be mid-20s at the very least and I just can't justify buying a near 20 year old car for anything over 10k. Maybe I need to reassess just how lousy the used market is with the chip shortage and the hyper inflation we're dealing with right now.

 

[DarthStig]

From experience...... An old girlfriend wanted a 'new' convertible. ( in about 1990)..... We discovered something.... We went to Enterprise Rental / used cars. We found a nice 'one-year lease' corporate rented car. ( 1990 Chrysler Sebring convertible ) It had 12,000 miles. We bought it for $12,000 ( I think?) The exact car, for sale at a Chrysler dealer used with 26,000 miles was $24,000.

Check out rental company auto sales... They never owned the car they just lease it, to rent. They are pretty well maintained. They sell the cars / suv's at a wholesale price, because they didn't 'buy it'. Plus..... You will be the "1st owner", so a " bumper-to-bumper " warranty is in affect. Plus you can get financing, because it is the 1st buyer of the car.

The rental / sales company can search for their 'corporate rented vehicles', nation-wide.

Thanks for this, I hadn't even considered it. I have an Enterprise sales lot literally just down the street from my house. I think I'll pay them a visit.

 

[DaveO9]

I'm always wondering about this question when I'm driving. See a young family driving an $80k or even $100k SUV, and my thoughts immediately go to "how do they do that?" I'm guessing for many it's a $1k car payment or 96 month financing. I've had just one new car in my life, a '97 Ford Ranger - I was 25 and single. My wife and I have always had a car we bought 2-4 years old, 30k-ish miles on them for our main family vehicle. Last two have been minivans (Odyssey, then Sienna which we have now). They've been great cars for us and have never been stranded by them.

I paid $7500 for my current '13 Tahoe four months ago - lots of miles, but looks and drives great. I've put some money into it since then, but really the only thing that's truly gone wrong with it so far is it needed a new starter. Over the next few years I'll slowly rebuild and replace stuff as needed/desired up to and probably including engine and trans. Probably do some upgrades along the way, maybe a 6.0 or 6.2 instead of the 5.3. Even with all that, I'll be light years ahead of $75k. (picked that number since it's 10x what I paid for my starting point) But some caveats with this: I don't care about all the latest electronics, we don't use it as our main family vehicle, and I have other vehicles I can drive if the Tahoe is down for maintenance, repairs or upgrades. And I have the skills, tools, and shop to do most of the work myself. And most important: I enjoy doing that stuff.

 

[mountie]

At least twice a month, someone asks me if I want to sell my 2005 Yukon XL. Some drive a newer Tahoe or Yukon, or a newer truck. Just about every auto shop asks.....
Some are not aware the year models, and are surprised it's, "What?? a 2005??

If you had a choice..... a 2020 , or a clean 1970 Camaro ..... Which would you choose??

 

[B-train]

Good question- both are enticing for different reasons. And, location would make a difference as well. If I didn't have to worry about snow, then I'd go for the camaro because literally everything is replaceable, no computers to fail, no tech2 or equivalent needed, etc. Plus a set of nice flow master mufflers and a 4 speed would be fun

 

[Geotrash]

I seem to be following in your footsteps, just 20 years behind. We max our Roth IRA contributions for ourselves and kids. That's #1 on our list. I maintain all of my cars as well. Not only do I enjoy it, but I also get to spoil myself with nicer tools to help myself out because the two times my wife took her car in for an oil change she was offended by the cost.

If I could find a decent SUV at $10k with low-ish miles I'd be ecstatic. Nowadays I bet a Yukon like the one you're describing would be mid-20s at the very least and I just can't justify buying a near 20 year old car for anything over 10k. Maybe I need to reassess just how lousy the used market is with the chip shortage and the hyper inflation we're dealing with right now.

That's the thing. I bought it with 196K on it, which is why it was so cheap. But I also waited a while to find one that had truly been pampered its whole life. The Carfax showed regular maintenance, and the paint and interior were flawless, apart from the driver's seat which was showing some wear. I'd think nothing of putting a $6K transmission in it to get another 5 years out of it. Time value of money. If I'd managed money in my 30's like I do now, my wife and I would literally be retired by now.

And keep that penchant for working on it yourself. Just last week I saved $1,000 when I put new calipers, pads and rotors on myself. I spent $400 on parts, and the shop that did the annual inspection quoted me $1470 to do the same job.

Also, the hyperinflation is over. My next door neighbor is a buyer for Carmax. We chat every few days and I always ask him how the auction prices are for the full size GM SUVs. This weekend he said they're "through the floor, and everyone who bought one in the last few years is underwater". Keep your eyes open on Autotrader for private party sales. I can guarantee you'll soon find a cherry 2018 XL Denali for around $30K or less.

 

[2591tdj]

Thanks for this, I hadn't even considered it. I have an Enterprise sales lot literally just down the street from my house. I think I'll pay them a visit.

Reread the initial advice from Walleye Mike and B-train. Both make excellent, very important points. Why would you buy a vehicle that costs more than 1/2 your annual GROSS income? If you compare the price to your net income it would cost well over 1/2 your annual take home. Financially, it makes no sense and is not a wise choice. And, you’re prepared to cut expenses elsewhere just so you can drive a pretty new SUV. Don’t let the vehicle you drive define you.

 

[DuraYuk]

Thanks for this, I hadn't even considered it. I have an Enterprise sales lot literally just down the street from my house. I think I'll pay them a visit.

Just be advised that most rentals get driven hard and put up wet. No one babies a rental. The companies take care of them and usually abandon them before the bumper to bumper is out. Many have body work and check interior closely for damage.

 

[2006Tahoe2WD]

Consumerism and keeping up the the Jones. In your original post you basically answer your own question. Can you cobble together cash/get a loan to buy the vehicle, yes. Can you afford it, no and hell no.

 

[vcode]

I am dirt ass poor by comparison and I have never purchased a new car in my entire life, nor would I.
buying a brand new car is like rolling the window down on the freeway and throwing cash out the window, not gonna happen
must be nice
I little hole in my pocket leaking some change i can handle, dollar bills out the window, hard no.

But there is a lot of money out there. I mean a lot. It's just not in my hands or in that of most Americans. Local Caddy dealers haven't had a new Esky on the lot for years. All are presold before they arrive at the dealer.....

 

[Doubeleive]

But there is a lot of money out there. I mean a lot. It's just not in my hands or in that of most Americans. Local Caddy dealers haven't had a new Esky on the lot for years. All are presold before they arrive at the dealer.....

i'm sure there is...
however the OP was questioning whether or not if they could really afford a new vehicle, based on NOT having a LOT of money
I have 4 GM vehicles (all used) 3 full size suv's and 1 full size pickup. a 2018, 2016, 2012, 2005
the price that I paid for all 4 combined "almost" equal's the cost of 1 new one off the lot
if I had bought all 4 of those new my net loss would be over $100k already, as it stands now it's somewhere around $30k
that's $70k I didn't have to throw out the window

 

[fozzi58]

I really have no idea how people are doing it. I LOVE the Esky V but there's no way I could justify (let alone afford) spending $150k on a new whatever.

My wife and I do pretty well for ourselves (not as well as @Geotrash !!!) but its getting more difficult to maintain current lifestyle, let alone save, with 1 in college and another a year away. NJ isn't the cheapest place to live but the salaries are usually decent enough.

I'll keep my $50k (at the time) 17 Burb LS, base model, no options, and keep adding to it and/or upgrading it. It will be "new to me" for however long I can keep it.

 

[dukbludvl]

Hi everyone,

Apologies for the sort of asinine question. It's on my mind and this might be more of a way to convince myself to pull the trigger.

I'm looking at an almost brand new Tahoe for my wife and I'm having a hard time pulling the trigger. Outside of it not having captain's chairs (just posted a question regarding that), something else is knawing at me. I've never spent more than $40,000 on a car, and that was for a sports car before I was married and had kids. I know hyper inflation has caused a good bit of the cost, but some of these SUVs are costing 6 figures and I can't pull the trigger for something that costs as much as some people's houses. I make a good wage and I'm well in the middle class area of my income (around 120k). My wife works as well, but it's a negligible amount since it's only once a week typically. I don't want to go into our finances and I suppose I'm getting distracted from the question at this point...

We can 100% afford the car. Sure we'll have to cut down on some other luxuries but I suppose the question is, should we? With the exception of things like old project cars, cars lose their value and it's a quick slope to worthless. I live in a city where morons rule the streets. My car has been hit 4 times and has gone from perfect and superb where I took it to car shows to now, I don't care about it, it gets me from A to B. So I'm asking is spending around $80,000 for a car I know is only going to depreciate over time worth the sticker price.

I don't want to buy used past '21 mostly because I want the 3.0L for economic and maintenance purposes. Plus the used market is insane right now and seems like buying new is a better idea.

I’m with B-train. We haven’t had a car payment in 20 years. My wife and I combined make roughly a half mil a year, and we drive:

2007 Accord (wife’s daily driver)
2012 Tahoe (travel vehicle)
2003 Yukon (my daily)
2002 Yukon (backup daily)

All our vehicles have roughly 250k miles on them (except the 2002 Yukon at 175k), were bought used for 5-10k, and are great mechanically and decent cosmetically. The wife is due for a replacement (not new) car soon.

We’ll probably never buy new again even though we can easily afford to. I actually prefer driving the 00-06 Yukons/Hoes. Way more comfortable and fun to drive.

I’m not telling you what to do, but if you’re making 120k a year or thereabouts, I’d argue you can’t really afford an 80k or 100k vehicle. Even if you CAN pay for it, you shouldn’t because you’re just throwing money away on something that’ll decline rapidly in value and will be worth nearly nothing in 10 years.

Nowadays, car loans are years longer than theyve ever been (7 or 8 years, crazy), and car payments are on oar with house payments. Insane, and not financially smart.

For the average middle class family, buying these vehicles new is a wealth destroyer.

 

[GBF1]

Hi everyone,

Apologies for the sort of asinine question. It's on my mind and this might be more of a way to convince myself to pull the trigger.

I'm looking at an almost brand new Tahoe for my wife and I'm having a hard time pulling the trigger. Outside of it not having captain's chairs (just posted a question regarding that), something else is knawing at me. I've never spent more than $40,000 on a car, and that was for a sports car before I was married and had kids. I know hyper inflation has caused a good bit of the cost, but some of these SUVs are costing 6 figures and I can't pull the trigger for something that costs as much as some people's houses. I make a good wage and I'm well in the middle class area of my income (around 120k). My wife works as well, but it's a negligible amount since it's only once a week typically. I don't want to go into our finances and I suppose I'm getting distracted from the question at this point...

We can 100% afford the car. Sure we'll have to cut down on some other luxuries but I suppose the question is, should we? With the exception of things like old project cars, cars lose their value and it's a quick slope to worthless. I live in a city where morons rule the streets. My car has been hit 4 times and has gone from perfect and superb where I took it to car shows to now, I don't care about it, it gets me from A to B. So I'm asking is spending around $80,000 for a car I know is only going to depreciate over time worth the sticker price.

I don't want to buy used past '21 mostly because I want the 3.0L for economic and maintenance purposes. Plus the used market is insane right now and seems like buying new is a better idea.

Your question makes a lot of sense. Our `06 Yukon Denali has 193K miles on it. It`s been mostly trouble free but we are looking at some big repairs ahead, and looking at late model used GM SUV`s. This would be my 4th. We are fortunate financially but I still am incredulous at the pricing on these rigs. My advice is only buy what you feel comfortable making payments on. You will end up with a nice ride any way, and feel better about it in the long run.

 

[B-train]

I'd like to thank all who have added their input. It's cool to see other successful people be miserly and realistic. Realistic talks about money, life, problems, etc is a benefit to all who read or participate. Keeping things hidden, or manipulation of facts, to get the 'right' outcome is never good in the long run.

Great question and thread!!

 

[DuraYuk]

Another thing to keep in mind is rate of inflation:

$50,000 in 2013 → 2023 | Inflation Calculator

The 2.82% inflation rate means $50,000 in 2013 is equivalent to $66,036.01 today. This inflation calculator uses the official US consumer price index published by the Department of Labor.

www.in2013dollars.com

 

[vcode]

i'm sure there is...
however the OP was questioning whether or not if they could really afford a new vehicle, based on NOT having a LOT of money
I have 4 GM vehicles (all used) 3 full size suv's and 1 full size pickup. a 2018, 2016, 2012, 2005
the price that I paid for all 4 combined "almost" equal's the cost of 1 new one off the lot
if I had bought all 4 of those new my net loss would be over $100k already, as it stands now it's somewhere around $30k
that's $70k I didn't have to throw out the window

Just a response to your buying a new car is like throwing money out the window...... I agree. But I'm just saying there is a lot of money out there and those people are happy to spend $100K on a new truck. Many pay over MSRP and that is driving the price up for used ones as demand is great. I still drive a 2010 Tahoe and my wife has a 2011 Malibu. I would drive my Tahoe another 10 years but rust issues are starting to appear, thanks to salty Wisconsin winters.... :-(

 

[AlexMahon]

By way of example only, last year I sold my 2001 Ford F250 Platinum Edition (Lariat) 7.3L diesel after owning it for 17 years, which I bought in Houston, TX with 114K miles on it. I bought it for $21K and sold it for $18K (267K miles). Yes, I had spent a bit keeping it up, but I could and did take it all over the U.S., putting 150+K miles on it. In its place I bought a 2008 Yukon 1500XL SLT 6.0L with 142K for $12K. Since then I have put about $9K into it (new shocks, new AirRide compressor, new battery, auxilliary battery, window tint, headlights, a bit of chrome, internal and external detail, refreshed the paint, tie rods, auxilliary trans cooler, sheepskin seat covers, plugs, wires, coils, all mechanical fluids, belts, and hoses. Other than its obvious year series, it looks and runs like new. It had been used in Arizona only - no rust/perfect undercarriage. I plan and anticipate that I will keep it for no less than 10 years, probably 15. Lots of great CA, AZ, NM, and TX SUVs with no rust and low mileage available. There's one on the market in Tucson now - a 2007 XL SLT with all the options, 102K, for $14K. And a 2015 Denali with 75K for $29K. Check out Craigslist for Tucson, Phoenix, El Paso, Albuquerque, etc. For a $200 plane ticket, a $250 independent inspection, and a weekend on the road you could have a great Yukon, Suburban, etc., for less than 20K.

 

[BrentS]

2016 Yukon Denali. Dropped $3500 into suspension recently. Looked at new and newer used, trade-in also, but it makes no sense to make a change with how expensive these have become. Haven’t had a car payment in years and can’t go back to one unless can pay off quickly. I too can’t figure up who is paying $100k for a new one to replace what we have. Cheaper to fix current Yukon.

 

[DuraYuk]

Just a response to your buying a new car is like throwing money out the window...... I agree. But I'm just saying there is a lot of money out there and those people are happy to spend $100K on a new truck. Many pay over MSRP and that is driving the price up for used ones as demand is great. I still drive a 2010 Tahoe and my wife has a 2011 Malibu. I would drive my Tahoe another 10 years but rust issues are starting to appear, thanks to salty Wisconsin winters.... :-(

Past few years if you bought right you could make money/drive your car for free (no depreciation even when trading)

Many people have no idea when buying and get hosed with markups and fees.

For me and my family we travel a lot and spend a lot of time in our family vehicle so we want safety and options. Many could care less. It's all about the individual and their needs/wants.

I'm thinking of ordering a new z06. Why? Cuz I want one built to my spec. Sure I could put 130k into a single family home and rent it and make some residual income (already do that) but where's the enjoyment? Lol