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.....