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Immediately’s visitor put up come from a very long time reader to my weblog, Dr. Jerome Enad, a retired orthopedic surgeon who a few of you may know on-line as BruinBones. Hope you get pleasure from his story of driving off together with his dream automobile at an unbelievable low cost off the prompt retail worth. His luxurious dream automobile was additionally a automobile I at all times had a longing in my coronary heart to drive. Essentially the most unbelievable a part of this story is being a resident on the time he pulled this off.
The frugal method to purchase a automobile
Everyone knows {that a} new automobile begins dropping its worth the second your drive it off the lot. In different phrases, a automobile isn’t an funding – it’s a depreciating asset. Due to this fact the Boglehead method to purchase a automobile is to:
1) not spend greater than 10% of your web value,
2) not go into debt, pay straight-up money as a substitute,
3) purchase a depreciated 2-3 yr previous used automobile (except it’s a brand new Honda, Toyota, or Subaru, which handle to maintain excessive worth throughout their first couple of years), and
4) drive the automobile for not less than 15 years or so long as you safely can.
Properly, again once I was a resident I managed to interrupt a few of these car-buying tenets to acquire my dream automobile, however as you will notice, I nonetheless got here out forward.
My dream automobile
I had at all times been frugal, cautiously avoiding debt all through undergrad and medical faculty, in order an single, army officer, I had managed to bump my web value previous $120,000 by the point I used to be a PGY3 orthopedic resident. Being single (and foolish), I foolishly checked out my automobile as a standing image and a mirrored image of my persona. Therefore my present trip was a rotary engine-powered sports activities automobile that I purchased with my earliest officer paychecks. That Mazda RX mannequin was quick, smooth, and daring. Nevertheless for the longest time, the automobile that I actually coveted was past my pay grade – a convertible Jaguar XJS, which was operating about $62,000 MSRP on the time. The XJS was additionally quick and smooth, nevertheless it exuded the sophistication and finesse I although was befitting of a profitable surgeon.
The Bid
One night time whereas I used to be on my busy trauma rotation at Shock Trauma in Baltimore, I obtained a message out of the blue from my brother-in-law, who was an auto dismantler and restorer close to Los Angeles and was conscious of my dream automobile choice. He had previewed automobiles up for bidding at a neighborhood dealer-only public sale and located an almost-new Jaguar XJS with minor harm and solely 2,000 miles on it. He had inspected the car, and the harm was simply to the physique, and never practical, which he might repair for round $5000. He requested if I wish to place a bid on it. My reply, “We is not going to be outbid!” He figured the bids would come within the $15k-$20k vary, and I calculated that I might mobilize all of my liquid funds to bid as much as $20k, and lo and behold, that’s precisely what our profitable bid got here to!
Now my brother-in-law had an auto store filled with automobiles that wanted work of their very own, so he was solely capable of work on my new Jaguar when he had sufficient time and vitality throughout his off-duty hours. Consequently, virtually a yr glided by for him to finish the bodywork and for me to take time without work from my busy surgical residency to fly to California and finally drive it again to the East coast.
How a lot did I save?
Assuming a automobile can lose as much as 40% of its worth through the first yr, then the used automobile worth for an XJS would have been (by conservative estimates) about $37,200 ($62,000 – 40%). With 2,000 miles already pushed on the automobile, then at $0.10 per mile depreciation, the used-car worth goes down one other $200 ($0.10 x 2000) to $37,000. Now fortuitously for me, my brother-in-law did the bodywork basically free for me (aside from that sushi dinner I purchased him), so I simply paid $5,000 to repair the harm. In the long run, it price me a grand complete of $25,000 (plus dinner) for my dream automobile that may have in any other case price $37,000 used (so a 33% low cost), however with solely 2,000 miles on the odometer, it nonetheless felt like a new automobile obtained at a [($62,000 – $25,000)/$62,000] 60% low cost!
Driving it residence
How did I do with the frugal car-buying guidelines of thumb? I broke the primary rule by spending over 20% of my web value on this automobile buy. (It was my dream automobile, in spite of everything). I saved the second rule by paying money up entrance for the profitable bid at public sale, however that emptied my liquid spending account for some time. (Being on the trauma rotation on the time helped right here, since 100 hours per week was spent within the hospital and the remainder of the time was spent catching up on sleep, so there was actually no alternative to spend a lot of my paycheck for these 3 months anyway). I did purchase the automobile “used” (as rule 3 suggests), however with simply 2,000 miles on the odometer and a few simply repairable harm, it nonetheless felt new to me. Lastly, I ended up driving that convertible tender prime Jaguar for 16 years.
One of the best half was, at both a 33% or 60% low cost (relying on the way you need to interpret its worth on the time of buy), I saved anyplace from $12,000 to $37,000 on my “dream” automobile.
Editor: I discovered a few wows on this story and a few parallels with my very own story. I retired from medication at age 54, he left his full time apply for some medication aspect gigs at age 54. We additionally each went to medical faculty on the army dime. He now does some work for the VA, and I attempted to do some work for the VA once I reduce my hours.
I believed I used to be good with my cash as a resident, however his PGY3 web value of $120,000 bested me. I used to be a PGY 2 once I check drove my dream automobile, which was a decade sooner than he and carried a price ticket higher than my annual wage. In the long run, I didn’t purchase my dream automobile, although I believed I might “afford” the simple month-to-month funds.
Earlier than you enterprise into these simple month-to-month funds, please learn The Docs Information to Eliminating Debt, as it would prevent a fortune.
Have you ever ever bought your dream automobile? Tell us about it.
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