A car enthusiast who is in his late 20s and earns more than $500,000 per year decided that he was ready for a Ferrari F360 Spider. He has built a $1.5 million nest egg and had been "mulling over it for over a year" before finally feeling ready to buy his dream car.
He then explained on Reddit the finances behind it and why he felt ready to make the big purchase despite regularly contributing to his portfolio.
"I didn't miss the money at all," he said.
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Negotiating A Good Price
The car enthusiast did not buy a new Ferrari F360 Spider. He found a dealer that offered a used vehicle and ran it through inspection to determine the vehicle's condition. After assessing what maintenance was necessary, the car enthusiast negotiated and ended up buying the Ferrari for $90,000. He estimated that he will have to invest $100,000 in repairs and an additional $10,000 in preferential changes.
"By all accounts, I stole a Ferrari," the car enthusiast told Reddit. He then said that very similar cars typically go for $140,000 before repairs and preferential changes.
Opting for a used Ferrari allowed him to avoid most of the depreciation curve. Buying a new car with zero miles would have cost a lot more. However, you may not need a car with zero miles if you don't intend to use it often.
"I don't know how much I'll actually drive this compared to my other cars," the car enthusiast said.
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You Only Live Once
The car enthusiast acknowledged the opportunity cost of buying the Ferrari while pointing out that he owns "about $218,000 in cars" with a cost basis of $183,000. However, he reasoned that his high income gave him enough flexibility to buy his dream car while saving for his future.
"I'm already at the top of my net worth and income bracket, and we're going to die," he said.
True to the idea of only living once, he financed the car with an Interactive Brokers margin loan at 5% APR. It's a risky move, but the car enthusiast says that he has been aggressively investing for seven years.
"I'll be paying back this loan aggressively over the next six months," he said.
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He's Not Showing Off The Car
Although the car enthusiast just bought his dream vehicle, he's not in a rush to show it off to family, friends, and coworkers. He prioritized this purchase for the driving experience instead of trying to be flashy.
"I know the badge brings preconceived notions that aren’t necessarily positive," he said.
Driving in a Ferrari can signal a high net worth, and he prefers to keep a subtle profile in his social circles. It's hard to justify buying a Ferrari from an ROI perspective, especially when the same money could have gone to stocks. However, the high earner's story is a valuable lesson for other people who have meticulously saved money for many years.
Sometimes, it's worth making the big purchase. You can't really justify these types of expenses if you look at the opportunity cost alone, but it is just as important to consider if the purchase will make you feel happy or act as a significant milestone.
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