I don’t really. I’m not into car and if I was going to splurge on a car I would buy a Porsche Panamera. But Tesla’s are the car to be seen in these days so lets go with a Tesla Model S. It’s not cheap to look so stylish and you can expect to pay almost €120,000 (the spec I went for came in at €116,191).
I’d also like to be financially independent by the time I am 60. Spending €120,000 on a car today will put a dent in my plans because I want to in (almost) 14 years time. But how much of a dent?
Buying a Tesla with cash is a big outlay in cash in one go. Lucky for me, they also offer a finance package on their website. With €30,273 down, I can pay €1,623 a month for 60 months at a rate of 4.90% APR. The total cost will then be €127,653, adding about 10% onto the purchase price of the car, which isn’t a bad tradeoff for being able to maintain my cashflows.
How much of a dent will buying a Tesla Model S put into my plans of being financially independent in 14 years time?
First of all, I will still need a car, so not all of that €127,653 will be saved. I drive second hand cars and the down payment of €30,273 fits in perfectly with what I would pay.
That means that for the next 5 years, instead of making car repayments of €1,623, I am investing it in the stock market and earning a return of 6%. At the end of 5 years, I have invested a total of €97,380 and it is worth €113,236.
In year 8, I have to pay deemed disposal tax which amounts to €15,369 and I take this directly out of my fund to pay the tax and in 14 years time I cash in my investment. It is currently valued at €169,508 and after all taxes are paid, I have €149,000.
You can have nice things now or lots of choices in the future. Unless a high earner, you can rarely have both. Which do you want?
11 October 2021