My Personal Finance Journey

Personal finance observation, musing and decisions in a journey toward financial independence by 2020 with at least $3 million.

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The BMW Story, Part I

Contributed by mm | March 26, 2005 10:40 AM PST

Is it a sin to even mention the word BMW in a personal finance blog? After all, car is depreciating asset and the common wisdom is to buy the cheapest car to preserve more cash for retirement.

Don't get me wrong: I'm a firm believer of this principle and my current inventory of a 5-year old Toyota Camry and a 3-year old Kia Optima is the best testimony to this belief.

On the other hand, our family financial picture changed pretty dramatically recently. Since my wife started her new career last summer, more bucks are flowing to our bottom line every month. If you take a look at our track record, you may notice our saving speed is much faster lately. As a matter of fact, our net worth grew $65,437 in the last 12 months; this compares to $42,707 for the 12 months immediately preceding June 2004, the month my wife started her new job. (Well, I should admit the different kinds of advertisement you see at PFBlog also helped a bit. :-))

Over the course of the last several months, we gradually, and consciously, "outsourced" some of the "dirty works" in the household. First, we send my shirts and trousers to the neighborhood drycleaners -- they provided a good service for around $45/month, and this saves my wife at least 5 hours a month. Second, we recruited TruGreen to take care of our lawn maintenance at around $350/year. After a couple of months, our lawn is greener and we are happier too.

Now you probably follow my logic: growingly, I feel it does not hurt much if we divert part of our increased earning power to some earthy happiness, especially, when such happiness (and freedom) creates more opportunity for us to earn more. You can probably also understand why my wife suggested to me that we consider a better set of wheels in the family, I didn't say no.

Back to the business, we are not talking about a brand new BMW; we are trained enough to understand it is not worthwhile to pay the rapid depreciation in the first few years for the "new car smell." My wife and I agree that we should look for a 3-5 year old BMW 5-series to replace our Kia Optima. Still, we will crunch the numbers first before we finalize our decision, and I am still committed to delivering our annual saving goals despite this big purchase. My general estimate is it will cost about $10k in the first two years, and you read my financial analysis soon on the details.

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This Post Has Received 6 Comments. Share Your Opinions Too.

Alan Commented on March 26, 2005

I think you will enjoy the upgrade, but one piece of advice - if you get a used one consider an extended warranty. The parts and maintenance on these cars are a lot as you probably know. I'm in the process of selling my 87 535is, it's been a great car, but the maintenance at this age of the car is too much. On the other hand I have a 99 Land Rover that I bought an extended warranty for and it has been a great experience. Maintenance is high, but it is predictable. I'm looking into a Passat to replace the BMW.

marcel Commented on March 27, 2005

I think it's fine and well to consider and or buy a BMW. It's not wrong to have some material things. It's wrong to have things at the expense of your or children's future. You can't take it with you.

Colby Commented on March 28, 2005

I'd recommend considering the Lexus line. Much much more reliable than the BMWs (Consumer Reports, April 2005).

ken Commented on March 29, 2005

Understand the temptation for a nice car - although a bmw's up there - but fundamentally what's this going to give you that a camry wouldn't.

Higher maintenance bills and meaningless prestige.

jake Commented on March 30, 2005

I bought a 2 year old BMW a few years ago. It is the nicest car that I have ever owned and I really enjoy driving it. But. .. . . after having a 100% paid for, Reliable, Worry Free Acura for the previous 8 years . .. . .It was tough to get used to a car payment, higher insurance payments, and the occasional repair expense+time.

I would buy another BMW again, and will probably buy my first new car 3 years from now (the new M3 -- when I am pushing 40...).

But -- If you want a more reliable car, you may want to consider a Lexus. I think they have a more reliable track record. My mother bought a (used) LS400 a few years ago. It is 4 years older than my BIMMER and has had 0 repairs needed.


Jason Commented on January 24, 2006

I see you bought the BMW Congratulations! I will tell you some of the best car buying advice I recieved was from one of the "Rich Dad" books by Robert Kiyosaki. He said when he wanted a porche he got it. But the way he got it makes great sense. Instead of using the money to buy the porche he bought a storage unit business. The positive cash flow from the business paid his car note. Even better once the porche was paid for he still had the cash flow from the business. I like the idea. Invest in an asset and let it pay for your toy's.

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