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When can I afford a Model S?

Hi folks,

I've been reading the forums for a month or so and have my heart set on a Model S. I read through a thread on financing where people basically said that Alliant Credit Union is the easiest and provides the best rates (PenFed had mixed reviews). I've created an account at Alliant.

I am determining what changes I need to make in my financial life to be able to qualify for a $70-100k loan for a Model S. I make money from my IT job and my house (I live on the first floor and rent out the basement + 3 rooms upstairs). I'm in the middle of a home flip (rehab) where I will probably make $15-45k profit. I plan on adding another rental property to my portfolio after paying off some debt. I will be starting a new job in 8-12 months at $70k. My current job pays $46.8k. I make $2370/month from renting part of my house. I'm 25 years old, single (with a girlfriend) and in Baltimore. My credit score is around 760.

Here are my current financials:

Income:
job = $2770/month
Rental = $2370/month
--------------------
$5140/month

(With new job the total will be $4124/month + $2370/month = $6494/month)

Expenses:
PITI + PMI = $1045/month ($127k left; will lower by $53/month next August when PMI is auto-removed)
Car loan @4.54% = $278/month ($13,500 left on it)
Personal loan @ 7.99% = $239/month ($5,000 left on it)
Personal loan @ 7.99% = $345/month ($9,000 left on it)
Cable = $150/month
Utilities = $250/month
Phone = $45/month
Insurance = $105/month
Food = $350/month
-----------------------
$2807/month

Assets:
House1 loan = $127,000; Value = $180,000

Liabilities:
My car (Honda Fit Sport 2012)

My current monthly cashflow = $5140 - $2807 = $2333/month
My soon-to-be monthly cashflow = $6494 - $2807 = $3687/month

With the profit from the home flip, I will pay off all of my 7.99% loans and purchase a 13.77kw solar panel system for $29k net expense (I'll use a HELOC for part of this). This will allow me to supply all of my own electricity and enough to include a Tesla Model S.

I'm thinking that once I've paid off every loan with the exception of my home loan, and once I have $25k from another flip for down payment + trade-in value of my Honda Fit, and once I'm making $70k + $28k rent + flipping income... I will be in a good position to purchase a Model S by financing $70-100k through Alliant. I'd probably be okay with the 85kwh Model S with some options... I've spec'd my Model S out to $88k, but I'd love to get the P85 for $98k.

What do you all think? Will I be able to purchase a Model S with no debt and $100k/year income (not including flips)? I'm thinking that in 18 months I will be able to accomplish all of the above and purchase a Model S.

@soma: One phrase I heard one time:
"Live as if you are working to leave your grandchildren a wealthy inheritance"

And of course, there is the bumper sticker on many RVs saying:
"We're off spending the kids' inheritance..."

Buy your fiancé a 1 carat Mossinite ring (more fire than a diamond, about 600 bucks). And tell her why you did it. If she's cool with the ring and your reasoning to not walk around with 10K on your finger because it could be better spent on your life together, she's a good partner.

I understand why you talk about being a millionaire. You are utilizing a visualization technique. You believe, then you achieve. That's good. I was taught the same thing as a young man.

I'm about twice your age. In my case I bought my last car 14 years ago. Get a good car that will age well, and take care of it. In my case, I did not want to be tied to my next gasoline car for 14 years. If you're thinking that far ahead, good for you.

Skip a huge wedding. Seen many friends blow 30K before they are 30. And get a vasectomy. Enjoy being your nephew's and niece's favorite uncle with the cool car and nice life.

@ Skotty - lol

@ soma - lol. Kids are 10 years away, if I ever have any.

@ Dreamknightmang - because I want to hear how their experiences relate to my own. I would never ask my accountant (I do have one) for financial advice. Thanks but no thanks.

@ soma - What if I don't have grandchildren? My girlfriend isn't (currently) interested in having kids. Neither am I.

@ jbunn - The 1 carat Moissanite ring looks awesome! My gf was going to give me her grandmother's ring to have restored, which would be super inexpensive, but I might just buy her one of these. She's not picky.

I do use the visualization technique, but it's coupled with a strong desire, drive, and ambition. I only have one life; might as well give it my all. In general, what I set my mind on obtaining ends up happening. If something is continually in my thoughts, it just happens.

I think I could be happy with a S85--certainly a P85--for 10 years or so. This would be particularly true if Tesla gets supercharger access to all the major highways. As it is, the Tesla covers 99.9% of my travel range without a problem, so I could live just fine. Maybe the gf (wife) will have a newer version (Gen 3?) Tesla at some point.

Already planning on skipping the huge wedding. We'll have a small wedding with a potluck. We have the best chefs in our family, anyway.

Vasectomy is actually not as good at preventing kids as I once believed. I actually know people who got a vasectomy and had a kid afterward. Besides, I may want to have kids by the age of 35. An IUD (i.e. Mirena) is probably the best form of birth control because it's actually preventing birth in several ways at once, and it's removable. That's what we're using :P

Isn't this thread informative? I bet people are learning all kinds of crazy stuff :D lol

Well, good for you for being thoughtful about it.

I have to make one comment though. Unlike what you said a while back ("no entrepreneur thinks about odds"), good entrepreneurs do think of the odds, and you really should think about them.

Good to visualize, and I think it's nice that "whatever you set your mind to, ends up happening". But that's kind of an arrogance, isn't it, that may blind you to rationally thinking about whether you're likely to succeed? And whether what you're doing is going to get you there?

You could be setting your mind to be a billionaire. But I think you have to admit to yourself that it's unlikely. The question is, what can you reasonably do in your life, and what will help you get there.

Are you going to be a $1M millionaire? a $10M millionaire? a $100M millionaire? Be realistic and take into account the odds of each case happening. And in the context of this question, ask yourself if buying the Tesla now makes sense when you honestly assess the probabilities of each case.

@ soma - I said "MOST entrepreneurs..." which was a subjective statement. The reason I said it is we all know that 9/10 businesses fail. If an entrepreneur let that get to his head, then he probably would say, "forget that, I'm going to be an employee!" Instead, a good entrepreneur might say, "how can I beat the average?" or "How many businesses must I start to become successful?" What I mean is, most entrepreneurs (successful ones, anyway) don't get bogged down in the odds of success.

There's a difference between wishful thinking and a plan. Under my current long term plan, it would be extremely difficult not to be a multi-millionaire by the time I'm 60. Even if I just invested my money at 12-15% interest, I would be a multi-millionaire due to compounding interest. Besides, a multi-millionaire won't mean much due to inflation... However, since I'm following the strategies of people with hundreds and thousands of rental units (people I talk to on a regular basis in my investment club), I find it more likely that I will reach the "multi-millionaire" status sooner than later. I'm not planning on being a software engineer for the rest of my life (maybe 3-5 years?)

Anyway, let's keep on track with the purpose of this thread: "When can I afford a Model S?" If people have any information to share about qualification for $60-100k loans at specific credit scores, debt-to-income ratios, etc then I would be very interested to hear about it. What will prohibit me from qualifying for a $60k-100k car loan?

This has been one of the best threads on the forum in quite some time. Love it. Exsedol am sure you'll figure out a reasonable path to have the MS within the next year or two and will continue on with your thoughtful and ambitious path forward.

Enjoy when you finally do get it and report back in here.

ex;
Elon's approach to odds: Be sure that success is one of the possibilities.

Millionaires are conservative. One question is, will you skip going to restaurants and bank that money every month? Good luck in your quest. It is about having fun. But fun costs a lot of money.

Watch the tv show Shark Tank to see how many entrepreneurs are kicked to the curb. Real estate landlords are some that do well. Check to see if Dave Ramsey has any books on real estate renting. He owns a bunch of rentals. Use your main skill to grow your base income. $70 K for a good software engineer is very low. Use that skill to go work for Google or another company that you can grow within. Once you get into NSA, you may be able to transition to bigger projects, maybe out to Utah, but government does not pay that well. Can be fun but also can be slow going. I did a fun project at the state department in the 90s. Before government work got more exciting as it is now. NSA is one of th more interesting spots to be. Make it work for you and try to work in their Big Data projects.

I'm going to tell you what you want to hear.

My Mom was 85 when she passed away and one of the last things she told me was "I wish I had gone in debt when I was younger. Enjoyed life more. Bought things I desired because when you are my age all of your friends are dead and your only concerns are health related. Life becomes quite routine and unenjoyable."

Now I'm a 40-something guy and am mostly retired based upon a couple of companies I've founded and I've purchased a Model S. You're 25 and you have your stuff together. What SHOULD you do? You should sock away the 17.5K a year that your 401K allows, company match to the max, build up at least 150K in savings, purchase real estate as investments, and spend as little on a car as possible. Purchase things that appreciate. Cars don't.

What would I recommend? Have some fun! Get the Model S. Drive it around and be happy. Keep it for 5 years and if you're tired of it sell it for 40K and move on. At least you lived. You tried. You had fun.

I did everything right and I get to enjoy the Model S almost 20 years later than you would have. Was it worth it? Who knows.

Go get it. My Mom would smile at your youthful exhuberance.

I agree with jjaeger as this has been a very interesting thread. I also agree with bonair, soma and others who argue a conservative approach. When I was 28yo attending medical residency , owning my own condo, engaged and making almost 40K a year, I could never imagine buying a 70-100k car even if I could somehow make the loan payments. I know a lot of banks that would have loaned me the money because of my future earning potential but I could not see putting my financial future at risk. I have always been a person who loves cars and technology and MS definitely fulfills both passions but indulging in this passion has always come secondary to getting my financial house in order. You're still young, ambitious, and have what sounds like a good financial plan but I would say buying this car should be at the bottom of your priorities. I really think it will really handicap you financially for years to come. Good luck with whatever you decide.

Thankfully the Model S was produced at the time it was (while I'm in my 40's rather than in my 20's). Otherwise, I might have been presented this difficult decision that you're trying to make :)

But now that I'm in my 40's, I have some experience to share. I hope it helps you a bit. In my 20's I was busy working and had no inclination to have kids at that time, although I knew I wanted 3 kids eventually. In my 30's, it was that proverbial "ticking clock" which told me to get the ball rolling before it was too late or riskier. Now I have my 3 kids, two of whom are within 4-5 years of going off to college. The other will attend kindergarten next year. Currently the cost of sending my youngest to day care is around $9k per year. The cost of attending college has risen ~8% a year which is much more than inflation. Today's private colleges can cost over $250k for 4 years. I would like my kids to go to any college of their choice without having to take out loans that they might have to continue paying off in their midlife. Of course, my kids might choose not to go to a private university, but at least they have that option. Salaries aren't necessarily rising with inflation (my employer hasn't given a raise for the past 3-4 years due to the recession). You also never know what other kinks life has to offer like job layoffs (several years ago my husband was out of work for 6 months), medical emergencies (my husband fell off his bike going 35 mph down a hill last year and broke several bones, and thankfully no car happened to be passing by at that moment or he could have been crushed), or elder care (my parents are in their 70's and 80's, one showing signs of Alzheimers so I may need to eventually help out financially). In summary, it's best to save up a good stash of money for emergencies and the future. In the past, I think financial experts recommended saving 3-6 months of living expenses for emergencies but have since increased that time up to a year due to the slow economic recovery. IMO, buying the Tesla in your 20's would be all about you and satisfying an innate desire to have something now. If you wait til later like when you're in your mid 30's, you'll have a chance to see what your family's money/health situation is like, and you'll get a better perspective of where your money should and can go. 10 years will go by much faster than you think. In fact, I'm convinced that time accelerates as you get older.

If you are 25 and have a girlfriend, KIDS may/could be in your future. Children are wonderful- I have 3- but kids are very hard on car interiors. Even if you prohibit food in your car, small children seem to ooze stickiness- somehow. Then there's the spontaneous vomit from a kid who was perfectly normal/healthy 10 minutes before getting in the car.
Then as kids get older, they're not as sticky, but if they play outdoor sports, you will have bits of the field in your car. My passenger seat (not ms) has gradually changed color from light tan to "infield dirt."
I don't know when is a good time to buy a model s if kids are in your future. Maybe you just do it and deal.

I'm not trying to discourage you from purchase of the most awesome car built in our lifetime, just something to consider, because you sound like someone who takes care of something you've worked for. And it's the job of children to ruin their parents things (remember, I am not anti-kid). Good luck.

Be aware that part of what your clearance hinges on is financial responsibility. If things go sideways (liability issues from a property or another real estate crash which stops you from generating cash with real estate, or simply over-extended yourself bill-wise due to unforeseen issues), you run the risk of losing your clearance, thus the salary you're counting on. I say buy a Model S, but give it 1-2 years and save up a large down payment. If you can meet your personal goals each year, buy.

The clearance may see him buy the Model-S and rate it a risk because he's buying a car "over his earnings potential" and they may flag him for unreliable financial situation or unreported cash income / side jobs.

TS used to be dime a dozen in DC. I got min in the 90s in about 1 month using maybe 2-3 personal references. Today, I'm sure it's a much deeper look into your current and past actions. Some GS-10 government employee might flag you as a risk. I'd wait until you got the job and worked there 6-months to ensure you have a solid career ahead of you at the NSA.

And, you do know that telling people you are at the NSA and that you have a TS Clearance is a violation of that clearance...

"And, you do know that telling people you are at the NSA and that you have a TS Clearance is a violation of that clearance..."

So true. Good catch.

Lucky for him, no one knows who he is. Of course, I'm sure with a little pressure, the NSA could figure out who.

Actually, they might. Public forum and possible access to the logins database and ip address capture of postings. I might be worried. But.... No reason to be paranoid. :)

Hmmm...I wonder if there's a way to edit one's original post :)

Maybe I didn't make it clear in my original post: the very earliest I proposed purchasing a MS was 18 months from now. That's assuming 12 months till the new job starts and 6 months on the job to prove that it's stable. At that point, if I'm where I want to be financially and feel comfortable with the decision, I will go forward with a MS. As long as I make 100% of my payments (always have) and am not utilizing much of my credit (currently 4%), I see no reason why there would be any concern. As long as I can afford all of my regular bills and the MS payment without any rental income, I should be in good shape.

I wasn't aware that telling someone I'm in the process of getting a clearance was a violation before I even have it (I haven't taken any oath or signed any papers yet). I looked online and can't find any information about it. Regardless, now that you mention it, I'm not taking any chances. Drop the security topic now, please.

michael;
yes. The OP gets an Edit option up near the logo.

Oops. michael is not the OP. No go.

In the end it's all a gamble. You might save most of your money for retirement, but what if you die before you retire or are in bad health by then? Maybe the money goes to children, and maybe that's perfectly fine by you. You just have to make sure you consider everything and make sure whatever gamble you make is worth the risk.

I can see people thinking it's Yosimite Sam to go out and by a $100K car unless you are super rich, but I'm one of those people who believe that Tesla is more than a nice car; it is about supporting the right future for all mankind. That's the reason I am personally considering a $100K Tesla when I wouldn't spend more than $35K on any other car, and the reason why I don't think it's irresponsible to commit a larger than typical percentage of your resources to buy one. Conservatives here are talking about investing in your future. Buying a Tesla IS investing in your future. It's investing in everyone's future. And you get a really nice car out of the deal.

You can't drive it with you.

Wow, I'm glad I finally looked at this thread - very nice food for thought. Thanks to OP and all participants so far.

I'm not sure if you are trying to determine whether you would be qualified for financing or whether it is a good investment. I'm of the opinion that a car is never really a good investment from a purely financial perspective.

Assuming you want to know if you will qualify for financing with Alliant - there are a few things you have to know.

First, Alliant offers a 1.49% interest rate for a 72 month loan if your credit score is above 740. If you are between 700 and 739 the rate climbs to 1.79 (give or take).

If you plan on seeking an 84 month repayment plan - you simply add one full % point. Assuming you qualify for 1.49% - and you want 84 months - your rate will be at 2.49.

Second, Alliant looks at more than just your credit rating. They will look at your debt to income ratio. Their threshold is 45% DTI. Anything above that and you will not qualify.

What factors determine your DTI ratio? They look at your mortgage along with any student loans/credit cards listed on your Equifax credit report.

Household expenses such as utilities, groceries, etc are NOT included in your DTI. Only fixed expenses as reported on your credit report.

If you are self-employed, they require copies of past two years taxes. How they average income? That is unclear to me - probably just average of the two.

It is my understanding that they will not consider Profit/Loss Statements for YTD income calculations. Instead, they will focus on two years past taxes only.

In summary, look at your credit rating to find out what interest rate you'll get. Then, calculate your fixed expenses as described above along with your income for your Debt to Income Ratio - if you are above 45% - Alliant will deny the loan. If you are at 45% or below, you will be driving a new Tesla Model S soon!

I'm currently working on my DTI at the moment. I was hoping they considered YTD Profit/Loss statement for more accurate income numbers. However, an Alliant Rep said they will only take your past two years taxes.

Anyone else self-employed to share their application process?

alexunlv: thank you for posting Alliant's total debt to income ratio (45%). I checked recently with PenFed, and was told their top ratio was 50%, with rates at 1.49% for up to 36 month terms, and 1.99% for 37-60 month terms. PenFed requires nothing down as long as your total debt is under that 50% mark. I think Alliant's rates have gone up recently (1.74% is the lowest rate currently advertised on their site).

Exsedol: It's been almost a year -- have you reached a decision point yet?

We finally decided to take the plunge, despite the ridiculously high cost of the S (we haven't spent over $30,000 on a car before), because:

a) we believe in electric vehicles,
b) we need something with a longer range than our Leaf if we're to be a pure ev family,
c) we can justify the cost in part because of a $20,000 windfall from investing our first S deposit in Tesla stock back when we cancelled our reservation the first time around in early 2012,
d) we will have projected gas savings of about $2,000/year, which if we hold the car our typical ten years would amount to at least $20,000 in total fuel savings (and possibly more if gas prices go up more than electricity rates),
e) our current gas guzzler is ten years old this summer and ready to be replaced, and
f) our state's tax break is going to disappear in a year which would cause the car to go up almost $10,000 in cost for us.

Ultimately, we recognize the purchase isn't fiscally responsible. We should really be paying down our mortgage faster, or putting the extra funds towards retirement. But we're in our mid-to-late 40's, have never done anything particularly imprudent financially before, and we "can" afford it (e.g. we fit within the lending guidelines that PenFed has), even if we recognize it's not prudent. But we can justify it because the purchase is an investment in a company that's revolutionizing the transportation industry for the benefit of the earth. We view it as a financial deposit towards clean air and a world worth living in for future generations. (Plus, it's really fun to drive!)

Good luck with your decision and keep us posted.

@twinmatesla: just happenstanced on this ancient post myself and when I saw how old it was;- I was wondering the same thing, did @exsedol take the leap. I hope that all the grandparenting that we were doing did not make him go elsewhere to seek advise.

I think most of the 'don't do it' advise was done with the best intentions, but didn't really answer what he was looking for. He was a pup laying with his belly up- exposing his financial vulnerabilities- in an effort to get us to help him to get what he already decided he was going to get- just help him figure out the best way to do it. Kudo's to the kid for not being THAT impulsive.

Based of many of these posts, I also should have never gotten my MS- not as rich as the average buyer, some of my income is somewhat unpredictable like @exsedol, there are smarter things to do with 100K, than to buy a car...

but for me, it happened to be the only car that had what I was looking for (never even heard of Tesla before I decided to go electric; stay with my luxury sedan preference; fit my kids and great dane in the vehicle- that was it). since no other car could meet my minimum criteria- even though the car seemed steep up front- I made the decision. Never considered FINANCING 100K, as all us older folk recognize the stupidity in that. But, (and this is for you @exsedol, and others like him;

1. I was already debt free before this situation, making it a little easier-

2. My existing monthly travel expenses were calculated- this was used as my 'max monthly' for Tesla ownership.

3. I was determined enough to come up with 80% downpayment over the next 18 months. This meant a willful and determined adjustment in lifestyle for my family.

4. The big challenge Exedol has, wanting to do multiple risky financial decisions at the same time- one of them being buying a car way out of his price league. Kids buy cars way over their budge quite often;- but their is a sacrifice to be made. When money does not flow like milk and honey- it sometimes is easier to take limit your risk taking to one at a time. For us little folk/ early entrepreneurs / young professionals / first timers, etc. it is easier to pick one mission or focus- and do it until it is accomplished. Even Elon Musk waited a while before he decided to battle space and earth at the same time :)


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