Bonus + Pay for Car Weekend

Every weekend has been a banner weekend recently, but this one pretty much has been the best and more likely than not, the most memorable one for a long time. First off, my paycheck was in the 5 digits, since I got my normal pay and my sign on bonus, which makes for a happy day in anyone's life.

Friday night, I knew I was going to get my car the next day, so I felt like a little kid on Christmas Eve. I contemplated drinking water to ensure I woke up early enough...

Anyway, Saturday came, we went to the dealership, and with very little difficulty, the 328i Coupe was mine! That night, I took it out for a test drive, and as always, I followed all posted signs, especially the ones marked speed limit.

I swear. ;-)

I would have loved to take it out for a spin today too, but the crazy weather in the Northeast did not allow that to happen. On the positive side, the rain could flood out the highways, perhaps canceling work.

What personal finance related issues can I talk about? Very little. I've worked out my monthly car payments ($690.81) and I know how much it costs to own my car ($0.74 / mile). Those are both values that fit into my budget, and if purchases fit into your budget, there is very little reason to not purchase.

BMW and Car Insurance

I'm two days away from being able to drive my 3 Series Coupe! I'm picking it up on Saturday. I finalized my insurance with Geico, which took a little time, but I got an OK rate of $750 for 6 months.

Recently I had been talking about depreciation schedules for cars as an aspect of networth. In previous posts, I talked about how a car's value declines as it gets older, and so the value is never the same as you paid.

However, before I describe the depreciation schedule, I first wandered about what value to start the depreciation at. Do I start at the price I paid for it, the MSRP, the Kelly Blue Book, or what?

Many online calculators start with the purchase price as the base value. Then it subtracts a first-year deprecation value to makeup for the "Drive off the lot" discount, followed by regular annual depreciation amounts.

I don't like this method for two reasons. One, it unfairly values your car higher/lower depending on negotiations. More likely than not, you may have paid more than you can actually get for the car. Second, it does not account for other aspects of the car, such as mileage, options, and etc.

I decided instead to use the Kelly Blue Book value as the starting point, and I assume the value includes the "driven off the lot" discount. KBB gives a value of $40,700 for the car, including all options.

Given that the typical depreciation is 11% a year, I'll estimate depreciation at 12% a year, or 1% a month. In essence, I'm saying after 100 months, the car will be worthless.

How will this affect my networth? First off, the value of the car will be added to my assets, while the debt will show up on my liabilities. Next, every month, the car value will be decreased by $407.

So as I pay off the debt, my networth will get worse, which is an accurate reflection that a car is a bad investment, but a necessary one.

2007 BMW 328i Coupe or How Quickly My Mind Changes

So for the past few posts, I had been promising to talk about the depreciation schedule of the 350Z. However, my sales agent at the Nissan dealership had really jerked me around for 3 weeks, and finally on Friday, I got him to admit he hadn't even ordered my car yet.

This really angered me, and it caused me to rethink the Z. Frankly, my parents and friends have been telling me to look at other cars in the same range, and consider both insurance premiums and resale value. Thus, I began to look at the Audi TT, Infiniti G35, and the BMW 3 Series Coupes.

After looking at the 3 cars, I realized that the Audi TT was a little out of my range with options, and the G35 reminded me too much of the Z. So I went to my Nissan dealership, took back my deposit, and started shopping for BMWs.

There was only one 3 series coupe on the lot, so I took it for a test drive. Thankfully, it was automatic and came with the premium package, heated seats, and some other niceties. I liked the feel, and the outside just looks amazing in the jet black color.

We sat down for negotiations which initially involved me storming out of the dealership because the manager came over and tried to smooth talk and then belittle my understanding of how buying a BMW works. He made it sound as if paying sticker price was normal, and getting any discount was outrageous.

Anyway, 2 hours later, we called back and the real theatrics started. They started with the price they quoted me at the dealership and I countered with a number I was willing to pay cash for. They then bargained a bit, and after about 4 hours, my parents and I got a great bargain.

The MSRP on the vehicle was $42,000, and the first price they quoted me was $39,000 pre-tax. At the end of the day, we got an out the door price of $41,300 or a pre-tax and fees price of about $38,300 or a savings of $700. Thinking back, I laugh at the dealership manager's suggestion that I didn't know how to buy a BMW.

Anyway, so now on the bigger story: how to pay and rationalize this purchase?

1) Payment is through a partial payment by me and a generous loan from my parents

2) Rationalization
a) Re-sale value: Looking up a few figures, I can estimate from comparable BMW 3 Series modes that the annual depreciation with be about 11%.
b) Insurance: About $25 / month cheaper than the Z due to 4-seater and lower HP.

3) Monthly payments are only about $100 more, but the insurance and re-sale value more than offset that difference

Buying a Car - A Consolidated Research Guide

I am in the market for a Nissan 350Z (Read my original post). I know I have to pay a premium for a sports car, but I'm NOT willing to pay a cent more than necessary. This caused me to search the web for some information.

From what I gathered, there are 3 price points to any car purchase:

1. Manufacturer Suggested Retail Price (MSRP) - a price made up by the manufacturer for the car, based loosely on its real cost
2. Invoice Price - the price the dealer pays to get the car
3. Net Price - the price the dealer actually pays after taking any incentives from the manufacturer, such as holdbacks, sales incentives, financing incentives, etc.

So to give an example from my own life, I contacted two dealers for the specific 350Z I wanted. I knew MSRP was $36,500.

They immediately quoted me a price of $34,000, with the suggestion that $33,000-$33,500 was their invoice price. The difference from price point (1) and (2) was 8%.

Next, I considered the holdbacks for Nissan (a complete list of manufacturer holdbacks can be found here). Its about 3%. However, since the holdback is pure profit when you special order a car, I had to recalculate their invoice point.

I also figured in sales incentives and bumped MSRP to Invoice as actually 10%.

This provided me a net price of $31,864.50. Armed with this number, I will be going into negotiations next week to see if my calculations hold out.