I recently heard about one of our local residents who has just purchased a pretty cool car. Being a car guy, that always gets my attention. In this case the local resident is Keith Urban who was spotted parking his $2.7 million Bugatti Veyron as he showed up for rehearsals. Now before you go crazy about how obscene this is let’s put in perspective. Yeah, Keith lives in the same county as I do so right off the bat, there’s the additional 9.25% sales tax – or another $249,750.
Photo credit Coleman-Rayner
Keith has made no secret of his love of cars. Just a few weeks ago he was at the 100th running of the Indy 500 and talked with others there about his passion for motor vehicles.
‘I inherited my love of cars from my dad,’ he said in a statement. ‘For me they symbolize freedom, independence, adventure and so much more.’
Keith said farewell to his 73-year-old father Robert in December of last year, after losing a long battle with cancer.
As a tribute to that shared love, Keith drove his dad’s beautiful Lincoln Continental to the funeral.
But now, back to the issue at hand – is this outrageous to spend $2.7 million on a car?
When I hear the callers on Dave Ramsey’s show telling that they owe $42,00o on the car they just purchased and their total family income is $36,000 a year I want to cry. I’ve always told people that a good rule of thumb is to never spend more than one month’s income on a car. That will keep it in range and should be something you can always pay for in cash. So if someone makes $15/hour they could spend $2600 on a car. Can you still get a decent car for that – absolutely! I just purchased this primo 2001 Mitsubishi Montero for $2500 for someone to drive. If you make $48,000 a year, then $4000 would be reasonable – and so on. If you make $150,00, step up to a nice $12,500 ride. 
So is our buddy Keith still in line with my formula? Well, I find that the 48-year-old has taken the No. 1 spot on People With Money’s top 10 highest-paid singers for 2016 with an estimated $46 million in combined earnings. (Not to mention that his wife Nicole Kidman makes a few coins to throw in the family pot as well.) Ah – that works out to $3.3 million a month. I say let him enjoy his ride.
What do you think? Should he ride a bicycle and give $2,699,000 to charity?
How do you give yourself a range for what you spend on a car?
Dan, I don’t think I’ve ever heard the principle of spending no more than one month’s income on a car. What a great rule of thumb! Thank you so much for this information AND for putting it into perspective based on your current life situation.
Troy,
Ah cool. Yeah I’ve been using that rule of thumb for many years. Just seems to make sense no matter where you are on the income scale.
Dan, thanks for this insightful post. People often seem to rail against celebrities and business people who makes loads of money because there is a sense of unfairness. However, they often forget that those same high-earners are creating immense value for others, not to mention providing jobs for countless people, and improving their lives through products, entertainment, services, and in other ways.
For instance, Keith Urban makes music for millions of people to enjoy and also provides work for touring and studio musicians, managers, attorneys, sound people, and so many others … not to mention the people who designed and manufactured his new car. I say, let him enjoy his new ride and his well-earned success. 🙂
Kent,
Thanks for your comments. I totally agree. Although some will not.
Hey Dan! Another great, thought provoking post, as usual. 🙂 I hadn’t heard of the one-month rule of thumb, either. I really like that. Especially since my 14 year old is starting to think about a car and figuring out how much she needs to save. She’s been listening to your podcast with me for years and leans towards the idea of getting a vintage car and learning how to fix it up. You make it sound so easy! 🙂 She’s highly driven, and I don’t doubt she’s capable of whatever she puts her mind to. I just wonder if it’s worth it, reliability-wise and all. Anyway, REALLY like the one-month’s wages guide. I’ll use that with our kiddos. Much thanks and God bless!!
Angila,
Ah what a great time to be helping your 14-yr-old with this fun process. If a vintage car has been taken care of it can be a great purchase. I seldom look at the year – but only at the condition. And with cash you never have to worry about how much the bank will loan on it. Of course I never allowed my kids to include a bank in any car purchase.
So wise! We’ve raised her the Dave Ramsey way so we won’t be either! 🙂
Thanks for your input. Knowing your experience with cars that holds a lot of weight! I’ll share that with her. As always, appreciate you greatly! Look forward to seeing you in a couple weeks at CWE!!
Well, I to am fascinated with cool cars and trucks, and have been all my life. HOWEVER, I LOVE LOVE LOVE being outta debt even more! So, if they have 100,000 miles on them, in good running shape, and look decent, I’m perfectly content with that. 🙂 I really enjoyed this post also because I LOVE guitars and Keith is an AWESOME guitar player.
ROCK ON KEITH, and ROCK ON DAN and THE 48 DAYS RULE BENDERS / WORLD CHANGERS!!!
Archie – Yeah Keith knows how to bring it on with his guitar. And that guitar playing has served him pretty well.
My father always said, “Keep repairing your car until the cost of repairs per year equals or exceeds the cost of a car payment for a new car.” Last year, I paid $2,500 to replace the transmission and clutch on my 25-year old car. Everyone said I should buy a new car, but the math doesn’t lie. $2,500 divided by 12 months equals $208, which is half what a car payment would have been on a new car. Plus, my 25-year old car is now considered an antique so I save $32 on my state inspection every year too.
Kathryn – I love that formula too. I’ve always driven cars that have a little age and typically a little more class than the new ones. They’re easier to work on an cheaper to maintain.
More than once I have had old cars break down so much that they needed to be replaced. Always seemed that I had no money on hand or in the bank so I HAD to get a loan. Then guess what happened? Yup.. Lost my job and the vehicles.
I will keep trying to follow good advice. Sooner or later it has to pay off.
Donald – wow, when I was deeply in debt after a business disaster would have been the time I was least likely to borrow money for a car. I have never had car payments. Granted I know cars pretty well and can keep them running but I just can’t imagine owing the bank for a car I am driving.
Dan,
Right now I am not working. 2 cars and 3 people. So when I do find work I will probably have to get a car from Buy Here, Pay here place. I don’t want to but ….Where I live there is no carpooling(out in the boonies). After reading your book I am trying to put it all into practice. Got to take it one step at a time.
The thing is I was almost 30 before I financed a car. Ahhh… those were the days.
It’s common for folks to automatically jump to conclusions about wealthy entertainers, entrepreneurs, etc., who have nice things as being materialistic. But that’s not always true. And the truth of the matter is that anything can be a ‘god’ to anyone. You have people who are not wealthy who spend money on big screen TVs, expensive shoes, etc., but that doesn’t get called out as much. Keith’s purchase is well within his income and car “budget.” And frankly, it’s probably a hobby like many other folks have. Here in Colorado, people will spend thousands on mountain bikes, camping equipment, you name it. And I agree with Kent. Keith’s singing career employs several people each year. And not just touring; there are many people behind the scenes in the production of an album, marketing, promotion, radio, etc. Worship the Creator, not the creation. Keep everything in perspective and prioritize people over possessions. Enjoy the fruits of your labor…and take me for a spin (that car looks sweet!)
Jamal – hey that’s what I say – “take me for a spin.”
As usual, Dan, I like your perspective and plan on car buying. I have always leaned towards buying used ones that haven’t been dolled up by a dealer, so I can get a true idea of the condition. I thought I had done pretty well over the years, but your $2500 cars surprise me. You are doing much better than I have done.
How about an information product on how to buy good cars for $2500 or less? It seems to me that it would fit right into your genre, as people need to take control of their finances as they seek to find the work they love. I know it might stretch the scope of your business a little, but I’d bet you would enjoy producing it.
If you don’t produce one, Dan, do you have any recommendations for such a product?
Thanks for your insights,
Bob
I love your rule of thumb here, Dan. “Never spend more than 1 month’s income on a car”. And personally, it feels so great to have a paid for car! No more payments!
It amazes me how some people consider it “a blessing” when the dealer gives them a note they can’t truly afford with “no money down and a low monthly interest rate”. Proves the point that many are bloated with the wrong information, but starved for wisdom.
I totally agree! I hear so many people say they were “blessed” with a brand new car where they only had to put down a small down payment and got a low rate. Meanwhile they’re paying $500/month and in bondage to the point that it affects how many hours they have to work, how much they can put into savings, and so forth. I never have understood that type of “blessing”.
Nice point on rule of thumb. However, I reliability should be a factor. If a cheap car breaks down and causes one to miss work and income, then was it worth it?
BTW: tax rate in your county drops to 7% on any purchase over $3200.
I agree with the “one month rule” Dan! We haven’t had a car payment in years. We only pay cash and typically spend about $10k on a car, even though we could afford more. But that’s not a sacrifice by any means as we still drive luxury cars (Lexus and Infiniti). We just let someone else break them in for us, then we drive them till the wheels fall off! This is just one of the things that allowed us to pay cash for my wife’s two college degrees and now my son’s tuition at Belmont.
Keith is perfectly entitled to buy a Bugatti if that’s what he wants, he earned it!
I’m a firm believer in quality used vehicles. The most I’ve ever spent was $4700 on a Toyota Previa minivan. It had a low 170k miles when we bought it. We drove it for 50k and sold it for $1500. 6.5 cents/ mile with minimal repairs. That was the most expensive 50k miles I’ve ever driven, and it was a steal!
I would probably feel pretty uncomfortable owning such an expensive car- and the insurance-ouch! but cars aren’t my thing. I want something that blends in but my hubby really does like cars….and I’ll pass along your rule of thumb….we also have a 14 yr old and they’re looking for a fixer upper as well.