There's an old saying in golf, “drive for show, putt for dough.” Hitting a massive 300-yard bomb looks beautiful, but what really counts is accurate putting. Well let me introduce you to a new saying, “Own one car for show and another car for dough.”
I can't tell you how many times I've lost money on the golf course because I three-putted instead of two-putted. I've also occasionally won money squeezing in an eight-footer. Those knee-knockers, when all is on the line during an Aloha bet, are intense!
Give me a regular 250-yard drive and incredible putting accuracy over a 300-yard drive and putting yips all day long. The same goes for cars.
One Car Or Two Cars?
I'm a one car type of guy. Owning a car is expensive, especially if you don't follow my 1/10th rule. With the proliferation of cheap ridesharing options that have emerged since 2009, not owning a car is making more and more sense.
But over the years, I've had a tremendous number of complaints that my 1/10th rule is too restrictive. Instead of limiting the median American household to only spending $6,200 on a car, many people feel the typical American should be able to spend much more.
If you want to spend more, it's totally up to you. Don't let me tell you what to do. I'm just offering a simple rule to follow to help you achieve financial independence sooner, rather than later.
For those of you who love cars and want to own two or more cars, I suggest owning at least a Dough Car. If you do, you might build your net worth quicker than the rest. You might even better keep yourself out of trouble.
The First Car For Show (to show off to everyone)
Your Show Car is also known as your splurge car. No one really needs more than a five-year-old Toyota Corolla to get from one place to the next. Thus, your Show car might be a new luxury sports car or a rare classic car. Or your Show Car may just be simply nicer than a used economy car.
A Show Car is your choice ride on the weekends. You may take it on the backroads with your buddies who are in your car enthusiasts club. This car is really just for your personal pleasure.
Even though you adore your Show Car, you don't want to be seen driving it by people who could cost you money. For example, colleagues, competitors, school administrators, etc.
The Second Car Is For Dough (economical to save money)
Alternatively, your Dough Car is your every day, unassuming ride. It is your 8-year-old Honda Civic with a dent in the passenger side door. Or, perhaps your Dough Car is a dirty old truck with dents in the side and mismatched tires.
This is a great car to drive around town because you don't care what happens to it. If someone bashes your bumper when parallel parking, who cares!
Your goal is to be seen in your Dough Car by everyone. Ideally, your show car is your beater car and not some fancy electric car.
Benefits Of A Dough Car (economy car)
I'll give you two recent examples which demonstrate why having a Dough Car is important. I'll also give a third example from when I was working.
1) Gain Customers
Once when I was remodeling, I had an appointment for a window treatments saleswoman to stop by my house. The consult was free with the hope that she would sell me a bunch of window shades.
When she arrived, she rolled up in a brand new ~$70,000 BMW X5. As soon as I saw her car, I frowned. Based on her expensive car, it was likely her products would be very expensive. I was hoping to make a good deal but now had doubts.
When she came up to my house, I was even further dismayed. She was wearing $800 Manolo Blahnik shoes and $600 Prada sunglasses.
We spent the next hour looking at samples until I picked my favorite. As she departed, she said she would email me by the end of the day with a quote.
My budget for 11 windows was $5,000 but she came back with a quote for $9,181!
Wow that's expensive. All I could think about was how huge her profit margins must be. Even though I was able to change a few options and get the price down, I decided to look at a different vendor.
When want to win customers, driving up in a Show Car could be detrimental. Every financially savvy potential client will think your fancy car is from profiting too much from your clients.
2) Increase Your Chances At Financial Aid
Three preschools we applied to asked what type of car we drive. The reason they ask is related to seeing who qualifies for financial aid. It wouldn't make a lot of sense to subsidize parents driving a luxury automobile versus those who are driving a used economy car or taking the bus.
So perhaps you can increase your chances of getting financial aid if you own a Dough Car. But you'll likely have to provide a copy of your tax returns or pay stubs in any case.
However, one potential downside is a Dough Car could lead an elite school to perceive you as too poor and lacking in status to be admitted. Ridiculous yes, but that's the BS, competitive society we live in today.
Ultimately, be aware that many academic institutions and employers make assumptions about your wealth based on the car you drive.
3) Get Paid More And Promoted Faster
I've told this story before, but while I was in banking, I once hired a 22-year-old first-year analyst. Unfortunately, he turned out to be a pretty cocky and immature guy.
He drove a $50,000 Acura MDX SUV to work, which was more expensive than 70% of the cars in the employee parking lot. Everybody quickly found out that his parents bought it for him. He already had a bad attitude working against him. And then his expensive car made things even worse.
His year-end bonus was slashed by $10,000. The bonus committee felt that not only was he underperforming, he didn't need the money since he was already rich. That $10,000 went to pay someone else.
Later, he ended up getting fired after his second year.
Owning Only A Show Car Is Not Ideal
If you are only going to own one car, you should own a dough car that will help you get ahead and make money. Owning only a show car is a suboptimal financial move.
If you only own one car, and it is a Show Car, this could put you in a bind. On the one hand, you want to own the nicest car possible since you will only have one. On the other hand, however, owning a Show Car might make you a target.
Although nobody thus far has given me any grief for owning a Tata Motors SUV, I sometimes feel like an oddball when I drive to my Saturday softball meetup games. Everybody is pretty down-to-earth, with the nicest car in the lot being a Tesla Model 3, a ~$50,000 car fully loaded.
I also feel kinda bad when teachers see me picking up my son from preschool. Preschool teachers only make between $40,000 – $70,000, depending on experience. Further, there are several parents who bike their kids to school.
I've tinted my windows black so it's difficult to see me while I'm driving (illegal in California). But that's not enough to stay stealth because I've inevitably got to get out of my car.
When I drove a Honda Fit for three years, I always felt great everywhere I went. Although I experienced a lot more car bullying on the road, it felt great blending in with my surroundings. Most of the time, my Honda Fit was also the cheapest car in the parking lot.
Too bad I had to give it up because there was no way I was going to drive a baby in a car with such small crumple zones and thin doors.
You Will Grow Into Your Show Car
Even if you only own a Show Car, know that things will get better because of three things.
The first thing is that your car will depreciate in value every day. If you hold on to it for at least 10 years, it will eventually not be worth much at all. If you follow my House-To-Car Ratio for financial freedom, you will be celebrating the depreciation of your car because your ratio will go up!
My plan is to own Beast Master for at least 10 years and then consider buying an electric vehicle. In 2027, when my Range Rover Sport will be 12 years old and be worth less than $20,000. At this time, I'll consider buying another car because my House-To-Car ratio will be well into the hundreds.
Your Income Will Increase Over Time, Making Your Show Car Less Expensive
The second thing is that you will probably make more money every year. Part of the reason why following the 1/10th rule for car buying is so important is that you won't feel as guilty buying any type of car.
As the car's value becomes a smaller and smaller percentage of your annual income and net worth, you will stop feeling as embarrassed about owning a Show Car.
The final thing is that you will get older. Nobody really cares if a 55-year-old drives a $110,000 Porsche 911S. If you're in your 30s or younger, however, sometimes people will give you grief for driving a Show Car out of envy. Don't drive a Show Car alone at night in Johannesburg or Manila. Chances are high you will get mugged at a stop light.
If you must own more than one car, make sure one of them is a Dough Car to help you blend in. On your road to financial independence, you never want to stand out too clearly. Protruding pegs tend to get knocked down.
Invest In Real Estate Instead Of Nice Cars
As you might realize by now, cars are a money pit. Everyone should consider owning the cheapest, most reliable car they can and invest the rest of their money in real estate.
Real estate is my favorite asset class to build wealth. It generates income, provides shelter, is tangible, and is less volatile. In my opinion, real estate is much more desirable than stocks. In fact, investing in real estate since 2003 was my top financial move.
To invest in private real estate, take a look at Fundrise, my favorite private real estate investing platform. Fundrise was founded in 2012 and manages over $3.3 billion with over 500,000 investors. The firm focuses on residential properties in the Sunbelt, where valuations are lower and cap rates are higher. For most investors, investing in a diversified private real estate fund makes the most sense.
Another great private real estate investing platform is Crowdstreet. Crowdstreet offers accredited investors individual deals run by sponsors that have been pre-vetted for strong track records. Many of their deals are in 18-hour cities where there is potentially greater upside. Crowdstreet is a solution where you can build your own select real estate portfolio.
Personally, I've invested $954,000 in private real estate since 2016 to diversify my exposure and earn more passive income. Both Fundrise and CrowdStreet are affiliate partners of Financial Samurai, and Financial Samurai is currently invested in Fundrise.
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Note: for those wondering how the 1/10th rule for car buying applies to owning a Show Car and a Dough Car, the best practice is to have the total price of all cars be 10% or less than your annual gross salary.
Samurai Help!
I’m a devotee of 1/10 rule who drives a Honda civic but find myself needing a larger vehicle for work (ride-sharing/ livery)
I also have about $6000 tax benefit to purchase a vehicle by end of year but prices are bananas!
How should I recalculate things to take in account that the vehicles bring in income and the tax benefits? Add right on top? Calculate anual earnings of vehicle and add to 1/10?
Help Sensei!
( love your website and advice, thank you for all you do!)
In my youth we repaired & raced old MG’s, Sunbeams & Rover vehicles that burned more oil than gas. I regret selling any of them especially the ’48 Riley convertible we rebuild. Each cylinder head had the cylinder # stamped on it with an Initial.
After 35+ years invested in real estate I only drive p/up trucks that I buy a couple of years old. BUT I have always Sect. 179’d them as did my wife for all her SUV’s in her S-Corp. We both paid cash & then run them up to 200K plus & then hand them down to one of the kids. Now my wife leases anything she wants & I plug away with my well used Ram 1500.
Our only ‘show’ car is a yellow 1995 Mustang Gt convertible we bought in ’97 as the wife always wanted one. Each kid learned to drive standard in it & it only has 30,000 miles on it. Our grandson hopes to ‘buy’ it from us one day.
A good friend of mine sold Jaguars & several years ago he told me the story of a couple who leased a Jag & when he gave them what he thought was a high /month lease their comment was, “that’s nothing, we spend that on cigarettes & liquor a month”.
I always like BIG trucks & I still remember one of my wife’s patients, who was injured when T-boned in a large p/up. She asked my wife what type of injuries do you treat when people in small cars are hit. My wife replied “I usually don’t see them”.
I figured about everyone already knew rule number one in life.
1. You do you. And don’t give a good god damn what anyone else thinks. Because whatever you do, and whatever decisions you make, you can bet someone out there will have an issue with it. So don’t waste your time on others opinions. Do what makes you happy.
Driving a crappy car doesn’t mean you aren’t an a-hole.
Bet that kid at the investment firm would have been fired either way.
Love that philosophy! And it’s also a great philosophy for those who have a proclivity to judge others.
Collector cars are also solid investments that can be fun along the way, without the pitfalls of the gambling stock market. Hemi cuda, Shelby mustang etc. And yes you can get them quite low at times it just take some work. My friend got a Shelby Mustang a few years back for 10k and its now appraised at 210k.
Will make a car work in my area no matter my income you need a car around here period
Loved this article. It reminded me of my brother, who is a highly successful plastic surgeon in Southern California. He owns a high end sports car and a vintage muscle car, but he never drives them to work, instead driving a nice, but moderate sedan, for fear that his staff will think he has money to burn (as if a plastic surgeon in So Cal doesn’t?) and expect higher compensation. As for me, I’ve owned Korean cars for the last 15 years or so because I put reliability over status. But recently, Korean cars can also be very high-end. But they aren’t “status” cars. My “fun” car is a fully loaded Kia Stinger which is a great performance car with just about every bell and whistle you could ask for. The Stinger has won several awards from the automotive press. I follow a Stinger group on facebook, and it amazes me how many other owners “re-badge” their Stingers to hide the fact that it’s a Kia. Like who are they trying to impress? I’d rather downplay the brand – the only people who are impressed with my car are people who know cars, i.e. “car guys”.
Great points about cars and show vs. dough. We’ve had good success following your guidance in terms of how much car to buy – our newest one at the moment is a 2011 Lexus RX.
One tip I’d suggest to you and your readers about “show” cars is that if you do it right you can have your cake and eat it too: you can buy a really cool sports car, drive it, own it, and even make money on it, or at least not lose a dime to depreciation.
For us, that would mean a Porsche. Back in the 1990s I was telling my nephews they should quit lusting after the latest and greatest $30k Japanese sports car of the day, and instead find themselves an early 1980s Porsche 911. Back then these could be had all day long for $15-18k. That vintage was air-cooled, mechanically pretty simple and bulletproof. Each series had a couple of known foibles – and they were easy and inexpensive to remedy before they became problems. Unfortunately my nephews failed to take my advice. Had they done so they’d own a car that is still fun to drive – and has tripled in value since then.
No need to despair, though, if you missed out. You can still pick up a Porsche 911 for reasonable money now that will not lose value, and may also (likely will) increase in value over the years. Aim for a 1999-2004 model 911 (liquid cooled now) with milage in the 100k or fewer area. These cars are also bulletproof and pretty low maintenance, especially if you don’t mind changing your own oil. They do have a well-known Achilles heel: the dreaded IMS bearing. Most owners know about this, and when posting them for sale will say something about the IMS having been changed/replaced in the ad. If you don’t see that, it’s a $4k deduction from the asking price.
We’ve got one of each – an 80s air cooled and a later water-cooled 911. My wife likes driving the newer one, and I love driving the older one. Happy family :-).
I laughed out loud when I saw the estimate of preschool teachers making 40,000-70,000. Not in Ohio! I may show this estimate to my boss to advocate for myself. I fully expect her to laugh out loud as well. And we are considered to be a top-of-the-line Center who pays staff well. (Most of us have 4year degrees, some have masters)
As far as the article… my husband and I purchase new, reliable cars, with Great warranties, always under 20,000, BABY them, and drive them for as close to 15 years as we can, until they literally give out. It has served us well.
Cool. So how much do preschool teachers in Ohio make? Don’t be shy!
Great article, in Miami 75% of people are driving vehicles they cannot afford. Consider taking over their ridiculous lease agreements, let someone else pay downpayment and fees. Currently driving an Infiniti Q50 ($42000 msrp) for $325 a month including taxes/maintenance with 1300 miles a month allowance. $2 million net worth, $200k in income but i park that bad boy on street if plumber is stopping by the house.
Years ago I blew that 1/10th rule out of the water and bought a brand spanking new RAV4. Even got a loan for it. It was my first brand spanking new car (I was in my 40s at the time). I’ve not regretted it – personally or financially.
It is pushing 12 years old and recently passed 100k miles. I expect to drive that baby for another 5+ years. And though it may fit the “dough” definition, I do give a rat’s patootie if it gets a ding – I got royally pissed when some numbnutz dented it in the parking lot at work. Fortunately, I got it 90% fixed for less than $50 rather than the dent pulled and touched up for $250.
Great post!
Our household income is around $300k and I do feel pretty guilty driving around in my wife’s new expedition $60k, way to expensive! I rationalize it because we live out in the country so 4×4 is needed, we have 2 kids with a third on the way so I want everyone to be safe and be able to get into town no matter what the weather throws at us, especially when I’m out of town for work.
My wife and I saved a ton of money when we just had a focus before we started to have kids.
I agree with keeping the show car on the down low. Whenever I go to work on our rental I always take our 12 year old Ford Focus or the old beater farm truck, I don’t want contractors or my tenants seeing the nicer vehicle. My wife also takes the focus to work whenever she can, to save money and keep miles off the suv.
Did you just call a ~$1.6 million dollar Mclaren P1 a 570gt? XD
Got to keep things stealth!
I sold my 2010 Audi A3 recently to move to Brazil and I was quite sad. It was a weird feeling watching the new owner drive off in my car of 10 years.
If I never had the opportunity to move to Brazil, I would have kept on driving that Audi A3 for years to come. I only had about 83,000 miles on it. Now the thought of having to buy a car in 4 years when I return to the US is a bummer. I’ll see how much Tesla will cost then, otherwise I’ll get a Dough Car. I do miss my Audi though.
Here I just take the metro or Uber. I am saving a lot of money on transportation!
I worked very hard not to ever let the financial status of an employee impact their compensation. I mean I had engineers married to medical doctors and engineers doing the same job married to stay at home moms. Certainly the “need” of one paled compared to the other but I tried to base pay and bonuses strictly on the value/replacement cost they represented to the company, which had zero to do with other family sources of income. So the fact that the guy married to the Doc drove a Porsche Carrera didn’t hurt his pay at all. So I’m curious, do you think driving a show car to work should impact your pay or are you just saying it isn’t smart because it very well might have an impact, even if it shouldn’t in a perfect world.
Because there is no true meritocracy at work or in life, I’m saying people need to be smart about what they show off to other people who control their destiny.
While I agree perception can appear to be reality, the fault lies with ppl thinking that somehow owning an expensive car is more of a sign of wealth than owning a larger home or a huge boat. As ppl who own 4 cars ( 3 of which are exotics, purchased used and at their greatest pt of depreciation), I take it as an opportunity to educate ppl on how poor of a perception that truly is. And yes, we’re engineers (wink).
In Texas, I tend to see more show cars then in NY. The reasons I’ve heard are centered around the amount of time people here spend in their cars. I get the argument to some degree. If you are spending 2 hours a day in your car commuting, make it an enjoyable 2 hours.
Personally, I buy 2 year certified pre-owned cars with cash or something like that lol. When we bought our Nissan Altima, they had a $1,000 credit if you took out a loan with them. So paying with cash would have increased the price which was a bit surprising. So, we got the loan and then paid it off a month or two later. I try and not pay for the high depreciation cost in the first two years. After moving to Texas, we now have 2 cars. We did buy one higher end car (Jeep Grand Cherokee).
The car you posted a picture of is a Mclaren P1 worth over a Million dollars! Huge difference from a 570 GT
I remember you making a similar post 5-6 years ago. At that time I was rationalizing to you, me buying S65 AMG that was 5 years old that I bought for 50k when I only earned 250k at that time. Looking back I do not regret it , being 26 and being accused of being a professional football player was fun.
Flash forward to today, we are purchasing a GLE63 AMG for my wife, 2 years old, but this time it is less than 10% of our income. I was thinking of trading in my two year old truck and getting my wife a more reasonable vehicle maybe just a basic GLE instead of the AMG. But my truck is only 2 years old and there is no reason to replace it other than there is a new body style. I didn’t feel like it would send the right message to my employees either. I walk about how we like to save money and be frugal as a company.
Honestly next year around this time I will get a new truck because my current one will have 100k miles on it. Being in the construction industry and owning a company I feel like it is important for me to drive a nice truck, but getting a new one every year like some of my competitors is just wasteful. My 2017 GMC 2500 Denali is a nice clean truck and having a new 2020 wouldn’t change anything.
On another note when I looked at the math of a used truck and new one, buying used didn’t make sense with all the driving I do. But I love buying used luxury vehicles and might get myself a weekend car someday. My wife’s new car will only cost 60k for a 120k sticker with 30k miles. It’s a deal in my mind
Such a timely post for me. Over the weekend I hit 200k miles in my 2003 honda accord that I’ve had since college.
I was so proud of the moment I recorded it along with my son in the back seat!
I’m in sales and as much as it hurts my ego I still show up in this car to take my customers out. However, I have rented cars for sales calls ONLY after I have previous shown up in my humdinger.
Customers appreciate that I regard them highly enough to rent a nice car to take them out in.
Cant agree more. Our Show car is the M4 and dough car is an Odyssey!
You must be nuts, make 200k to 250k a year and dont recommend a car that you want? What’s the difference from paying $350 $800 or $1200 if you make 15k or more a month. Not everyone lives in New York and san francisco…
I make $650-700k/year in the SF Bay Area but I can’t imagine paying $1200/month on a car. $900 is a few nights at Hyatt, or one night at an ultra luxury pool villa. Burning that much money every month just so that I can drive / own a slightly nice car doesn’t seem right. Not to mention that $10k/year will make a huge difference to your retirement fund over 10-20 years (it can shorten your retirement by 1-2 years!)
I’m in the process of buying a new car but I’m so taken back by the prospect of having to shell out $40-50k to get an entry level luxury car when a basic Toyota Camry provide the same utility.
The more I earn & save money, the more I realize the uselessness of spending so much money on a car.
It is true, I am a nutty guy. But at least I’m financially free. The difference between $1,200 and $350 is $850/month.
What is your income and cost of the car you drive?
Great post, Sam! My husband and I are about $300,000.00 household gross income family. No kids. We drive one car, dough car, which is a 10 year old Prius. 140, 000 miles strong and going. Three years ago, we sold our convertible Mini Cooper S because having an extra car when we only needed one car seemed wasteful. Best decision, ever!
My dough car is a 2016 Jeep Grand Cherokee 4×4 with the Hemi V8. Before you laugh, keep in mind I haven’t had a car payment in 8 years as my work pays for my car payments. Prior to the Jeep I drove two BMW’s.
Haven’t decided what my show car will be, but once I purchase a home in Montana to relocate and the Jeep is paid off, I’ll purchase my show car. Haven’t decided what though, but it will be luxury as sportscars are way too much maintenance, uncomfortable on long trips, and too low to the ground.
My dough car is a 2006 4Runner with 165k miles. I plan on driving it to 300k.
I bought my show car for way cheaper than my dough car… 74 Datsun 260z.
Gets plenty of looks everywhere I go. Who says the show car has to break the bank? I went on a canyon cruise in Los Angeles with my Lambo buddy. The Z got more attention than the Lambo sitting right next to it ;)
For your ‘show’ car, would you recommend private plates? So that people can’t tell how old the car really is?
I understand this is also a rather strange request, but would you consider doing an article on private jets? Something entitled “Becoming Financially Free- Private jet, Yay or Nay?” I think this article would be great!
I would personally love to see your opinion on it!
Would love this as well.
Thank you! I’ve been preaching this for years to my friends. My dough car is a 12 year old VW and I still enjoy driving it. Yes, it sticks out like a sore thumb in my company’s parking lot (even my boss tells me to get a better car), but I can freely park it anywhere I want, especially when we go to rougher parts of town.
Great post. I purchased a 2015 Toyota Camry Hybrid nearly a year ago (with 90k miles) and plan on keeping that as my only car until the wheels fall off.
The price fit below the 1/10th rule, even before I knew that existed. Now at 110k miles, I find myself driving less than the first year, and the loan will be paid off in six months.
I drive 50 miles to and from work each day so hunted down an economical dough car. Spent £2,500 on a 2003 Audi A2 that had done 80,000 miles. It gets 70 MPG and I love it.
Having the show car for weekends actually makes the whole thing more palatable from an emotional stand point to me. It goes from, “this is all I can have” to “this is what i have chosen to have”. I think this only applies to those who care about cars though.
Hi FS,
I wonder your opinion re 1/10 rule towards brand new car or used car? Also, would you recommend cash, loan or lease, knowing I have money to buy in case but in the timeline 3-5y I could invest this money…
Thank you!
“Show Car” is fully loaded Tesla Model 3 and Dough Car is a 1998 Lexus ES 300 with 187K miles. My wife wants to get rid of the dough car and get a new Lexus SUV :( – I won’t show her the 1/10th chart, otherwise she’ll want a RRS!
That’s a nice spread! I think your wife will love the Lexus SUV. Is she lugging around kids in it?
The mid-size to smaller size Lexus SUVs could be considered Dough Cars, as their design is understated. But not brand new.
No kids! She rarely drives (takes Uber almost everywhere or walks). She wants the SUV in advance of any children in the mix. 2017-2019 Lexus NX. A few years back we had to get the radio fixed on her 1998. The dealership loaner was a 2019 RX450 Hybrid. Now that was tempting! I see why they give loaners out..
Sam, the work scenario you described also happened to my friend so I totally agree that it is NEVER a good idea to have a better car than your boss (if you care about your career path).
My car is 12 years old although only 120K miles on it. Was planning to checking out a new car but just last week it was dinged by someone who did not even leave a note. I immediately realized that I would be more upset with my new car dinged so I will drive this one for a bit longer.
BTW I totally expect Uber and Lyft to raise prices and stop subsidizing passengers now that they are responsible to shareholders and free VC funding has run out.
If your 12 year old car with 120K miles on it still works, I’d keep that puppy for as long as possible.
I feel like you read our minds all the time! We have a nice car, SUV for our kids and longer trips then we have our commute car, 2015 prius which is paid for. The prius is an easy ride and if we take care of it my two year old daughter can learn to drive it too! I love this statement “You must not be seen in your Show Car by colleagues, competitors, school administrators, or anybody who might cost you money.” So true! Lol
Took over my wife’s 15 year old Lexus as my dough car, alittle banged up but takes me from point a to b and I don’t have to worry where I park the thing. Love driving my 4X4 SUV on the weekends.
Am now looking for a “fun car” I can take out to the scenic back roads by Mt. Tam. Hoping to come across a 69′ Camaro convertible(which I’ve always wanted since HS) or a current model Mazda Miata MX-5 convertible.
Go for the 69′ Camaro! One of my HS dream cars was a ’90 Mustang GT convertible. The rumble of the engine was the best.
Hi Sam! I just read about your 1/10th car rule and I’m still struggling…in the opposite way. Gross income is $400,000 and I drive a 2007 Hyundai. I will need a new car soon and have been looking at used cars for $15,000 or less but can’t find anything I like. $15,000 seems like so much money to spend on a car, let alone $40,000 (your 1/10th rule). I’m not normally that frugal but struggle with big purchases. I won’t take out a loan so maybe my problem is writing such a large check? Any advice?
Can you try and find a really lightly used car in the $25k range? Hats off to you for the ‘07 Hyundai making that much money. It sounds like you can more than afford it….that’s why I’m suggesting a lightly used (low miles) used vehicle. Good luck!
Love the dilemma! If you don’t want to spend $40K on a car, don’t! Consider the 1/10th rule as the absolute upper limit for you.
I love that you drive a 2007 Hyundai. If it’s safe and works, then keep it.
I got over my fear of spending more by thinking about safety and a little bit of YOLO. I wasn’t going to drive my baby in a Honda Fit anymore. So I had a reason to look for a larger, nicer car.
See: https://www.financialsamurai.com/the-safest-cars-to-survive-a-crash/
What do you drive for?
Curious to know, assuming you’re a w-2 employee. What’s your take home after taxes on $400k? I’ll be right at or just under that number this year but I own a business under an s-corp
I’ve had lots of luck with craigslist. Five times I’ve started looking on CL with a dollar amount in mind, maximum mileage etc. I take my time and when I find a vehicle in the ballpark, I run the make and model through carcomplaints.com, if it’s a solid year/make then I go take it for a drive and then offer cash money and negotiate anywhere from a hundred to a thousand bucks off. We found my dough car (2001 chevy prizm… aka “the chevy”), the replacement for the family minivan (the only car we bought we new and drove it into the ground, once the header gasket blew we donated it to public tv) cars for both of my kids, safe/4 door sedans with great track records etc. and my wife’s “show car”. Our income is just over 2 and we have a gov pension so our stability is high.
The caveats to this approach is that you deal with a lot of flakes on CL, on both sides of the transaction. I was very interested in one vehicle, a Toyota corolla, that was under-priced, when I called the owner he said I was #17 on the list, he called 3 days later and said no-one had showed up, he couldn’t believe it when I showed up a few hours later with an offer for cash. The second caveat is that I’m a mechanic by trade and don’t mind doing the work on our vehicles AND are not afraid of buying something that could develop issues a few months down the road (hasn’t happened once in five purchases).
If you can be patient and do a little bit of leg-work, CL can still be a great resource, but I have lots of free time/flexibility and not everyone has that luxury.
Try renting your neighbors cars or sharing yours with neighbors instead of this entitlement to own 2 cars just for yourself. Most cars are sitting parked 98% of their lifetime, such a waste of space and resources. Your ancestors would be ashamed at the consumption Sam! Check out Turo and Getaround car sharing apps like Airbnb for cars, I’ve been a host for 5 years.
First the wasteful restaurant food and packaging consumption post, now the car consumption, time to reflect what have you become? This is not the frugal simple Sam I remember=) Maybe the baby did something to you. Take it all with a sarcastic grain of salt and keep up the good work.
I’m glad you mentioned Realtors as an exception to the rule. This topic gets discussed on Realtor boards on a regular basis and the vote seems split 50-50 between Realtors who think you should drive a nice car to look successful and those who feel their client base will respect that they drive a practical car. I feel I found the middle ground with a used 3-series BMW which I bought from a client’s parents. That turned into a referral for more business also :)
After the kids were grown I bought my wife a 2012 Porsche Cayenne for her birthday (to replace the Toyota minivan she’d been driving for years). She ended up hating the Porsche and so I had to take over driving it :-). It now has 100,000 miles on it and I plan to drive it as long as it lasts. It is a sweet ride. My dough car is a 2007 Honda Ridgeline… which get’s a lot of use in our snowy, rural area.
As for my wife, she is thrilled with her Lexus RX350, which she plans to drive into the ground.
Fun post! I’m not a car fanatic by any means so I’m always curious when I see people spending a lot of money on brand new luxury cars. What I care about most is safety, easy to drive/park, and then comfort. What the car looks like or the brand doesn’t really matter to me.
Great examples about the blinds woman and that young guy you used to work with. I love that pic of the Honda Fit parked between those 2 trucks too. Now that’s an A+ parking job! :)
Made a mistake few years ago and bought a new fully loaded Nissan Murano for around CAD $35,000 CAD. The monthly payments are killing me! Instead of burying myself to debt, I used the car to make some side hustle – driving it for TAPP (ride sharing app in Canada). Made some few bucks and hope I can finish paying this car soon.
Love the idea of one dough and one show car, Sam, but strongly disagree about how they should be used. In your example of the shutters and blinds woman, you say that her car made you suspect she was overcharging you. Well of COURSE she was overcharging you — you’re a rich person living in a rich person’s neighborhood, and she suspected that you wouldn’t mind being charged a lot as long as you feel like you’re getting the best. A lot of very wealthy people shop in this way — that’s why Rolex does well, and Tesla, and Whole Foods. The saleswoman’s BMW X5 makes most people feel on some subliminal level like they’re getting the best blinds person. If she drove up in a beat-up Toyota people would resent paying $9,000 for window treatments — they’d think she was jacking them because they’re rich, because clearly she doesn’t charge everyone that much. But when she shows up in an X5, it suggests that she’s one of them — the best catering to the best.
Now of course, this technique didn’t work on you, because you know it’s manipulative BS. And it probably wouldn’t work on other rich people who are really looking for a bargain. But the truth is that those bargain hunters are not her customer base, because with $9,000 custom window treatments she’s selling a luxury good. Her customer base is that large percentage of wealthy people who just want to feel like they’re getting the best, and are willing to pay a premium for that privilege.
I live in Los Angeles, and I always drive my “show car” to appointments with new clients because it suggests they’re getting someone super-successful for the money I’m asking for. Whether you’re a realtor, an accountant, or a math tutor, most wealthy people will be more likely to accept high fees if you show up looking like you’re super successful (and in LA at least, a nice car subliminally says that — even though logically it shouldn’t!). There will obviously be some that are looking for a bargain rather than for the best, but if your goal is to make big profits and retire early then those aren’t the clients you’re looking for. So, if you deal in luxury goods or services, drive that show car to meet clients!
Maybe in L.A. people share your mindset but L.A. is not like most of the world. Take a look at the cars listed on the chart above. Then think about all the luxury cars on the highways in L.A. Do you think most of those luxury cars belong to people making over 500k? Its much better to have money and spend below your means than to take the fake it til you make it approach.
Mmmm, depends what your job is and where you live. If you live in LA or San Francisco and are a realtor, for example, it is probably better to fake it ’til you make it. A lot of rich people simply will not want to list their house with a guy driving a used Hyundai, because it doesn’t project to them that he’s been successful selling million-dollar homes. Obviously, if the expensive car doesn’t help you with a lucrative job then it’s not a good move financially, no one competent would argue that. But if driving the car contributes to your sales success — as I imagine it likely does for Sam’s window-treatment lady — then by all means drive the car.
Ha- its like you read my mind with this post. My wife and I are coming to this realization after recently acquiring a RRS similar to the beast master (love that name). We love enjoying the car for ourselves, but feel self conscious around others. There are plenty of Range Rovers around where I live (and at my sons school) so hadn’t anticipated that feeling. And I’ve had BMWs in the past, so was used to having “nice” cars. I’d think that in SF they’d be even more common (along with plenty of 80k+ Model S Teslas).
We’re also a 1 car family and, fortunately, I don’t need to drive to work. My wife suggested buying a beater car yesterday, but overall, I just don’t want the hassle of an extra car even if it’s a super cheap used Toyota.
Who knows- this might lead to my next car being very under the radar. Kinda ironic that most people assume you buy a car like this to show off when in fact that’s the last thing we want. Non “car people” can’t believe anyone would want a luxury car for its merits and not as a status symbol. My dream car is a 991 911S, but I imagine i’d feel even more self conscious in that.
I love the 1/10th rule, but I actually have the opposite problem. My ’05 Corolla sticks out like a sore thumb at my office’s parking lot because all my colleagues in the auto industry are really into their cars and have pretty unique stuff. They think I’m pretty weird for driving something so boring.
Everywhere else, though… a dough car is where it is at. Especially after kids. We mostly walk everywhere where we live so I’m comfortable with the Corolla’s safety, but on the few occasions it is a big stress relief to know such an insignificant portion of your net worth just got vegetable puree smeared all over the door handles and goldfish crackers ground into the seats.
I worked for an Auto group and everyone in our office received a car allowance of about $400 a month. I never used that money for a car, I just invested the money. Most others had new cars every two years. My wife is a partner in an accounting firm and drove a 14 year old Lexus. After seeing her collegues lose everything after Enron and they were so leveraged that many probably never recovered, we were never going to have that much in stuff.
I took the middle of the road with a lightly used BMW 3 series. Every car in my suburb is a BMW or Mercedes, so it doesn’t stand out. It’s low key enough to drive through rougher neighborhoods, but nice enough to not be embarrassed in the Hamptons.
I don’t care about the status–I just love how it drives!
Good call on looking at your surroundings and then matching. BMW 3 series is also a dime a dozen here in SF. Getting a used one is a nice good balance of pleasure/practicality.
This post made me chuckle because I do have a show car and a dough car. For the past couple years my show car has been my daily driver, and in some instances (such as checking out investment properties) I did not want people to know that I had such a nice car – Tesla Model S. I bought it when I was 26 and had wanted one since I was maybe 20 or 21. It does serve a business purpose too, as it has my company branding on it and I take it to car shows for networking.
This past summer I bought a 2012 Toyota Camry. Only 35k miles on it. That thing should last me a while!
I am pretty recently single again and as a successful business owner under 30, I did not want to show up on dates with a Tesla. It helps me weed out people a lot quicker.
At the end of the day, as much as I hate it, people judge you on the type of car you drive. Especially in my line of work. So I’m just playing the game. It’s kind of fun to decide which car I want to drive every morning, and I’m super fortunate to be in that position. I also have the Camry listed on Turo to hopefully let it make me some extra money :)
Oh yeah! I remember you buying a Tesla S several years ago! At least it’s a nice business expense.
Your Toyota Camry 2012 is the perfect Dough Car!
I have a 2007 acura tsx with over 220,000 miles. Im an artist and need something bigger to haul canvas and panels in. What type of vehicle would you recommend? Im looking for an SUV or van that I could treat as a dough car, something dependable and easy on gas. Also reliable, easy and cheap to fix and will increase in value or won’t depreciate in value? Should I keep my car and have the bigger Suv? Curious to know your thoughts. Thanks in advance
I’d go for one of these models that’s 5-7 years old:
Toyota Highlander
Toyota Rav4
Honda CRV
Honda Pilot
They should cost less than $10-$15K. Reliable, unassuming, functional.
I love to paint btw. Did around 15 hours of painting last week while listening to some podcasts. Feels like my mind heals during this time.
Hey Sam, you described our dough car perfectly!! We have a rusty and beat up diesel F350 from the early 90’s that used to be a farm truck, ripped upholstery and all. It even landed in a ditch at one point and has a massive dent on one door that looks as though the Hulk punched it! But hey it was cheap, tows like a champ and it’s perfect to transport our dogs.
Our show car used to be a 2011 convertible Camaro with racing stripes but we just sold it and got a used Subaru Ascent (SUV). It isn’t fast or sporty, but it’s quieter, gets better gas mileage and less envious looks even it’s much newer (came out in 2018). We’re planning to keep it at least 10 years so depreciation will eventually catch up and get us to the 1/10th rule. At least that’s the plan! ^_^
Sounds like a great plan!
The preschool asked what type of car you drive? That’s crazy. Only in California.
We only have one car, a 2010 Mazda 5. I love it. It’s 100% stealthy and I don’t care (much) when it gets dinged. I hope it lasts until our son goes off to college. Then we’ll get a nice convertible.
Your guideline is very restrictive. Someone making $250,000/year should be able to buy a nicer car than a Honda. :)
Well, it was on the financial aid application. They don’t want people trying to game the system. Although, purposefully buying a Dough Car may be considered gaming the system too.
A $25,000 Honda Accord is SWEET! What you talking about? It was one of my dream cars as a middle school kid. But my dad ended up getting a 1976 Nissan Datsun with no paint and only three hubcaps instead. This was in 1990.
I bought my show truck for half the dealer cost because it was in an accident and rebuilt. And my dough car is almost 16 years old and I plan to drive it to the ground. :-)
Doughshow cars.
It is incredible how cool of a vehicle you can get for under 6 grand.
We always drive pre-smog American classics. You can register them as antiques and never pay registration again.
Parts for these oldies are very cheap and you can do everything yourself with essentially a 9/16 wrench lol.
They only catch the good kind of attention.
The best part is they do not depreciate- you can buy a ‘69 Ford pickup for 5 grand, drive it for 5 years, sell it and get all your money back.
Im looking for an SUV or van that I could treat in the same we you are with your 69 Ford truck. Considering there probably are not any antiques of SUVs or vans, are there any older ones that are reliable, easy and cheap to fix and will increase in value or won’t depreciate in value?
There are many cool old American suv type vehicles that could suite your needs.
Search “panel truck” on Craigslist.
Vans are really cool and fun but they are more tedious to work on because of the engine location.
Dodge b100, Chevy g10, Ford econoline, Chevy Apache. Just do some searching and see what you find. 80s Toyota 4runners are really cool too and they are collectible now.
Just look for something clean, well maintained, with ideally a senior owner.
Curious about the anecdote about the cocky employee getting the small(er) bonus.
Can you estimate the how much each factor played in the bonus decision?
1. pretty cocky guy who didn’t follow instructions. we discovered how truly immature he was.
2. he drove too nice a car
Sure sounds like y’all thought he was an under-performing employee who wasn’t liked and his work wasn’t respected and him owning an expensive car wasn’t the actual reason he got a lower bonus. Makes a good story, though. Was it truly causal?
Counterpoint to the judge a book by its’ cover mindset. My brother, a high-earning doctor living, once asked me about my choice of car. I am a tech consultant and show up to people’s homes and business and he thought I would lose business because I was driving an older, unimpressive vehicle (it was a Honda Civic ~13 years old). I didn’t agree with his point of view that clients saw someone in a beater and wondered if they were good at their job / business. I drove that car for another 5+ years until another driver crashed into me.
Good question. Bonuses are subjective. They are discretionary too. The car was part of his cocky demeanor, a big part of it. Once you have a bad reputation, it’s really hard to get it back.
But if he suddenly came in and told us he sold the car, gave the money back to his parents, donated some of the money to a foster home, and started taking the bus to work like many of us, I think he would have got the standard $25K bonus for first-year analysts at the time.
At work, you need to be liked to get ahead. It’s that simple.
People are superficial by nature. We use our basic 5 senses to take in external stimuli and the result is our action and behavior.
The 5 basic senses we shared with the animals, therefore, it is meant for survival as animals.
We have been blessed with the frontal cortex serves as the manager of the 5 senses. Ninety-nine percents of the population do not use it properly.
That is why the young banker you hired drove his fancy car to work to just get the envious feeling from others, and did not realize that his showboat will cost him in raise and promotion from his boss – as his boss, you already gave him a merit evaluation long before the due date.
I DISAGREED with you about the blind lady situation. She will be successful with the showboat package because most people will relate the fancy car and shade to the quality of the products she is selling – it did not work for you because your frontal cortex is doing its job.
A simple and effective exercise for your frontal cortex is asking the following question – WHY DO I DO WHAT I DO? Before any the execution on any decision!
My wife drives a basic Toyota SUV and I switched to the show car about 4 months ago. We were doing really well laying low until the new car showed up and people began looking at us a little differently. Within the first week of bringing the new car home, two neighbors asked, “what is it you do again?”
It’s funny how quickly people seem interested in what you do when in reality they’re just curious as to how you can afford things…
So I have spent the last few weeks looking for a small, old pickup truck so I can at least I can fly under the radar when I am out of the neighborhood.
But is it perhaps too late? Since your neighbors all know you had a Show Car? What car was it?
I guess you can make up a story and say you fell on hard times or something.
Your son was actually checking out a $1M McLaren P1! At the very high end, cars will appreciate better than most equities. The car is now worth about $2M.
Dang, I had P1 in my head as this was a picture from earlier in the year. But I was guessing it was the cheaper model. How can you tell it’s a P1 so easily? It doesn’t look like the GTR b/c it doesn’t have the massive spoiler in the back.
The guy has a Aventador and Rollys Royce Wraith as well. I wonder what he does. Hmmm.
I was going to comment as well. You can tell it’s a P1 easily b/c of the front hood (unique to P1), the HUGE air intakes in the front, the doors, and the big rear wing. This car is in a whole other league that McLaren’s “regular” cars. :)
Great point about about judging someone who works in the service industry showing up in a flashy car. I remember one landscaper who showed up in tricked out H2 hummer. Foolishly I went with him and got gouged with the pricing. Later chose a much more down to earth landscaper who drove a regular pickup truck.
I live out in the boonies so ride sharing is not an option (have the Uber app which shows absolutely no cars around me for 30+ miles). I have 3 cars (daily driver which is my Tesla model S90D I bought new, a 2004 Mercedes C320 I bought new which is the driver I gave to my mom to use and help pick up my daughter from school, and an 06 Land Rover I bought used mainly to take trash to the dump and when I go the airport.
One experience I had was when we were shopping for a used car for my fiancee. We chose to go into the lot with her car which was old and damaged from a recent hit and run (reason for shopping) because I felt showing up in a tesla would set us up for trouble.
Thoughts on owning three cars instead of just two?
For me it was kind of a necessity. My mom can’t drive “anything big like the LR3” so she took my previous daily driver to become her own.
I don’t have garbage service so have to take our garbage to the local dump (just 2 miles away) and obviously would not subject my Tesla to that and the C320 is incredibly small for that (if I didn’t want to put the garbage in the interior of the car and just leave it in the trunk (which of course I wouldn’t want since daughter and my mom use that primarily).
I could have gotten a cheaper option like a pickup, but felt SUV would be better for my lifestyle (my fiancee previously stated, “I don’t see you as a pickup kind of guy, whatever that implies. lol)
If you’re not insecure (most minorities Are) you wouldn’t need a “show” car.
Golfing: never done it, despite living next to a golf course for half a century.
Because I don’t need to.
Edit: I’m an old, lonely, white guy with racist tendencies.
This made me LOL..I’m a middle aged Ivy League educated black woman, who went to a left-leaning hippy school, but who hates political correctness. Your post is awesome, and very funny. Of course all of my family and acquaintances drive luxury cars and always have. You are like the Howard Stern of this thread, thanks for the laugh.