In my previous job (the one I recently quit) there was a secretary who drove a BMW M3. The picture above is of a BMW M3. She would often make digs at me for riding my bike to work and absolutely loooovvveeedd to talk about that car. I began to resent her and her annoying affair with her car along with her narrow mindedness about my bike. However, in my head I had the last laugh because I had two more years of my life… here’s why.
The car that imprisoned the secretary
The secretary was making anywhere from $12-$15 an hour. Let’s give her the benefit of the doubt and say that she make $15 an hour, which comes out to a yearly wage of approximately $31,200. Lop off uncle Sam’s portion and you’re looking at around the $25,000 mark (rough estimate).
The sticker price on a new BMW M3 today is $58,400 (source). This means that the car is nearly twice as much as her gross income. Of course this is assuming she bought new and also didn’t lease, but the principle still applies.
She laughed at me when I told her I rode a bike to work. However, I laughed at her knowing she’d have to come to work everyday for at least two years to pay for her car that she probably used mostly to simply drive back and forth to her wage slave job. It’s not like you can take too many road trips when you live on an Island.
How much should the secretary have spent on her car?
This is a perfect time to mention a rule of thumb that Financial Samurai like’s to use. That is the 1/10th rule which goes something like this:
Spend no more than 1/10th your annual gross income on a car. If you make $50,000, buy yourself a nice second hand Honda Civic for $5,000. Multi-millionaires don’t spend more than 1/10th their annual gross income on cars, neither should you.
Now her ratio is about 20 times the recommended limit at about 2/1. Her car is nearly double her gross income and according to the 1/10th rule she should be driving around a $3,000 car, not a $58,400 car.
In the end time is money and the secretary decided her car was worth two years of her time or approximately 4,160 hours of work. I think I’ll be okay with being considered weird and ride my bike while enjoying my two additional years of freedom.
What do you think – Are “cool” cars really worth this much?
How much did you spend on your car and how much is it in relation to your yearly income?