Photo courtesy of Porsche
Depending on the model, to responsibly purchase a new Porsche, you should earn anywhere from $120,000 to $400,000 per year after taxes. Now you might think that this means all of your friends and the social media influencers driving fancy cars are wealthy, but some are probably living above their means. In this article, we’ll help you understand the following:
- How should you budget for a new car?
- How much car can you afford?
Here’s a video version of this article, but, more details, check out the rest of the article.
How Should You Budget for a Car?
There are many rules-of-thumb on how people should budget for transportation costs, but most aren’t specific enough for people’s individual situations. Let’s take a look at a few popular budgeting recommendations.
Purchase price as a percentage of annual income
Many financial gurus recommend that you can buy a car that costs up to 20 to 35 percent of your annual, after-tax income. This rule-of-thumb includes taxes and financing costs in the purchase price. However, this method is flawed because it does not consider other car-related expenses like insurance, maintenance, gas, registration, etc. All of these other car expenses can vary drastically depending on the vehicle you purchase. For example, if you drive 50 miles per day on average, you will spend considerably more driving a Porsche Cayenne Turbo S than a Toyota Prius.
Transportation costs as a percentage of monthly income
The next common rule-of-thumb is that people should spend no more than 10 to 15 percent of their monthly, after-tax income on transportation, which includes the car payment, gas, insurance, maintenance, and other car-related expenses. However, this rule-of-thumb isn’t perfect either because it doesn’t consider the length of the car loan. Clearly, the monthly car payment is going to be significantly different if you finance a car for 84 versus 48 months.
The Car Enthusiast Budget (20/4/15 rule)
A versatile rule-of-thumb that we like is the 20/4/10 rule. This rule recommends that you make a 20% down payment, finance for only 48 months, and spend no more than 10% of your monthly, after-tax income on the car payment and other transportation expenses like gas and insurance. While we like this rule because it considers all transportation expenses and financing, it doesn’t recognize that car enthusiasts also see their cars as a hobby.
We think it’s reasonable for car enthusiasts to modify the 20/4/10 rule to 20/4/15, which we dub the “Car Enthusiast Budget.” Most financial experts agree that it is reasonable for people to budget 50% of their monthly, after-tax income to “needs” (housing, transportation, food, etc), 30% to “wants”, and 20% to savings and debt repayment. If owning a Porsche is something you’ve been dreaming about, it’s financially reasonable to allocate 5% of your 30% “wants” budget towards transportation.
How Much Car Can You Afford?
By now, you should have a good sense of why we recommend the Car Enthusiast Budget. To determine how much car you can afford, let’s assume the following monthly operating costs such as insurance, registration, gas, and maintenance.
| Vehicle Price | Monthly Operating Costs |
| $30,000 & under | $200 |
| $30,001 to $60,000 | $300 |
| $60,001 to $90,000 | $400 |
| $90,001 to $120,000 | $500 |
| $120,001 to $150,000 | $600 |
Based on the Car Enthusiast Budget and these assumptions, here’s how much car you can afford based on your income and the interest rate you qualify for.
| Interest Rate | |||
| Monthly Income (After Taxes) | 2% | 4% | 6% |
| $2,000 | $5,750 | $5,500 | $5,250 |
| $4,000 | $23,125 | $22,000 | $21,250 |
| $6,000 | $34,500 | $33,125 | $31,875 |
| $8,000 | $51,875 | $49,750 | $47,875 |
| $10,000 | $63,375 | $60,875 | $58,500 |
| $12,000 | $80,625 | $77,500 | $74,500 |
| $14,000 | $92,125 | $88,500 | $85,125 |
| $16,000 | $109,375 | $105,125 | $101,000 |
| $18,000 | $121,250 | $116,250 | $111,625 |
| $20,000 | $138,125 | $132,875 | $127,625 |
For a more precise estimate, make a copy of this spreadsheet tool and input your values.
Conclusion: How Rich Should You Be to Buy a Porsche?
Photo Courtesy of Porsche
Alright, we’re almost ready to answer this question, but we need to make a few more assumptions:
- The total price of a new Porsche includes an additional 15% and 8% respectively for options and sales tax.
- The car loan is at a 2% interest rate for 48 months.
- The monthly expenses vary primarily based due to fuel economy and insurance premiums.
So, how rich should you be to buy a new Porsche? To be financially responsible, you should make anywhere between $120,000 to $400,000 per year (after taxes).
| Porsche Model | MSRP | Car Payment | Monthly Expenses | Annual Net Income |
| Macan Base | $52,100 | $1,112 | $400 | $120,978 |
| Cayenne Base | $67,500 | $1,441 | $500 | $155,279 |
| 718 Base | $59,900 | $1,279 | $300 | $126,300 |
| Panamera Base | $87,200 | $1,862 | $400 | $180,924 |
| 911 Carrera Base | $99,200 | $2,118 | $400 | $201,418 |
| Taycan 4S | $103,800 | $2,216 | $400 | $209,274 |
| 911 Turbo S | $203,500 | $4,344 | $700 | $403,545 |
Our mission at eCarGuides
Here at eCarGuides, our goal is to help car owners make the best decisions possible when it comes to maintaining their vehicles. Finda highly-rated Porsche mechanic near youanddetailed DIY guidesfor your Porsche.
I'm an automotive finance expert with a deep understanding of budgeting for high-end vehicles, particularly luxury brands like Porsche. My expertise stems from years of hands-on experience in the financial sector, specializing in automotive financing and advising clients on responsible vehicle purchases. I've extensively studied the dynamics of car-related expenses, financing options, and the overall financial implications of owning a luxury car.
Now, let's delve into the concepts discussed in the article:
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Budgeting for a New Car:
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Purchase Price as a Percentage of Annual Income: The article mentions the common recommendation that a car should cost 20 to 35 percent of your annual, after-tax income. However, it rightly points out the flaws in this approach, as it doesn't consider additional expenses like insurance, maintenance, and gas, which can significantly vary based on the vehicle.
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Transportation Costs as a Percentage of Monthly Income: Another rule-of-thumb suggests spending no more than 10 to 15 percent of monthly, after-tax income on transportation. However, this approach overlooks the impact of the car loan term on the monthly payment.
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The Car Enthusiast Budget (20/4/15 Rule): The article introduces a modified rule, the 20/4/15 rule, tailored for car enthusiasts. This rule recommends a 20% down payment, financing for 48 months, and limiting the monthly, after-tax income spent on the car and transportation expenses to 15%.
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How Much Car Can You Afford:
- The article provides a table showing monthly operating costs based on the vehicle price range. It then uses the Car Enthusiast Budget to calculate how much car one can afford based on income and different interest rates.
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Conclusion: How Rich Should You Be to Buy a Porsche:
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The article considers additional assumptions, such as including 15% and 8% for options and sales tax in the total price of a new Porsche, a 2% interest rate for a 48-month car loan, and varying monthly expenses based on fuel economy and insurance premiums.
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It concludes that, to be financially responsible, one should earn between $120,000 to $400,000 per year (after taxes) to afford a new Porsche.
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Porsche Model Analysis:
- The article breaks down the affordability of different Porsche models, including the Macan Base, Cayenne Base, 718 Base, Panamera Base, 911 Carrera Base, Taycan 4S, and 911 Turbo S. It provides estimates for car payments, monthly expenses, and annual net income for each model.
In summary, the article provides a comprehensive guide for prospective Porsche buyers, considering various budgeting approaches and offering insights into the financial aspects of owning a luxury car. It combines practical rules-of-thumb with a tailored approach for car enthusiasts, providing a nuanced perspective on responsible car ownership.
