Is it time for that Aston Martin?
There are legendary sports cars — flashy Italian Ferraris and rumbling Lamborghinis — and then there are refined Aston Martins, a British breed of their own. In Toronto, a mathematician we'll call Thomas, 27, asked Urge to Splurge to calculate if he can afford one on his present pre-tax combined income (with his girlfriend, Eva, also a mathematician) of $170,000 per year.
Top of the line models of the Aston Martin DB6, a V-12 with a manufacturer's suggested retail price of $316,716, rise in price to a version with carbon fibre body panels that has a MSRPs of $342,985. A much less expensive version, the V-8 Vantage, can be had for as little as $136,495. Options on the DB6 do not include the built-in .50 calibre machine guns and ejection seat that came with the Aston Martin V-12 Vanquish that Pierce Brosnan drove in the 2002 James Bond thriller Die Another Day. They would be owner-supplied extras.
It's possible to lease a DB6. You can spread the $100,000 down payment on the top-of-the-line model over three years at $33,333 per year. Then you have to make payments of $4,824 per month. That adds up to $57,888 per year on top of the down payment.
Insurance can run up to $20,000 per year because parts for the Aston Martin are very expensive. The total of those costs is $111,221 per year. That is standing still.
If the car is turned on and driven, then, according to Natural Resources Canada vehicle data for the standard 5.9 litre engine, fuel would be $3,180 per year based on 20,000 kilometres, 55% city and 45% highway driving.
The total basic cost per year for the first three years, including fuel: $114,878.
We asked Derek Moran, head of Smarter Financial Planning Ltd. in Kelowna, B.C., to estimate what it would take for Thomas to get behind the wheel. Assuming that the car should not cost more than 20% of family after-tax income, he and Eva would need disposable income five times the $114,878 annual cost or $534,390. Assuming further that each earns half of the total family income and that their Ontario and federal combined tax rate averages 40% after quite limited deductions for business use of the car — if so used, they would need combined pre-tax income of $890,650, Mr. Moran suggests.
Thomas and Eva's current assets total $177,000. Their monthly expenses, $6,500 including rent of $1,750, total $78,000 per year. Their disposable income, based on an assumed present average tax rate of 32%, $113,900, leaves room for discretionary spending of $35,900 per year. That would cover the annual down payment charge. They would not have sufficient funds for the monthly lease payment.
"I know it is expensive to have an Aston Martin," Thomas says. "Maybe if Eva and I had our own consulting business, we could earn $900,000 per year before tax."
Now that might be a different scenario.
"That would leave $540,000 for spending after 40% average tax, enough to cover the bill for preening in this automotive masterpiece with some cash left over for food and shelter, clothes, educating their future kids and charity for those who can't afford an Aston Martin," Mr. Moran says.
(c) 2012 The Financial Post, Used by Permission