A $55,000 Mercedes-Benz On $45,000 Take Home Pay? You Bet!

Isn’t that insane? Someone wants to spend over a year’s worth of take home pay on a new car! I guarantee you that almost everyone has judged the person who wants to buy the Mercedes already.

I initially did the same. However, after examining the situation I think this particular purchase of a $55,000 Mercedes-Benz on $45,000 a year take home pay is perfectly fine.

What Were The Details?

Technically, the potential Mercedes-Benz buyer is a 46 year old woman named Debbie that takes home $44,916 a year and has $16,848 a year of expenses.

She owns a home and actually owns it because she doesn’t have a mortgage at all. In fact, she doesn’t have any debt at all which is pretty awesome!

As far as monetary assets go (assets like cash, investments and retirement accounts) she has $142,000 in liquid assets, $6,000 in non-retirement investments and $390,000 in retirement accounts. 

Analyzing Debbie’s Financial Situation

You should never make decisions solely based on income alone. You need to look at the full picture before making a decision. In this case, the full pictures shows a much different story than just Debbie’s income would.

Debbie has done an amazing job of only living on 38% of her take home pay. She has over 100 months of expenses in liquid assets. That’s over 8 years of expenses in liquid assets!

If that’s not good enough, Debbie has over 23 years of expenses in her retirement accounts. Combined, her liquid and retirement assets would provide over 30 years of current expenses. On top of that, her expenses are less than the often quoted 4% rule for retirement withdrawals.

Why I Think A Mercedes-Benz Is A Reasonable Purchase

In Debbie’s case, I think a $55,000 Mercedes-Benz on $45,000 a year in take home pay is a reasonable purchase. Debbie clearly lives well below her means and saves for what is important to her. If she wants to spend 40 months of her normal living expenses on a car, I’m betting she’s put a lot of thought into the purchase and really, really wants the car.

Yes, the car will depreciate and will eventually be worthless. Yes, she could make better decisions with her money to grow her money. However, she has 30 years in expenses saved already and still has at least 19 years until traditional retirement age!

She has plenty of time to let her money grow or save even more money for her future retirement. At some point you need to enjoy your money. You can’t take it with you when you go and it would be a shame to work so hard for the money and never use it.

I say she should buy the Mercedes if that is what she really wants! Enjoy it!

What Do You Think?

So, what do you think about this situation? Do you think Debbie should buy the Mercedes-Benz or do you think she’s crazy? If you don’t think she should buy the Mercedes, what do you think she should do with the money? There is no right or wrong answer, but I’d love to hear your opinion in the comments!

Where Did This Situation Come From?

I’ll admit it. I was watching the Suze Orman show and this clip caught my eye (view it here if you want). Normally I don’t comment on these shows, but this situation was extraordinary.

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About Lance Cothern

Lance Cothern, a Certified Public Accountant (CPA) licensed in the Commonwealth of Virginia, is the founder of Money Manifesto. You can read more about him here or connect with him on Facebook, Twitter, Google+ or Pinterest.


  1. Hey, if it’s her dream to own an expensive luxury car, more power to her since she obviously has the financial means to do so. Also, it will likely last her FOREVER because given what else we know about her she’s going to wrap it in bubble wrap and take care of it like it’s the most precious thing on planet earth.

  2. I still think that’s too much to spend on a depreciating asset like a car…but to each their own. It sounds like she has her financial life together and has the ability so splurge if she really wants to.

  3. Kudos to Debbie. As noted, on the surface it would seem like buying a $55,000 car on a $45,000 salary is a terrible idea. However, she is obviously financially savvy and can ‘afford’ the purchase. There are plenty of people out there that make more than $45,000/yr. that cannot afford such a purchase because they have not made the right financial decisions.

    As I often say, it is less about ‘how’ much you make and more about ‘what’ you do with what you make.

    • I’d say very few people that make $45,000 take home a year could afford the car given the average person and how they spend.

    • Hi, was reading the replies about me and the salary is actually $75,000/ yr. base, $92,000 with overtime. The take home pay is what’s left over after my retirement accounts are funded fully. I know it’s frivolous but I always wanted a new car and I’ve waited a long time. Thanks for your comments.

  4. Interesting! I think it would always be a PF blogger/expert’s opinion to say NO WAY to the details of that purchase but when you break it down like that.

  5. Seems excessive to me. However, I came up with the Net Worth Rule For Car Buying which guides for one to spend 5% of their net worth on a car. Based on this rule, she can rock out a $20,000 Honda Civic!

  6. Now, if she is truly obsessed with cars and it’s a life dream, then who am I to criticize. Her savings and lack of home debt are fantastic, no doubt.

    That being said, my own view is that there needs to be attention paid to actual cash flow relative to the purchase price in this case. Spending more on a car than annual income at a young age seems off. Thus, I say forget the expensive car and buy a nice, reliable $25,000 instead as a splurge. Keep in mind I drove a car to over 200k miles, so an upscale vehicle doesn’t register as an important possession to me.

  7. A guy I’ve worked with a long time did this same thing when he absolutely had to have a BMW. The problem isn’t so much the car, but everything else that comes along with it. How much are parts, tires, insurance for this car? Sometimes because they are “high-end”, you’ll pay a lot more for repairs or even basic services like oil-changes than you regularly would. And then comes the “status expectations”. Now that you’re a Mercedes owner, is it going to stop there? Bigger house? Fancy clothes? More things to impress the friends? It’s a slippery slope …

    • I’d hope she would have researched that in advance and figured it into her calculations. Either way she can afford the car. If it expands to other areas of her life though, she’d be in trouble.

  8. At first I thought this woman was just having a “YOLO” moment, but after looking at the story closer and finding out that Suze Orman “approved” her decision, I think it’s fine for her to treat herself to this car. You do have to watch out for YOLO purchases, however. Because most of the time, you do wake up the next morning in debt and feeling regretful.

  9. I personally would suggest she go for a certified pre-owned Mercedes just because that saves so much off the bat right there for a basically new car but if she has the money and she’s find in the savings department, you gotta do what you gotta do.

  10. I have a problem with spending so much on an asset that depreciates! Personally, I think she should invest the money instead. If a Mercedes was so important, I would suggest a classic much older SL. It would increase in value.

  11. Interesting. Very interesting. I think what is so fascinating is that she seems to be ultra responsible with money and living below her means, so why this car? Just doesn’t seem like the type of person to be interested in a name brand car like that. At the same time, she can afford it and she worked hard for it! I personally would invest the money or take a vacation but traveling is more of a priority for me than a nice car so to each their own!

  12. I am debt free and take home half her income (in a very poor country, mind you). And I wouldn’t pay my entire yearly income on a car, even if it came with golden tires. I own a small car that’s valued at maybe 10K and would probably replace it (when time comes) with a similar one, costing me 7-10K. We’re not only talking about the value of the car, but everything for a Mercedes is more expensive. My tax (we pay car taxes here) is VERY small, the car has a small engine (enough for our needs) and everything costs very little, even if it is a German car.

    Anyway .. if she wanted a Mercedes, she should enjoy it 😉

  13. I’ll start by saying that it’s her money so she can do what she wants with it, according to her priorities…

    I’ll start by saying that the amount she’s saved up is very impressive, given her salary. By my math, that’s something like 15 years of her total take-home when you throw in the house.

    As for the car, I wouldn’t do it. Owning a luxury car gets expensive very quickly. The mistake people make is to think that the increased cost ends at the financing.

    Insurance costs more, taxes cost more, routine maintenance costs more, gas costs more (I’m probably not sticking 87 octane in a Mercedes).

    Not only that, I’d start buying things I’d never spend money on if I had a cheaper car.

    Yes, I know how to change my oil, but would I if I owned a Mercedes? I’d probably buy into the lifestyle and have the dealership put expensive synthetics in it.

    Sure, I could park it on the street for all the world to ding, but would I? If I spent 120% of my annual take-home on a car, I would bet that I’d spend the extra money to park it in a garage.

    And don’t get me started on repairs. If I owned a Civic and a rock took out a headlight, I could pull the replacement out of a junkyard and install it myself for next to nothing. Would I do that if I owned a Mercedes? I think I’d be more likely to spend $1,000+ to have the dealership put a new one on.

    That said, other than her house and office, it’s probably the place she spends the most amount of time in. If she really wants one, she should do all the research for the complete and REALISTIC costs she’s going to face…and if she’s still convinced, she should get it and enjoy the heck out of it.

  14. I think this woman instead should see the world and take some nice vacations. Buy a car that is half this price.
    Her monthly expenses are insanely low and I don’t think she is taking a vacation on 16K a year. She needs to treat herself to an experience. As I get older, I spend more money on experiences rather than things.

  15. Sounds like her financial responsibility deserves a reward! I would like to think that if I had the discipline to save that much and live off that little for so long that I would be free to buy whatever I wanted!

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