how much should i spend on a car

how much should i spend on a car

How Much Should I Spend On A Car

How much you should spend on a car depends on a number of factors. Most car buyers finance a car purchase – that is, they take out a loan to pay for it, rather than paying for it with funds they’ve saved up (to learn more about car loans, read How to Finance a Car and Get a Car Loan). Because financing a car means committing to a monthly loan payment for a period of time, your monthly budget plays the biggest role in deciding how much to spend on a car. Keep in mind, however, that your car loan payment won’t cover all your car-related expenses. You’ll still have to pay for things like insurance and gas, as well as other less regular costs, like car registration, taxes, fees, repairs and maintenance.
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How Much Should I Spend On A Car

It’s easy to buy an expensive car. Yes, Americans typically spend a lot on cars. After all, you probably need a car. You rationalize it by saying it’s reliable, fun, safe, whatever. Auto manufacturers are more than willing to help you think this way. Therefore, it’s a slippery slope. Pretty soon you’re rationalizing an expensive car purchase as a ‘need’ rather than a ‘want’. I get it. I’ve been there. After graduating college, I too asked myself the question, “How much should I spend on a car?” It can get confusing. There’s a lot of talk about practicality, seating, safety, options, depreciation, color, leasing, owning, foregoing, buying, etc. There are so many car brands and so many places to buy a car. There are so many things restricting your car budget. There are so many other things to buy besides a car. First and foremost, don’t buy a new car. Buying a new car is a terrible idea.
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How Much Should I Spend On A Car

I’m sorry, I only read about halfway through because I couldn’t wrap my head around the premise of this article. I don’t get how you equate how much car you should buy with you’re annual income. Shouldn’t the amount you spend on a car have more to do with your priorities? I mean, say I’m a frugal person who makes about 28k a year but wants something that’s not going to break down all the time. Those priorities lead me to roughly $5000 for a car that’s about 10 years old (these are really rough estimates just for argument’s sake). Okay but now say you have person B who makes 100K a year but it ALSO frugal, and wants a reliable car. He has the same priorities as someone with less income. I don’t see how much car you need is a function of how much you make. Why does a rich frugal person need or want more car than a poor frugal person?
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How Much Should I Spend On A Car

I read The Millionaire Next Door a few years ago. Of all the millionaires interviewed, the average they spent on cars was 2% of their net worth! Can you believe that? How much should I spend on a car? I want to spend what the millionaire’s spend. I know it’s hard to spend so little when you’re starting off in life. But if you aspire to become a millionaire, it’s best to listen to those folks. I definitely am.
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How Much Should I Spend On A Car

Budgets are important, especially when you're buying a car. As with all things financial, of course, there's a debate over how much of money you should spend on your next car. Roughly 40 percent of consumers try to stick within 15 percent of their budget, according to CNW Research, while about half want to stay within just 5 percent of their budget. You should check with a financial planner to determine what's right for you; you don't want to become “car poor” because you don't have anything left for the month after making your car payment.
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How Much Should I Spend On A Car

The recommendation you follow to determine how much you can spend on a car depends on how conservative you like to be with your finances. You could spend half of your salary on a car if you have a secure job, no other debt and your other expenses are fairly limited. If you don’t have debt beyond a mortgage, see if spending up to 15 percent of your monthly net income on car expenses makes sense for you. People who have other debt, live in an area with a high cost of living, or who want to avoid biting off more than they can chew debt-wise, should use the 36 percent debt rule.
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The exact amount that you should spend on a car might change depending on who you ask. Some experts recommend that car-buyers follow the 36% rule associated with the debt-to-income ratio (DTI). Your DTI represents the percentage of your monthly gross income that’s used to pay off debts. According to the 36% rule, it isn’t wise to spend more than 36% of your income on loan payments, including car payments.
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Enzo Baldwin Lol @ Seanmar. Lots of American cars are made in Mexico or Canada and plenty of Imports are made right here in good ole states like Tennessee. Edit: This article was pretty informative, but if you’re a young person, there’s no way in hell you’re only spending 80 a month on insurance. TruthTrollUSA Agreed, which is why I’ll always be an Accord driver. Mikael Accord? You mean, Honda? The Japanese company? TruthTrollUSA I encourage you to research where the Accord is manufactured and how many American jobs are tied to its production. Many “American” cars (ehem, looking at you Chevy and Ford sedans) are actually imported from Mexico. ANDREW JACKSON Accords are actually manufactured in Ontario, Canada TruthTrollUSA That may be for the Canadian market. Accords sold in the US are manufactured in Ohio. Mikael I burst into laughter at the thought of spending more than 10k on a car! LET ALONE 30-40k Bahahah, good one. Here I was looking for advice on weather or not to buy a car outright for 3k-6k or if it’d be worth it to take a 6 month loan of 2k go up to 8k, and which factors to take into consideration to make that choice! Floyd Why not spend more? What are you going to do with all of your money? Life is short, enjoy it. Mikael You know, down payment on a house, savings, investments. Life is short, but that doesn’t mean it’s smart to spend my hard earned money now and have none for later when hard work isn’t possible, not even going to consider spending TOMORROWS hard earned money today. Ant and the Grasshopper and all that. Cody Williams A very solid reason is that money has other uses. Not spending it on a depreciating asset lets you use it on something more useful, like a better down payment on a house or investing it for retirement. People hear things like “retirement” and assume its far enough off that it doesn’t matter, but you could retire far earlier than otherwise (like decades earlier) if you save more of your money. Life IS short, and being able to spend extra decades enjoying life instead of being required to work is a very valuable thing. jason I dont see any reason why it has to be no more than 4 years. You can get 0% interest for 6 years on some new cars. If its 0% interest there is not reason to even put any money down. Even if you do pay interest better off investing the money in something that earns a higher return than the interest that you are paying. Woof! Woof!
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So if you value your car, I don’t see anything wrong with spending more than we recommend for most people, perhaps up to 50 percent of your income on a car. Chances are—as a car person—you’ll care for the car more, enjoy it more, and get more money for it when you sell it than the average car owner. Again, you just have to remember that because the car will be a large expense, you’ll have to be extra vigilant about other expenses.
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For the majority of shoppers, the budget hits home in the form of a monthly car payment. About 85 percent of new-car buyers today finance or lease their car, according to Experian Automotive. A majority of used-car shoppers do the same. So, how does that monthly payment turn into a new-car budget, and how much should it be? Start with some of our tips.
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Lots of guidelines and even some affordability calculators aim to help you answer the question: How much can I afford for a car? But it’s fairly simple. You earn a certain amount of money and you have to spend some of it on expenses, including food, rent or mortgage, utilities and commuting. How you divide up the remaining money — and how much of it you spend on a car — is up to you. While there are practical limits, the way you slice up your spending is partly emotional.

Published on Jun 2, 2017 | Under Car | By michael ellis
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