How much car can one afford?

[Dave-ROR]

Originally Posted by Purdue FR-S

I was moreso looking for a general rule of thumb (and/or legal rule if it exists) of "how much car" someone can afford given a specific level of income.

I used to go by the "Car shouldn't cost more than 50% of my annual income". That was when I made 40-50k a year. Now I don't want to buy anything that's more than 25% of my annual income. Different priorities now, even though I still dump way too much money into car related activities, just not my car payment so much. I also have a personal rule on my maximum car payment, which is $400 a month. No matter if I buy a Ford Fiesta or a GT3RS 4.0, the downpayment will have to allow for no more than a $400/month payment or I'm not going to do it.

The bank is going to look at your DTI, employment history, income, living expenses (rent/mortgage/etc) to determine the risk. They don't have a "rule" that I'm aware of besides making sure the loan makes sense (ie low chance of you defaulting on it, interest rate increasing with that risk).

[wbradley]

There are two main measurements of wealth; assets such as cash, real estate, cars, businesses etc, and the second type of wealth is future income. In oither words, your expected monthly salary at present.

Unless you have the assets which you can liquidate to pay cash, or the income that you can afford to comfortably pay monthly, then don't bother. Further if you are young and have yet to build significant assets, buying an expensive car which is usually a rapidly depreciating item, will likely delay you from aquiring significant assets for some time.

As an example, I am married, own a home etc. The FR-S is my toy summer car and a bad investment. However, I was able to liquidate assets to pay for more than half the vehicle up front. Also, since I now own 2 relatively new vehicles, I promised myself I will keep them both at least 8 years since I usually change vehicles ~ every 4 years. This way, aside from maintenance and insurance, I will have spent not much more than I normally do on my vehicles.

That's why you *usually* see a lot of older people driving the really expensive cars.

[Dadhawk]

Originally Posted by Dave-ROR

I used to go by the "Car shouldn't cost more than 50% of my annual income". That was when I made 40-50k a year. Now I don't want to buy anything that's more than 25% of my annual income. ...

The version I use of this is that all vehicles (cars, motorcycles, atv's boats, airplanes, x-wing fighters) do not add up to more than 50% of our family income.

The good news is each year everything depreciates so that adds wiggle room.

You wouldn't believe how much a x-wing depreciates the first time you fly it off the star cruiser.

[ap5512]

Everyone has great responses. I think it's really a personal decision as everyone will have different priorities. The BRZ is the most expensive car I've ever bought and I almost sweated bullets paying $28k for it. Now, I would say my wife and I definitely make more than your average household but our priorities are tied up in buying a bigger house and of course just general savings and paying off other debt. We can easily afford a higher end car but doesn't mean we should. I've got friends who buy expensive cars and have big houses...BUT they aren't saving shyt. They don't have any kids but I wonder what they will do once the expense of kids plays a huge factor.

I see no problem in enjoying a new job money (I certainly did with a used S2000) but always keep in mind your near/long term goals. I like the 50% rule @dave_ROR mentioned.

[Captain Insano]

LOL!!!

Originally Posted by LSxJunkie

How well do you want to live?

[e30kawi]

Originally Posted by Purdue FR-S

But to me, seeing my income increase 4-7 fold (purposely vague) means that I'll have a lot of excess sitting around, and assuming I make solid contributions to retirement accounts, I could still have a nice chunk left over.

You might be surprised at how quickly you can spend your increased income. The little stuff adds up quick. I remember being like you in college and thinking "wow, I can't imagine making $xx,xxx.00 a year and not having tons of cash laying around."

Like others have said, focus on buying a house and some land before you even consider buying a car anywhere near half of your annual income.

[Porsche]

Originally Posted by LSxJunkie

How well do you want to live?

There's an alternative to this funny caption.

This could be the Viper owner visiting her son and grandchildren at the place they rent. For the first time in American history, parents (Boomers) report that they don't believe their children will do as well as they (the parents) have done. This reflects a trend that is probably irreversible.

The youngsters such as Purdue FR-S and his generation may be looking at hard times into the indefinite future. Purdue looks to have an unusually good start, and more power to him, but he may wish to ponder the significance of the realities of modern America. The opportunities that his parents enjoyed are fast disappearing in our country.

Purdue would also do well to consider that the kind of job security his parents enjoyed is also fading fast.

You don't see what's so scary?

You're about to find out.

I wish you luck.

[Purdue FR-S]

Originally Posted by Porsche

The youngsters such as Purdue FR-S and his generation may be looking at hard times into the indefinite future. Purdue looks to have an unusually good start, and more power to him, but he may wish to ponder the significance of the realities of modern America. The opportunities that his parents enjoyed are fast disappearing in our country.

Purdue would also do well to consider that the kind of job security his parents enjoyed is also fading fast.

You don't see what's so scary?

You're about to find out.

I wish you luck.

Lol be careful about the number of assumptions you make here. While indeed there was a time when manufacturing jobs were easy to come by, my dad has been laid off multiple times and had to find new work on more than one occasion. I'm not sure what job security you're talking about.

And to be honest ... I'll admit a lot of my generation needs to get their shyt together; but I'm also pretty convinced that you'll reap the seeds you sow. (In terms of how much time/effort you spend in your youth preparing for entering the job market)


Good conversations guys! Balancing what you want/need is something everyone has to suffer through I'm afraid. I'm also afraid of learning how quickly my extra income will disappear!

[Dave-ROR]

Originally Posted by Purdue FR-S

Good conversations guys! Balancing what you want/need is something everyone has to suffer through I'm afraid. I'm also afraid of learning how quickly my extra income will disappear!

It's a strange thing but it happens. When I made 20K a year I thought "man if I could make an extra 10K I could do all these other things" then at 30k it was "How'd I live with just 20k? geez I need another 10k/yr to do those things" and the cycle repeats over and over. Besides wasting money racing I don't have too vastly different spending habits now than I did when I made half the money, and yet, I still don't feel like I have plenty of extra cash to do whatever I want.

Well I guess investing and 401k has taken up a fair enough chuck of that money too.

[OrbitalEllipses]

Originally Posted by Dave-ROR

It's a strange thing but it happens. When I made 20K a year I thought "man if I could make an extra 10K I could do all these other things" then at 30k it was "How'd I live with just 20k? geez I need another 10k/yr to do those things" and the cycle repeats over and over. Besides wasting money racing I don't have too vastly different spending habits now than I did when I made half the money, and yet, I still don't feel like I have plenty of extra cash to do whatever I want.

Well I guess investing and 401k has taken up a fair enough chuck of that money too.

That's typical. When my parents came here they made minimum wage; now they're pretty set as they spend within their means yet there's always the "if we had $xxxxx more money..." which to me makes money like a drug. You build up tolerance and need more and more of it to get the same effect it used to give you. Eventually you can OD and die (bankruptcy).

[paros28]

"Beggars make rags
Rags make paper
Paper makes money
Money makes banks
Banks make loans
Loans make beggars
Beggars make rags"

Anonymous. English 19th Century.

[Dadhawk]

Originally Posted by Dave-ROR

It's a strange thing but it happens. When I made 20K a year I thought "man if I could make an extra 10K I could do all these other things" then at 30k it was "How'd I live with just 20k?.....

Originally Posted by OrbitalEllipses

That's typical. When my parents came here they made minimum wage; now they're pretty set as they spend within their means yet there's always the "if we had $xxxxx more money..." which to me makes money like a drug. You build up tolerance and need more and more of it to get the same effect it used to give you. Eventually you can OD and die (bankruptcy).

I think you may be leaving out the "more I earn, the less I get to keep" portion of this. That has a much bigger impact than people realize.

[Dave-ROR]

Originally Posted by Dadhawk

I think you may be leaving out the "more I earn, the less I get to keep" portion of this. That has a much bigger impact than people realize.

I was purposely leaving that out. I love paying my taxes after all :happy0180:

[OrbitalEllipses]

That too. Taxes only go up!