Can I afford this car?

[reni]

As much as I want Toyota/Subaru to sell as many as possible, I really don't get the point here. You want to spend something like 80-90% of your yearly take-home pay on something that will drop rapidly in value, and you won't even use it very often.

If it was me I would get something used that's already past the steep part of the depreciation curve, you're tying up less capital and the value should remain pretty stable if it's not driven often. Or, wait until I could pick up a 2013 FRS/BRZ for pretty cheap and DD it to avoid the expense of owning/maintaining/insuring two cars.

[kayoh]

My 2 cents, no you can't. But then again, it depends on the type of lifestyle you want. If saving for retirement, not having to pay off your student debt 2-3 times over, putting a down payment on a house, or establishing an emergency fund aren't priorities for you, then go for it.

[Longhorn248]

I took a wild guess at your monthly numbers. I basically took your monthly average take home and subtracted your expenses. If I had a better idea of where you lived the rent and tax rate would be more accurate. Obviously plug in your own numbers. With this you'd have about $400 left to cover entertainment, vacations, mods, and savings for a rainy day fund. If that makes you comfortable then go for it. If it doesn't then I'd hold off.

Gross Pay............................................... ..43000.00
Gross/Week.............................................. ....826.92
Monthly Avg. (4wk/mo)...............................3307.69
Monthly Avg. Take Home (25% tax rate)......2480.76
Savings (5%).............................................. .-124.03
Rent+Utilities.................................... ...........-800.00
Insurance......................................... ..............-80.00
Gas............................................... ...............-100.00
Food ($3/meal for 30 days)..........................-270.00
Cellphone......................................... ..............-50.00
Student Loans ($29k national average).........-300.00
Car Payment........................................... .....-350.00
Remaining .................................................. ...406.73


Creating a monthly budget is fairly simple, they really should stress this a lot more in high school.

[pche]

If you have to ask, no.

[Prog]

I don't think you can afford it. As others have said, being able to pay for the financing isn't the same as being able to afford the car.

@Longhorn248 was very nice there and took the time to estimate your budget. I think he may have underestimated just a little on a few things, but I realize that also depends on where you live (I pay more than $50/month for my phone, and I definitely spend more than $3 meal on food, despite not eating out more than a couple times a week).

I think you really shouldn't be considering this purchase based on your current finances, but also keep in mind your future finances. You're currently renting, but are you ever planning on buying? Do you have an emergency fund that covers 6 months of your expenses? Are you properly contributing to a retirement plan?

You already have a car, so I don't think it would be financially wise to ignore your other possible financial responsibilities.

[ncmx5]

If your down with leasing, since your not driving alot. I did 0 down 16k a year 300/month for 42 months. Was a great deal but I did have a bit of equity from my trade, which was a lease as well.

[AznBRZer]

@Prog and @Longhorn248

Just a quick nitpick: Because of the current job market and depending on the field, I'd say it's far safer to have at least 1 year of savings nowadays.

[Longhorn248]

Originally Posted by Prog

I don't think you can afford it. As others have said, being able to pay for the financing isn't the same as being able to afford the car.

@Longhorn248 was very nice there and took the time to estimate your budget. I think he may have underestimated just a little on a few things, but I realize that also depends on where you live (I pay more than $50/month for my phone, and I definitely spend more than $3 meal on food, despite not eating out more than a couple times a week).

I think you really shouldn't be considering this purchase based on your current finances, but also keep in mind your future finances. You're currently renting, but are you ever planning on buying? Do you have an emergency fund that covers 6 months of your expenses? Are you properly contributing to a retirement plan?

You already have a car, so I don't think it would be financially wise to ignore your other possible financial responsibilities.

I agree with the underestimate. I didn't want to bias the analysis towards not getting the car. Hopefully he can fill in his own numbers to decide for himself. If I were doing my own personal budget I'd use $5-$6 per meal as I only eat out once or twice a week and consider that "entertainment" and the phone bill would be double. If you throw those into the calc that leaves $290 a month of discretionary spending which is less than $10 a day. I don't know about anyone else, but I'd like to know I can spend more than $10 a day on random shit without having to worry about it affecting my ability to pay my bills.

[Dadhawk]

There's a lot of good advice above. I'll add my $0.02 worth.

If you were my son (and I have one your age) here is what I would tell him, and it is what I do.

• Never buy a car (or any other depreciating asset) that you can't pay cash for, even if you decide to finance it.
• Don't finance it. There is a car out there you can afford to pay cash for, it just may not be your dream car, but it will be great car. Extreme example, I drive an FR-S. I'd love to drive a supercar (say an Adventador), and I could probably find someone to loan me the money for it (at minimum I could mortgage my paid-for house tomorrow to finance it), but that doesn't mean I should.
• The total value of anything with an engine in it you own should not add up to more than half your annual income. That's a lot of money to be losing every year. (That kills the supercar for me!)
• The definition of being adult sometimes means we give up things we want today so we can have better things tomorrow.

(NOTE: For those that are familiar with Dave Ramsey, this will probably sound directly out of his playbook, and it is. However, I've been doing it since I was 16 and paid $300 for my first car, when what I really wanted was a $2,500 used '69 Camaro, so let's just say he and I both understand common financial sense.)


I've posted this before, but here is something to think about (also Dave Ramsey)

[ame="http://www.youtube.com/watch?v=BKyV8CTHeJ0"]http://[/ame]www.youtube.com/watch?v=BKyV8CTHeJ0

[Prog]

Lots of good advice right there ^ from @Dadhawk.

[shellslinger]

Buy a nice used Miata pretty much the same thing just convertible.

[AznBRZer]

Originally Posted by Dadhawk

There's a lot of good advice above. I'll add my $0.02 worth.

If you were my son (and I have one your age) here is what I would tell him, and it is what I do.

• Never buy a car (or any other depreciating asset) that you can't pay cash for, even if you decide to finance it.
• Don't finance it. There is a car out there you can afford to pay cash for, it just may not be your dream car, but it will be great car. Extreme example, I drive an FR-S. I'd love to drive a supercar (say an Adventador), and I could probably find someone to loan me the money for it (at minimum I could mortgage my paid-for house tomorrow to finance it), but that doesn't mean I should.
• The total value of anything with an engine in it you own should not add up to more than half your annual income. That's a lot of money to be losing every year. (That kills the supercar for me!)
• The definition of being adult sometimes means we give up things we want today so we can have better things tomorrow.

(NOTE: For those that are familiar with Dave Ramsey, this will probably sound directly out of his playbook, and it is. However, I've been doing it since I was 16 and paid $300 for my first car, when what I really wanted was a $2,500 used '69 Camaro, so let's just say he and I both understand common financial sense.)


I've posted this before, but here is something to think about (also Dave Ramsey)

If the point is to save your money for retirement, I think it's a great one and I agree with it whole heartedly, but the math is in that video is a bit...questionable.

[t.chk]

Originally Posted by BlueDubbinTDI

Jesus, I hope nobody gets butt hurt by this but for the the 700-800/mo youre paying for this car every month between insurance and payments, you could get a much nicer ride...

I test drove a lot of cars before buying this one (dodge dart, chevy cruze+camero, Hyundai volester+genesis coupe, mustang). Not the nicest of the bunch but I liked driving it the most. I am spending that much because I might loose my job at the end of next year. Budgeted myself to have the car paid off by the end of this year so I can get cheaper insurance and no loan messing with finances if I don't get as good a job.

[Dadhawk]

Originally Posted by AznBRZer

If the point is to save your money for retirement, I think it's a great one and I agree with it whole heartedly, but the math is in that video is a bit...questionable.

The rate of return on investments he uses for demonstration purposes tends to be a bit optimistic but having an investment account to use to buy a car is the same as having one to enable retirement.


Basically, you want to have an account where you can extract the gains (plus taxes) every so often without touching the principal. In the case of the car, you have a slight advantage in that there is some residual value in the car you are replacing you can add to it.


Even just paying yourself a car payment each month (rather than to the bank) will enable you to buy a new car at the end of the "loan", and even step up in car several times along the way (as suggested in the first part of the video). The advantage is that if your situation changes tomorrow, you aren't stuck with a car payment (you can stop paying yourself).


In the end, people get along fine doing it either way, as long as everything goes OK. It's when things don't go OK the choice becomes more clear to me and the level of risk I'm willing to take.