Auto loan as % of income

[civicdrivr]

My loan is about 7% of my take home pay. But that number is really skewed since I travel quite a bit for work, so just my monthly mileage reimbursement covers the car note - and the mileage reimbursement is separate from my income.

Rent is approximately 20% of my income, food and other bills come in at ~15% or so (Im very low maintenance ) and the rest goes into savings.

[SkullWorks]

I got financing for 1.99% and bought the car to establish credit, and as a parts dev. mule. it is my 6th car (in the collection). and the first thing I have ever bought on credit, I got a 48 month loan, and the payment is 7% of my monthly post tax income.

I will pay the car off well before the loan period, and the interest on the loan would only be $1,100 over the life of the loan if I took full term to pay it off.

[poudre]

Originally Posted by Rossman

This is crazy logic that I often hear repeated and it just makes no sense. You've been conditioned by the banks if you actually believe this.

Debt is NEVER good (though largely unavoidable when buying a house) and should never be used if at all possible. If you want to get played by the banks, have fun with your "manageable debt" (this really just means the banks are "managing" to make a living off of you!).

One of the primary reasons North America is still in recession (in case you hadn't noticed!) is because of people taking on debt, instead of saving like the old days!

+1

[Rossman]

I would love to reply to all the comments in this thread but you guys just posted too much, and I won't convince anyone of anything anyway. Also I don't really care that much since I am content with my financial planning!

Originally Posted by Spaceywilly

Company stock options

Of course, I haven't sold anything yet so the 20% is all just unrealized gains, but it's still doing better for me than if I had just taken it all as cash and used it to pay for my car. Regardless, with interest rates being so low the original quote that I replied to "debt is no good" is a foolish way of looking at things. The interest rate on my car is 2.9%, it's easy to beat that even without taking on a lot of risk.

I would like to comment on this point though, if I had a dollar for every time I heard the above type of comment "stock options/company stock I am gonna be rich woo!" and then shit fell through, I would be a rich man. You aren't "doing better" until you cash out and have money in hand. Money that may or may not ever be realized can't be counted. I knew so many paper millionaires in the dot-com boom that weren't feeling so happy just a few short years later when the bottom fell out.

I wish you the best of luck but there is "chance to make money" versus "actually made money" and things generally fall into the former category, unrealized, far more often than not.


Also, yes I do realize that our economy is not solely in the shitter because of personal debt, there are grave structural problems that have developed in our systems which are like a cancer gutting it out from the inside...but really that would make for a very, very long and boring thread, and I'd rather be talking about our cars!

[Nevermore]

All this talk of numbers, you guys are going to make me regret getting an FR-S >_>

I will say, I've always been fairly responsible with my money, and most people I know will tell you I'm cheap, my parent might call me responsible, even stingy. I will admit, the FR-S was probably the worst financial choice I could've made at this time. It is affordable, but at the high end of my budget and probably 18% of my income. I live at home on cheap rent and have a decent amount of student loans racked up. A car loan at this time is not a good idea, but because of my nature, I won't default.

A little background, a few months ago my current car decided to act up and while I was going back and forth with a mechanic trying to fix it I got a bit jaded about it. I love this car to death, but I was tired of fixing it. My dad told me about this program that toyota had so I started looking at toyota's and scions. I flip flopped around while my car was getting fixed, and while I was flip-flopping, the FR-S showed up and I decided I had to have it. At this point, my car was fixed.

I had 3 choices, keep my car and hope it didn't break again. Get another used car, spend less. Get a cheap toyota/scion, or get the car I wanted, the FR-S. I chose the FR-S. It might make my budget tight. But I think it'll be worth it, plus the lease option has made it cheaper. All this worrying might make me regret it though.

[Spaceywilly]

My company is fortune 500, S&P 500, and we get it 15% below market value. There is always risk in the stock market but this is not a huge risk, and it's not like I'm betting my house on a startup. All I'm saying is I can invest the money this way and maybe make money, or I could spend it on a car and guarantee that I lose it. I paid cash for my last car and did not regret it, since I was still in school and did not have a reliable source of income to make the payments on a loan, but this time around financing made more sense to me.

[Capt Canuck]

Nevermore: Everyone on the internet knows everything and always maxes out their potential this, that, and the other. Surely you know that ;-)

Seriously, enjoy the car, if it makes sense for you and you are comfortable with all the responsibilities that come with the car, well quite frankly everyone else can get stuffed :-)

[robinD'soza]

I can understand....that you are eager to buy a car; however, for 5 years loan do not go over 9.8%.

[michaelahess]

I've been young and stupid. I've had loans that were over 50% of my income. I've managed. Would I recommend it to anyone? HELL NO! You are one BROKE ASS MOFO and you KNOW IT! The car just doesn't make you feel better about yourself in that circumstance...

I like keeping loans under 2-5%, my BRZ is about 4% right now but that's only for the 3 months I'm financing it for before I just pay it off.

Better to save a few years and get a new car without the debt over your head in my opinion.

[Tman08]

One of the main reasons I am waiting until next June to get my BRZ is due to how much I can save, to put down on the car. I also want to get a 36 month loan over the 48 or 60 mo. While a part of me really wants the car now (85%), I have to step back and make sure I buy it under the best circumstances in my current situation.

With that said, I will echo what others have said and it all depends on your income/comfort level, etc.

[Sprinterboy]

Originally Posted by alyon

No.. just no. A entry level credit card will build up your credit score but be almost entirely ineffective. When you go for a mortgage the lender will look for installment credit history. This include auto loans, student loans, previous mortgages, and other personal loans. We really don't give a crap about credit cards.

Originally Posted by alyon

-I work for a commercial real estate lender

Solution?

I have had loans, I’ve had credit cards, I now find myself here in the USA (i'm Aussie and moved here 4months ago) with ZERO credit score.
Proof of loan history back home means nothing (paying 15.5% as its one of the lowest rates you can get)
Proof of credit history back home means nothing (again paying 7% as one of the lowest rate you can get)

What can a 28yr old Guy earning 75k (tax free) do to get a "US credit score" ?....

Get a credit card..... Start from scratch...


For those that have "bad" credit (and I’m still learning this rather weird system) Have a thought for somebody in my shoes. The last thing I expected when moving to the US was to be put behind…

All banks back home require you to complete a means test before getting a loan/credit car. Provide your pay slips, your costs of living (rent/insurance/credit cards etc) and then they decide if your disposable income is enough to make payments.

A credit card back home is considered a bad thing. It affects your likely hood of getting a loan.
Example: a credit card with $5000 limit at 10%interest (about an average rate) will mean that even if you have a clean card with nothing owning, the bank will see it as you have the ability to use that credit (as you are entitled to) and thus consider it a constant dept with a constant minimum repayment. In-turn effecting your “disposable income”

[alyon]

Originally Posted by Sprinterboy

Solution?

I have had loans, I’ve had credit cards, I now find myself here in the USA (i'm Aussie and moved here 4months ago) with ZERO credit score.
Proof of loan history back home means nothing (paying 15.5% as its one of the lowest rates you can get)
Proof of credit history back home means nothing (again paying 7% as one of the lowest rate you can get)

What can a 28yr old Guy earning 75k (tax free) do to get a "US credit score" ?....

Get a credit card..... Start from scratch...


For those that have "bad" credit (and I’m still learning this rather weird system) Have a thought for somebody in my shoes. The last thing I expected when moving to the US was to be put behind…

All banks back home require you to complete a means test before getting a loan/credit car. Provide your pay slips, your costs of living (rent/insurance/credit cards etc) and then they decide if your disposable income is enough to make payments.

A credit card back home is considered a bad thing. It affects your likely hood of getting a loan.
Example: a credit card with $5000 limit at 10%interest (about an average rate) will mean that even if you have a clean card with nothing owning, the bank will see it as you have the ability to use that credit (as you are entitled to) and thus consider it a constant dept with a constant minimum repayment. In-turn effecting your “disposable income”

Hmm. Have not worked with any Aussies. With Canadians we will use their non US based credit history but it will just be under more scrutiny.

Although commercial versus residential lending have many different practices. We also tend to deal with much more sophisticated borrowers.

[Dadhawk]

Originally Posted by Sprinterboy

All banks back home require you to complete a means test before getting a loan/credit car. Provide your pay slips, your costs of living (rent/insurance/credit cards etc) and then they decide if your disposable income is enough to make payments.

There are banks in the US that will do a means test if your score is zero or there abouts. You just can't go to the big lazy banks. Go to a local bank or credit union where you are living, they should be able to do it.

[Sprinterboy]

Originally Posted by Dadhawk

There are banks in the US that will do a means test if your score is zero or there abouts. You just can't go to the big lazy banks. Go to a local bank or credit union where you are living, they should be able to do it.

I Live in DC. It was painful enough to set up a bank account with Bank of America.

I've spoken to a few dealerships and they do have some compashion which is nice and may be able to help out with some sort of finance option as its not totally uncommon in this area.
Whats a good rate over here? Ive seen adds for 1.9%. Thats crazy low for a new car!

I'm still on the understanding that I'll have to work up a credit score for pretty much everything. so Credit card is the only way to go for me for now.
The bank was nice enough to give me a sizeable limit to start with. (after many calls from my embassy stating my employment/salary etc)

I just want to get behind the wheel and get to some track days. I miss my AE86!