what percentage of income is acceptable for car payment?

[snoflewis]

i keep reading 8-10%. thinking about pulling the trigger although mine would be 15% pre-tax income

is that unreasonable? i know it's different for everyone, but for a fairly new professional/college grad, not sure if im going over the top here.

background: currently paying ~6% for a used ep3 civic si i financed due to my car breaking down a year before graduating college. didnt know what the future held, so played it safe and bought a car w/ cheap payments over a g35 coupe. can't say i don't regret it. been looking at the ft86 since the concept. is it time to pull the trigger or what? :happy0180:

[kthxbai]

My fiance used to sell cars for Nissan and found a safe rule for knowing if you can afford a car would be to keep one idea in your mind: the max you should spend on a car would be equivalent to what your make in a year. Thisb is a good rule of thumb unless you can put a nice down payment to bring your payments down.

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[7thgear]

I wouldn't ask a forum about your personal finances...

it depends entirely on how you live your life and how you spend the rest of your money

[njccmd2002]

if you live with mom and dad 75%. 25 % for gas and mods
if you live alone then 50%. 50% for gas mods beers and apt.
if you have a girlfriend then 25%. 50 for gas, mods, apt and 25% for your girls hair and needs.
if you are married 100% to your wife, for anything she wants.

[CSG Mike]

Banks typically allow 15% of your gross income for car payment, and 50% of your gross for your total monthly obligation.

Keep in mind, those are the MAXIMUMS for those with top tier credit. You really should be under that. I'm guilty of having a car payment that is far more than what I should have.

I'm in banking for my day job, and also used to work for an Automotive OEM in the past.

[suaveflooder]

Hmmmm....we need more info. I would keep the civic personally and refinance for a lower rate. I currently have both an FRS and 2007 civic. The civic is HANDS DOWN the more practical of the two. Better gas mileage, more room, bigger trunk, just a more usable car IMHO. If I had to choose to get rid of one, I would say goodbye to the FRS before the civic. Love my FRS, just able to use the civic for more

As far as what to pay, I would at least get the car out of the red with your downpayment. Probably gonna be about $7k-$8k after TTL. That should get your payments in the mid 300's and if you end up NEEDING to sell for some unforseen circumstance, you are covered. Being freshly out of college that would probably be your wisest choice if you want one now/soon. Cover yourself for if/when something comes up and you need to sell.

Sorry, rambled a bit, but hope that helps.

[n2oinferno]

Originally Posted by kthxbai

My fiance used to sell cars for Nissan and found a safe rule for knowing if you can afford a car would be to keep one idea in your mind: the max you should spend on a car would be equivalent to what your make in a year. Thisb is a good rule of thumb unless you can put a nice down payment to bring your payments down.

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Sounds like a car salesperson's advice, for sure, haha. That means I "could" buy a Vette, but could I really afford it? Hellll no.

The rule I've always heard is half of your yearly income.

[nalc]

Originally Posted by n2oinferno

Sounds like a car salesperson's advice, for sure, haha. That means I "could" buy a Vette, but could I really afford it? Hellll no.

The rule I've always heard is half of your yearly income.

Yeah, a full year is high. Even ignoring interest and taxes and insurance and maintenance, that means that on a 5 year loan, you're paying 20% of your annual gross income on the car every year. Toss in income taxes, interest, gas, maintenance, insurance, etc. you're getting to the point where every third paycheck goes straight into the car. Not a comfortable place to be, unless you're living with parents or something like that, in which case you should be saving up money to move out on your own eventually, not blowing it all on a car (trust me, I've had friends with $30K sports cars who lived with Mom, nobody thinks you're cool)

It depends on how much worrying you want to be doing about money, but I'd personally keep your car payment well under 10% of your annual gross income. That gives you plenty of breathing room. You don't want to have a pretty nice new car and not be able to afford to go anywhere or do anything fun because you're barely making ends meet trying to pay for a car you really can't afford. I like the freedom of being able to decide to go out for a night, take a trip, whatever, without worrying too much about how much money it is, so I don't rent the biggest and nicest apartment I could afford, and I don't buy the highest end luxury sports car that I can afford, because it's a lot more fun to be able to spend money when you want than to have a slightly nicer car (that's going to depreciate anyway) or a slightly nicer apartment (that you don't own anyway). No way would I want 15% of my AGI tied up in a car payment , but to each his own.

[7thgear]

Originally Posted by njccmd2002

if you are married 100% to your wife, for anything she wants.

your math is a little off, it's actually around 130%.. as you go into a little more debt every month.

[utekineir]

one of those questions that varies for everyone, and not necessarily info you want to put out online.

at the end of the day, income isn't what you make, its what you keep.

Just food for thought.

[bakerr6]

Originally Posted by 7thgear

your math is a little off, it's actually around 130%.. as you go into a little more debt every month.

I can attest to this same fate. I asked my wife to guess how much our last vacation cost us, and she guessed high. When I told ehr the actual amount, she told me "next I guess I'll have to do better." Believe me, she wasn't talking about spending less by no means lol

[rapidcars]

Originally Posted by kthxbai

My fiance used to sell cars for Nissan and found a safe rule for knowing if you can afford a car would be to keep one idea in your mind: the max you should spend on a car would be equivalent to what your make in a year. Thisb is a good rule of thumb unless you can put a nice down payment to bring your payments down.

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That sounds way too high unless you live at home and/or never plan on retiring. Half of what you make in a year sounds about right.

[rice_classic]

IMHO, the total price tag of a new car shouldn't be more than 25% of annual income for us "average" folks. Gross or Net, that's up to you I suppose. So if want a $25k car, you should be in the ball-park of a 100k salary.

Once you're an international oil magnate then do whatever you want.

[n2oinferno]

Originally Posted by rice_classic

IMHO, the total price tag of a new car shouldn't be more than 25% of annual income for us "average" folks. Gross or Net, that's up to you I suppose. So if want a $25k car, you should be in the ball-park of a 100k salary.

Once you're an international oil magnate then do whatever you want.

I know that you said your opinion, but I think this depends on cost of living and other factors though, as well.

100K for me here in South Carolina is a lot different than someone in New York or California.