by "BIGBLOCK472 - wide and bizarre" (bigblock472)
Published 03/21/2017 at 22:05
by "BIGBLOCK472 - wide and bizarre" (bigblock472)
Published 03/21/2017 at 22:05
Tags: Car buying
STARS: 0
Just getting a feel for the general consensus (if there is one)...
How much would you spend on a car, expressed as a percentage of your yearly income assuming a 10-20% down payment?
"BmanUltima's car still hasn't been fixed yet, he'll get on it tomorrow, honest." (bmanultima)
03/21/2017 at 22:07, STARS: 1
I’m really not the right person to answer, because my car was 50% of my yearly income, paid up front in cash.
Hopefully that percentage will go down next time I need to buy a car.
"CB" (jrcb)
03/21/2017 at 22:12, STARS: 1
Depends on the kind of car and what I’m looking for. Daily driver? I’d say $90k at the absolute maximum (I dream of Volvos). More likely it’d cap at $50k. Prices are Canadian, of course.
If it were a toy, and I had the funds, I’d say probably $100k? At an absolute max, once again. I dunno, I could never spend that much more on a car, considering the fact that most things past that price range would only ever be driven at 50% their capacity if it was a performance car, and I’d be terrified to drive anything else that expensive.
"FTTOHG Has Moved to https://opposite-lock.com" (alphaass)
03/21/2017 at 22:12, STARS: 0
I’d say max 30% on a 5 year loan, assuming an interest rate of 3% or less. What I financed for my two cars total (after down payments) is a more like 33% with 1.9% and 1.65% interest and it makes the budget tight. My rule of thumb has always been you can to finance $30k on a new car new if you make $100k/year. Of course, depending on your family an housing situation, this can shift around a little bit.
"E90M3" (e90m3)
03/21/2017 at 22:12, STARS: 0
It comes down to what you’re comfortable paying. I put down 40% on my M3 and the total price of the car was 71% of my salary before taxes. I bought the car before I knew how much bonus I would be getting. At the time I was comfortable with the loan. The loan was “only” 42% of my pretax salary. It was something like 570 a month, I was fine paying that. I may have spent a lot on a car, but if that’s what you want to do, then go for it.
I guess I should add that I was a frac engineer and I ended up making a lot of money and paid off the M3 in a year. However, I didn’t have that knowledge at the time. I was comfortable making those payments and could have survived fine on salary.
"XJDano" (xjdano)
03/21/2017 at 22:13, STARS: 0
I wouldnt pay over $15k.
I’m also a cheap ass, and own 4.
"E92M3" (E46M3)
03/21/2017 at 22:15, STARS: 1
Most financial advisors will tell you that your auto expenses shouldn’t exceed 20% of your monthly income (take home not gross). That includes the cost of insurance. I believe you can go beyond that if you’re willing to sacrifice (spend less) in other areas like (eating out, clothing, housing, etc).
"Dr. Zoidberg - RIP Oppo" (thetomselleck)
03/21/2017 at 22:15, STARS: 0
Any car I buy is paid in cash. Before you think to yourselves, “What a shock there,” do know that my wife’s car cost
actual
money at the time, and we paid in full. Percent of our income... it was not much of it, because we both work full time. It’ll have paid for itself in no time with how much money I’m not spending repairing her last car.
"FTTOHG Has Moved to https://opposite-lock.com" (alphaass)
03/21/2017 at 22:20, STARS: 0
That seems like a good absolute upper bound. I just calculated out my 2 payments + insurance + gas to be around 15% and I don’t think I could stomach much more.
"Wobbles the Mind" (wobblesthemind)
03/21/2017 at 22:24, STARS: 0
A week’s take home paycheck in the end would be my limit. So a $20,000 annual salary would be about a $291 monthly car payment.
"Rusty Vandura - www.tinyurl.com/keepoppo" (rustyvandura)
03/21/2017 at 22:28, STARS: 0
$0.02
Otherwise, $5,000 including new tires, brakes, shocks and a timing belt. Cars are four-wheeled money pits. I like my money pits as shallow as possible.
"Dr. Zoidberg - RIP Oppo" (thetomselleck)
03/21/2017 at 22:30, STARS: 0
If anyone is making as little as $20,000 and they’re paying $300 a month for their car, I hope they live somewhere where the costs of living are close to zero.
"Die-Trying" (die-trying)
03/21/2017 at 22:32, STARS: 2
i keep 2 months bills lined up, (rent, light, water, gas,food) all the re$t can go........
"Wobbles the Mind" (wobblesthemind)
03/21/2017 at 22:38, STARS: 1
I think that’s actually how people end up with roommates and splitting the cost of living with someone else. BigBlock did ask for the limit and I think that’s the real limit.
Hey, parents would be zero cost of living!
"functionoverfashion" (functionoverfashion)
03/21/2017 at 22:40, STARS: 0
We may soon actually finance a car for the first time because the money we would use to pay cash is sitting in a place where it’s gaining about double the going interest rate for an auto loan. So we could pay up front but why? It would cost more.
To answer your question I don’t think I’d pay more than 20% of our household income on a car, financed or not. Hell, I’ve never spent more than 25% of my own income not counting my wife’s which is more than double mine.
"E92M3" (E46M3)
03/21/2017 at 22:40, STARS: 1
That’s pretty good with gas included. You’re much better off in the long run spending less than than 20%, and investing the rest. Housing expenses are so high in some parts of the country, 10% is a stretch for some to spend on a car/cars.
"smobgirl" (smobgirl)
03/21/2017 at 22:51, STARS: 0
My payments and insurance are maybe 10% of my take home pay, and that’s the only car I’ve had that wasn’t cash up front and greater than $5k. Car payments make me nervous.
"Funktheduck" (funktheduck)
03/21/2017 at 23:00, STARS: 0
I just did some quick math and my one car payment and insurance for 3 cars is about 12-13% of my average take home (after taxes)
"deekster_caddy" (deekster_caddy)
03/21/2017 at 23:04, STARS: 0
I would not get anything longer than a 60 month loan. 72 is too long for any car, you will be umderwater the entire time.
I was paying $350/mo for my old Yukon, which also cost me $300/mo in gas. Then I bought my Volt for $600/mo (0% interest 60 mo loan) and pay $50/mo for gas and electricity. So basically I got into a new car for the same monthly cost as my old truck.
"Manwich - now Keto-Friendly" (manwich)
03/22/2017 at 00:59, STARS: 0
I spend about 5% of my annual income on my car.
"davesaddiction @ opposite-lock.com" (davesaddiction)
03/22/2017 at 01:04, STARS: 3
Please tell me of this magical place where your cash is making such a good return for you.
"190octane" (admiralcb)
03/22/2017 at 02:36, STARS: 0
After doing the math I’m at 24% of take home for my car payments but I’m only including my income and not my wife’s because I’m the one that pays the payments. Not as bad as I thought because we have two decent cars.
Personally I would spend as much as I felt I could afford on a car because I love them and having a nice fun car is a high priority for me. If you’re putting money away in the 401k and saving some, enjoy life a little.
"VonBootWilly - Likes Toyota, but it's still complicated." (vonbootwilly)
03/22/2017 at 06:50, STARS: 0
I would never spent more than 25% of my salary on a single cash vehicle purchase unless it was a vehicle that would nearly be guaranteed to last a minimum of 5 years without a major problem based on model history and still be worth at least half the price I paid after mileage and depreciation, so that projects to something like 5% (or 2.5% once I resell it) max per year. that’s worst case ontario .
"R Saldana [|Oo|======|oO|] - BTC/ETH/LTC Prophet" (r-saldana)
03/22/2017 at 07:36, STARS: 3
^dis
I also notice he has not replied. May be too busy with cabinet selection hearings.....
"davesaddiction @ opposite-lock.com" (davesaddiction)
03/22/2017 at 08:55, STARS: 1
I was pretty happy to open a money market account making 1% APY.,,
"haveacarortwoorthree2" (haveacarortwoorthree2)
03/22/2017 at 09:28, STARS: 1
I assumed he meant instead of cash simply sitting in an account, it was in a liquid investment. But if it is just cash, I’m with you!
"davesaddiction @ opposite-lock.com" (davesaddiction)
03/22/2017 at 09:50, STARS: 1
Yeah, I assume he just got money in stocks or mutual funds that have been performing pretty well recently. Seems like the market’s due for a pretty big correction, though...
"finn's arm" (andjeee)
03/22/2017 at 11:20, STARS: 1
I completely agree with 20-25% of monthly take home income on a new vehicle purchase. I pay $450+gas ($50) for a truck a month for payment and insurance. My take home is about $2500/month. It’s amazing how much taxes, healthcare premiums and pre/post tax retirement funding reduces your take home pay v. that big starting number.
I cannot imagine doubling or tripling that amount on my meager salary. All 4 of my other cars are paid off at this point.
"functionoverfashion" (functionoverfashion)
03/22/2017 at 13:35, STARS: 1
I thought I replied hours ago. My bad. I guess I don’t literally mean cash, but money in a mutual fund is generally making more than 3%. One place I keep some money is averaging 5.7% annually since 2007. Clearly it has gone up and down. Two other places I keep a little money are making 5.11% and 10.32% over the same 10 years. Last year they were about 3.5 and 5.5% at year-end, and this year they’re both way up(over 6% each) - but that’s due to change I’m certain.
In any case, I guess my thought is just that the money will be better served in the long term in a mutual fund or something, so long as we can comfortably afford the monthly payment and interest. We’ll come out ahead in the long run, for sure.
"functionoverfashion" (functionoverfashion)
03/22/2017 at 13:36, STARS: 0
haha, I thought I replied earlier. See my reply to davesaddiction... I guess I don’t mean “cash” but money in a mutual fund... it will be better than 3% in the long run.
"functionoverfashion" (functionoverfashion)
03/22/2017 at 13:37, STARS: 0
Right, it’s invested in a way that I can take it out at any time (and pay taxes accordingly, however) but long-term, it’s well over 3%
"functionoverfashion" (functionoverfashion)
03/22/2017 at 13:38, STARS: 1
See above... I thought I replied earlier but either me or kinja... anyway, you’re right. Mutual funds have been doing well long term - last year was kinda weak actually. And while this year is way up, I’m not expecting it to stay that way necessarily through year-end. I think we’re better off leaving it alone while it’s gaining, though.
"davesaddiction @ opposite-lock.com" (davesaddiction)
03/22/2017 at 14:00, STARS: 0
Yeah, if you can invest well and do better with the money elsewhere, it definitely makes sense. My wife and I are going to be able to pay off our mortgage soon (feeling very fortunate about that). We have a very low rate - 3.125% - and we probably could invest the cash elsewhere and make a slightly better return, but the 3% “return” on paying off the debt is guaranteed, and the feeling of being completely debt free is worth something to us, too.
Over 10% for a decade is amazing - care to share?
"functionoverfashion" (functionoverfashion)
03/22/2017 at 14:22, STARS: 1
I would love to be free of a mortgage; we’re at about 4% but even so. We’re still early so we’re getting a good deduction for the interest. The mortgage was my first ever debt and I still don’t like it.
The 10% return was on Janus Twenty D fund. I don’t know the exact start date they’re working from to get the 10.32% but you can read more about it
here
. - edit - I have no affiliation with morningstar.com, it was just a nice summary page I found via google.
My first real job paid me more than I needed at the time, so I was able to put some money aside. Now with kids, I’m thankful I didn’t spend it all on hookers & blow, you know? I mean, on a new car. Whatever.
"davesaddiction @ opposite-lock.com" (davesaddiction)
03/22/2017 at 17:07, STARS: 1
Ha - smart man to think about the future early on!
I feel very thankful and fortunate to be where I’m at today. My wife and I made plenty of mistakes early on, bought a new car (for her) too early and ended up with too much credit card debt and had to get things under control - seems like everyone has to learn some lessons themselves.
I had a job for about a decade with an awesome match and pension replacement. By the end of my time there, I was putting aside 8% personally, but effectively, I was saving 22% of my salary. When they closed my office two years ago, I was able to get on with a start-up where I got a small equity stake, which has been an incredible thing for my family’s long-term financial stability.
It’s crazy, but I never would have ended up with the company I’m with now without being laid off by my former employer. And I wouldn’t have ended up with my previous employer if I hadn’t been laid off by the company I worked for before them! As scary as it is in the moment, if you look at unexpected career changes as an opportunity for bigger and better things, sometimes they actually turn out even better than you could have expected.
"functionoverfashion" (functionoverfashion)
03/23/2017 at 09:23, STARS: 1
You’re right that there’s always a silver lining, so to speak. Not to say that bad things don’t happen, but if you take it as an opportunity, it can work out well in the end.