What is a good % range to save/pay for a replacement vehicle ?

[LittleMsMom]

I was wondering how much money you are paying on your vehicle loan? Or if you have a paid in full vehicle how much do you save each month towards the purchase of your next one or for repairs? I am asking in terms of percentage of savings or payment to what your take home pay is. If you are spending more than you think you should, what percent range of take home income do you feel is reasonable?

I drive a 12 year old car (bought new), it is still a very reliable car and the repairs have been for the most part nothing more than regular maintence. My car is 12 years old though, and eventually it will start to need repairs more often and eventually I will need to replace it.

Mostly I am also getting a case of the "wants". I really want a vehicle with higher ground clearance. Where I live atleast once a winter I am stuck in my house because my car will not make it through the snow on my road because we had a blizzard and the snow is too deep.

I am on Dave Ramsey's Baby Step 3, so as soon as I finish funding my Emergency Fund I want to start saving for a replacement vehicle and want to know how much is realistic to be saving.

Thank YOU!!

[jpg7n16]

I have no problem with someone who has total value of cars (not loan amount) of 30% of their annual pre-tax income.

So if you make $60k year, that would be total cars worth $18k. One car for $18k (preferrably less) would work. Or 2 cars, one 10k and one 8k would work as well.


As far as how much the 'payment' would be - it's usually preferrable to have no payments. Pay for the car in cash, don't bother with financing, pay no interest. But if you must have one, make it less than 10% of your takehome monthly pay, for a 3 year loan.

[Frugal]

I personally would save to pay cash for a car, and not take out the replacement loans.

[kork13]

The kind of car you need doesn't really match up with what your income level is... Thus, I'd say that a percentage isn't a good measure for saving up a car fund. The amount you want to save really depends on how much you want to spend, and how often you want a new car.

Just to throw a figure out there, I'd probably call $100/mo a good baseline. That way if you want a newer car in 5 years, you'll have $6k ready for it. Not enough? Double it to $200/mo and you'll have $12k in 5 years. Or if you make your cars last, perhaps you can save up for it for a whole 10 years, and have that much more available for your next car. If you currently have a car loan (OP doesn't, but in general terms), once you pay it off (or heck...start now!), you can start saving the same payment amount in a savings account. That way, you're seeing no net decrease in your monthly available funds, but your paying yourself and getting ready for your next car.

But as already stated, if you can avoid it, you should pay for a car in cash, or only have a small car loan to cover the little bit that you haven't saved--at least have a 50% downpayment if a loan is the only option.

[disneysteve]

Originally Posted by jpg7n16

As far as how much the 'payment' would be - it's usually preferrable to have no payments. Pay for the car in cash, don't bother with financing, pay no interest. But if you must have one, make it less than 10% of your takehome monthly pay, for a 3 year loan.

I agree with this. Paying cash is best. If you must borrow, the general rule of thumb is no more than 10% of your monthly take-home pay for no more than 3 years.

Of course, as kork13 pointed out, it isn't all based on income. Someone earning $15,000/month really doesn't need to be spending $1,500/month for a car payment while someone earning $3,000/month probably can't truly afford to be spending $300/month for a car payment.

[MonkeyMama]

I'd aim to pay cash.

I'd personally work backwards. What kind of car do you want to buy, how much does it cost, and how much so you have to save to make the goal of buying it in the time you want to? If you can't make it work, set your sights lower, or wait a little longer.

I personally save about $100/month for car replacement. We are quite content paying cash for a vehicle worth about $10k. I'd expect our cars to last 15 years, but just in case they don't last so long, gives us 10 years to save up $10k. We've had my dh's car for 10 years, and I have about $10k to replace it. If I didn't start saving for it until later, I'd obviously have to save a lot more. Likewise, if he drives his car 15 years (likely) we may buy something a little higher end next round. May have $15k saved. I don't think we'd personally see the point to spend more, but would be nice to have more options.

I think it also depends largely on your big financial picture, as mentioned. I personally could not imagine having cars worth 30% of my income. We've always been closer to about 10%. But, housing is expensive where I live so there really isn't a lot of income left over for cars. If my mortgage was half the size, maybe buying more car wouldn't be such a big deal. If I Was a single chick with no family to support, I could certainly splurge on more car.

Sticking to cash, it's been hard to buy "too much car." I've found cash buying to be a good personal rule of thumb.

[jeffery12]

I made 20% as downpayment while the rest has touched 2K as EMI.