Suze said...

[myrdale]

I think far too many people don't look beyond the monthly payment.....As long as they can handle the payment, they think they can "afford" the car. Many of these people also think that having a car loan is just a natural thing and that they will always have one.

Your so right it is almost cliche.

An additional rule of thumb I've heard is your car should not cost more than half your annual salary.

[disneysteve]

An additional rule of thumb I've heard is your car should not cost more than half your annual salary.

I've heard that, too. I think that is a Dave Ramsey teaching. I happen to think it is much too high a number, though. Someone earning 30K, for example, probably shouldn't be spending 15K on a car. And at higher incomes it becomes even worse. Someone who earns 150K most certainly shouldn't spend 75K on a car. Personally, I think anything over 30K is getting ridiculous. I wouldn't spend much more than 20K or so myself. That is well under 20% of our income.

[maat55]

I've heard that, too. I think that is a Dave Ramsey teaching. I happen to think it is much too high a number, though. Someone earning 30K, for example, probably shouldn't be spending 15K on a car. And at higher incomes it becomes even worse. Someone who earns 150K most certainly shouldn't spend 75K on a car. Personally, I think anything over 30K is getting ridiculous. I wouldn't spend much more than 20K or so myself. That is well under 20% of our income.

That number is more based for all the cars in a family(Usually two). He should specify for the number of cars a separate %. IMO.

[disneysteve]

That number is more based for all the cars in a family(Usually two). He should specify for the number of cars a separate %. IMO.

I agree. I do think, though, that the 50% is a more reasonable guideline at lower income levels. If a couple earns $50,000, that would mean having 2 cars each costing about $12,500 which would buy very modest new cars or reasonable used cars. At higher incomes, the numbers get ridiculous. If a couple earns $200,000, that could have 2 $50,000 cars which is nuts. So the rule of thumb should be somehow scaled to income level.