Auto loan

[junkmail]

I asked this in the debt forum.
I have car loan at 0% and I owe 21K..5yr loan, $420 a month
Given the scenario with no other debt except a 1k mortgage and income of $2,200 to $3k a month. Should I sell the car and buy another vehicle? At 10k

[disneysteve]

I'll give the same answer I gave in your other thread (which has a slightly different scenario with a couple of other debts but that really isn't relevant).

Rule of thumb for financing a car is to not borrow more than you can repay in 3 years with a monthly payment not exceeding 10% of your income. You have a variable income and your budget should be based on the base salary, not the max you can earn, so with a $2,200/month income, your car payment should be no more than $220 for a term of no more than 36 months. That works out to a loan of no more than $7,900 at 0%. So yes, $21,500 is way beyond affordable given your income.

Another rule of thumb is that all of your vehicles combined shouldn't cost more than 50% of your income, so you are out of range by that measure, too.

I'd sell the car and buy something cheap, like in the 5K range. Once you are debt-free (except the mortgage) and have an funded emergency fund, then you can think about upgrading the car, though still using the above guidelines when making that purchase.