How much can afford to pay for a new car

[JoeP]

I would definitely be financing assuming I can still get a good rate and I definitely agree with your logic. My credit score is around 800 so I should be in good shape.

Why would you definitely be financing? You make enough money to save up for a year and buy a good quality used car for cash. Paying cash, you'll be putting yourself in a position where you'll immediately own the car free and clear, reduce your exposure to risk, and set yourself up with financial habits that can propel you into a whole new realm of financial maturity.

Seems like a waste to have your income and squander the opportunity to rise above the perpetual debt cycle people find themselves in with car loans.

[chaseb]

Why would you definitely be financing? You make enough money to save up for a year and buy a good quality used car for cash. Paying cash, you'll be putting yourself in a position where you'll immediately own the car free and clear, reduce your exposure to risk, and set yourself up with financial habits that can propel you into a whole new realm of financial maturity.

Seems like a waste to have your income and squander the opportunity to rise above the perpetual debt cycle people find themselves in with car loans.

low financing rates. If I put that money to work in the market instead, on average, I will easily earn a substantial carry. If I couldn't get a rate under 2% though I may reconsider.

[autoxer]

low financing rates. If I put that money to work in the market instead, on average, I will easily earn a substantial carry. If I couldn't get a rate under 2% though I may reconsider.

Are you borrowing money to invest? or are you borrowing money for a car? I certainly understand the logic of earning a higher rate on money borrowed at a lower rate, but would you actually take advantage of that? or is it just an excuse to spend more on a car?

You don't exactly have a big stash built up, so financing a new car will only burden that with increased depreciation, insurance and interest costs. If you do finance it, keep the term as short as the bank allows. If you need a longer term to 'afford' the payment, then I would say you can't 'afford' the car.

[snafu]

chaseb, you've changed the initial facts. If you have $ 20.k cash to plop into an investment, I understand weighing the benefit of one of the lower risk investments. In the circumstances you've outlined, you carry $ 10k in debt, balanced with a $12.k EF savings; your 401k wouldn't be cashed in less penalty and taxes for a depreciating asset like a car.

The sales staff are most interested in selling you the highest price vehicle possible as that is reflected in their commission and value to the dealership. I suggest shopping with your head rather than your heart. You need to buy an affordable vehicle that best meets your needs. I hope you'll keep in mind depreciation and try to pick something that retains value.

[humandraydel]

$5,000.

I stand by my original suggestion. Which, basically means you should continue to drive your Lexus for another 60k miles. Over the next 3-4 years you should save 3-4k per year and then buy a $15k car with cash.

EDIT: This is just what I would do - and is certainly the most financially prudent plan.

[freedomv]

Car buying comments

Wow, lots of food for thought here.

[dawnwes]

Wow, you have a 19 year old car with only 120K miles on it?

Thanks everyone for your help. These are all good things to think about.

I was never considering buying a new car. Was hoping to get something around $30k but it isn't an immediate need. My current car has 120K miles on it though so it could go at any time Then again it's a '95 Lexus so it might go forever.

I'm working on figuring out a budgeting strategy.

• I contribute 6% (+3% employer match) to my 401k and 17% to an emergency fund for now. Net of these contributions I end up with $4,000/month.
  
• When I have enough emergency funding, I'll move the 17% to my 401k as well.
  
• Rent + Utilities run around $1,350. Gas and tolls is another $300.
  
• Another $1,460 went to other expenses in January - Around $800 in Food, restaurants and entertainment. About $150 on some stuff for my apartment which is probably a one off.

Any thoughts? Where should I be setting my budget for entertainment, food, restaurants and other expenses?