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    Can we afford this much vehicle?

    So my wife has a 2015 Chrysler 200 that we bought 15 months ago for $14,250 out the door. It is now worth about $11,000 private party value.

    I have a 2003 Chevy Trailblazer and would like to upgrade to a Ford F150 either in 2021 or 2022. I'd like to pay $20,000 out the door but looking at trucks I may have to go up to $25,000 out the door but would have to have everything I want to pay that.

    My question is can we afford to have that much money tied up in vehicles? I know Dave Ramsey says no more than 50% of your yearly income in things with motors.

    Below is our income breakdown.


    Yearly Income - $75,000 split evenly between the both of us.

    No debt besides house. Owe $97,277.86. Worth $150k to $175K. Pay $1,356 a month but our payment is only supposed be $558. We pay extra.

    We currently have a $20k EF (in an online savings account) and another $3k in online savings.

    We save $6,000 a year in online savings.

    No kids.


    Plan would be to pay cash for truck. I always use take home pay for calculations so based on that it would be over 50% of our take home pay, but what do you guys think?

    #2
    Looks like you'd be fine with the purchase.
    I don't think it would cripple you to own it especially since you are paying cash.
    Service on the truck may cost more, insurance, maybe.
    But, without a payment I don't see that being an issue
    Brian

    Comment


      #3
      My rule of thumb is if we can pay cash, we can afford it. It's very simple. (& I mean there is more to it. Must also have enough of an emergency fund and not take away from other financial goals).

      I don't think it's a big deal. We've personally been much more careful with our car purchases (only spending $15k max on a vehicle when we were at the $75k income range). But... We also live in a state with very expensive housing. So that impacts how much we can spend on other large items (mostly vehicles). If I didn't have a $200k+ mortgage at that income level, I don't think we would have thought twice about spending $20k cash on a vehicle or two.

      We admittedly keep our cars for 15-ish years, which is another factor to consider. If you are upgrading a 2003, then clearly you keep your cars a long time. That allows you to have a bigger car budget, with less frequent car trades. I might answer differently if you were upgrading a 2013.

      P.S. My only concern would be are you tying up all your cash for this purchase?? I am confused about that part.
      Last edited by MonkeyMama; 01-16-2020, 06:30 AM.

      Comment


        #4
        Originally posted by skives View Post
        Pay $1,356 a month but our payment is only supposed be $558. We pay extra.

        We currently have a $20k EF (in an online savings account) and another $3k in online savings.

        We save $6,000 a year in online savings.
        So you pay an extra $800/month on the mortgage.

        Is the $6,000 in online savings per year? per month? I'm not clear on that.

        What is your monthly spending (not counting extra mortgage payments)?

        It sounds like you're just fine, especially if the plan is to wait until you've saved up the cash to buy it outright. This also assumes that you are adequately saving for retirement which you didn't mention.
        Steve

        * Despite the high cost of living, it remains very popular.
        * Why should I pay for my daughter's education when she already knows everything?
        * There are no shortcuts to anywhere worth going.

        Comment


          #5
          What are your retirement savings - 401k, Roth or other?

          Comment


            #6
            It's crazy how much nice 1/2 ton pickups cost. That $20 - $25k will likely only get you a 70,000+ mile, 4-7 year old or older vehicle.
            Nothing wrong with a vehicle like that, but new ones are approaching the cost of entry level houses. My first house was $25,000.

            Comment


              #7
              The $6,000 a year in online savings is broken down to $500 per month.

              we both contribute 15% to Roth 401k. We have a combined retirement of about $200,000

              I am 36 and my wife is 31.

              other monthly spending below

              auto fuel - $200
              groceries -$100 per week
              internet - $60 per month
              electric -$75 per month
              cell phone -$45
              netflix -$13
              other bills we set money aside for each month ( life insurance, auto insurance, Propane/wood pellets to heat house, property taxes, homeowners insurance) $748 per month. we usually have $600 to $800 leftover here depending how much it costs to heat the house. Everything else is pretty much set payment.


              Last edited by skives; 01-16-2020, 10:45 AM.

              Comment


                #8
                I think you're fine. Saving 15% for retirement. Saving $500 per month general savings. Paying $800/month extra on the mortgage.

                You want to pay cash for a 25K vehicle and currently have 3K in savings. At $500/month, it will take 44 months to save up the rest. Or are you thinking of cutting back on the extra mortgage payments to get the truck money?
                Steve

                * Despite the high cost of living, it remains very popular.
                * Why should I pay for my daughter's education when she already knows everything?
                * There are no shortcuts to anywhere worth going.

                Comment


                  #9
                  Will this $20k-$25k tap you out for cash/investments besides your retirement & EF?

                  Short answer: While you can likely afford it (so long as you pay for the truck in cash), I'd say that you're probably pushing the bubble.

                  The problem with having a large portion of your assets tied up in cars that are depreciating in value (as you've seen with your wife's car). Not necessarily that you do or don't have debt on them as well. It's just harder to get ahead. You want your assets to go up in value, not down. So if you make a moderate income ($75k is good, but still only slightly above average), having alot of money tied up in cars means you have fewer assets available to invest & grow.
                  "Praestantia per minutus" ... "Acta non verba"

                  Comment


                    #10
                    Originally posted by disneysteve View Post
                    At $500/month, it will take 44 months to save up the rest. Or are you thinking of cutting back on the extra mortgage payments to get the truck money?
                    I was sure if we should cut back on mortgage payment or not. In the end I have a year or two to think about it and the way I am I will look for a cheaper truck probably but who knows.

                    Comment


                      #11
                      Originally posted by kork13 View Post
                      Will this $20k-$25k tap you out for cash/investments besides your retirement & EF?

                      Short answer: While you can likely afford it (so long as you pay for the truck in cash), I'd say that you're probably pushing the bubble.

                      The problem with having a large portion of your assets tied up in cars that are depreciating in value (as you've seen with your wife's car). Not necessarily that you do or don't have debt on them as well. It's just harder to get ahead. You want your assets to go up in value, not down. So if you make a moderate income ($75k is good, but still only slightly above average), having alot of money tied up in cars means you have fewer assets available to invest & grow.

                      Yes it would tap us out of cash beside retirement and EF. I know what you're saying about depreciating in value. That does worry me so in the end I might go for a less expensive truck.

                      Comment


                        #12
                        Originally posted by skives View Post

                        I was sure if we should cut back on mortgage payment or not. In the end I have a year or two to think about it and the way I am I will look for a cheaper truck probably but who knows.
                        Well if you don't cut back on the mortgage, it doesn't sound like you can accumulate 25K in cash by 2021 or 2022.
                        Steve

                        * Despite the high cost of living, it remains very popular.
                        * Why should I pay for my daughter's education when she already knows everything?
                        * There are no shortcuts to anywhere worth going.

                        Comment


                          #13
                          You are concerned about having too much $$ wrapped up in cars but the same could be said for your house.

                          you are paying about 9600 extra per year. Imagine if you contributed that towards two IRAs and let it grow.

                          you may even be eligible for the savers credit if you focus more on retirement.

                          Comment


                            #14
                            why do you need a truck

                            Comment


                              #15
                              Originally posted by Jluke View Post
                              You are concerned about having too much $$ wrapped up in cars but the same could be said for your house.

                              you are paying about 9600 extra per year. Imagine if you contributed that towards two IRAs and let it grow.

                              you may even be eligible for the savers credit if you focus more on retirement.
                              our goal is to payoff house 10 years after buying it. We have just under 7 years to go. Plus homes usually go up in value unlike vehicles.

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