Advice needed. How much car can I afford?

11/24/24 3:18pm

How do you figure out exactly what you can (or should) spend on a car? My clunker is probably going to die soon and I’m about to go car shopping, but I don’t really trust the dealer to level with me when it comes to the financing. I’m not sure if I’m going to buy new or used, and I’ve never taken financing out so I’m not totally sure what I should budget? Anyone got any tips or guidance on how you figure this kind of stuff out? It’s sort of overwhelming. For context, I want to know how much car can I afford based on a salary of about 50k.

WikiCheetahTamer414

11/25/24 2:44pm

Hey there! Yeah, the car industry doesn’t make this stuff easy, so I sympathize with you. There’s really no difference between how you buy a new or used car—the only impact there is on the valuation of the car (used cars are cheaper than new cars, generally speaking). When it comes to paying for the car, you can either pay cash and fork over the entire price with a check, or take out a loan to finance the car over time. Just know, you will pay interest if you decide to finance, so the overall cost will be higher. However, you’ll make smaller payments over time instead of paying for everything all at once. Now, on to the numbers.

The basic rule of thumb is that you shouldn’t spend more than 10% of your monthly income on transportation. Now, if your salary is 50k, your monthly take home is about $4,160. Take 10% of that to get $416. So, you’re looking for a monthly payment of $416! But how much should the car cost? Well, most car loans are 60 months, so we multiply 416 by 60 to get $24,960. So, that should give you a general sense for your budget—you’re looking for a car that costs a little less than $25k. Keep in mind that you typically want to put at least 20% down on a car loan. If you don’t, the terms of the loan generally get very unfavorable very fast. That down payment actually gives you more breathing room in your budget, but it’s not advisable to stretch your budget as far as you possibly can with cars. Maintenance costs, repairs, interest on the loan, all of that will sneak up on you if you don’t give yourself a little space. So yeah, I’d recommend looking for a car that costs 20-25k in your shoes. Good luck out there!

WikiWombatCatcher891

11/26/24 8:35am

Some common maintenance repairs that I'd recommend working into your budget are oil changes, tires, and batteries. Oil changes may be $30-80 (depends on whether you get synthetic oil, since that's more expensive) and can be needed every 3-12 months (synthetic would be on the higher end of that range). You might need to change your tires every 4-6 years and a full set of tires may set you back around $400 to $1,200. Batteries are $100-$250 and last 3 to 5 years. There are other things you should be keeping an eye on and maintaining too but it'd be a lot to list it all out here. You can find more info in your owner's manual or online!

WikiTapirChaser448

11/26/24 10:41pm

Other people in the thread have done a good job of laying out what you should budget for a car. I just want to chime in and say that on top of maintenance costs, repairs, and interest on the loan, you should also keep in mind that you'll need to pay for insurance, registration, and fuel. Depending on where you live/how you use your car, you may also need to pay for things like parking and cleaning. I budget a little for decor and car fresheners to make the space my own too haha.