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#1 of 390 Recent college grad...
Mar 19, 2001 (6:43 am)
Up to this point, it has been Want Advertiser specials, =) Now with a decent income coming in, I can turn my head to new cars. Any rough guidlines as to what one should spend as a % of income?
I do plan on financing, and this will be my first time jumping into the realm of getting a loan (outside of school) and would like to get to know the system. Anybody recommend some good resources to learn about the process?
Any other comments about taking the plunge on a high-ticket item for a newbie greatly appreciated...
Mar 19, 2001 (7:25 am)
The actual amount is up to what you're comfortable spending, but the figure I've heard bandied about (and seems to be a good guideline) is your monthly payment should equal about 20% of your monthly income.
#3 of 390 I would NOT use percentages as a guideline....
Mar 19, 2001 (9:02 am)
At the risk of sounding like your mother, keep in mind that those % are what a lender will LEND you; huge difference between what that and what you're comfortable with...unless you want to be car poor, house poor, or whatever poor....my advice is not to get into any deep debt. Keep the loan as short as possible (no more than 4 years) and you'll quickly build up a good credit rating. Life is alot more fun when you have some extra cash at the end of the month.
#4 of 390 As far as monthly payment...
Mar 19, 2001 (9:57 am)
don't forget things like insurance, fuel, maintenance, etc. You're going to have to pay them, no matter what kind of car you get, but they will still vary from car to car. I remember my first year in college, I was paying about $800 a year or so for liability-only insurance. I looked at some new and newer used cars, but when I saw what it would do to the insurance, I said forget it! (I was only 18-19 at the time though, so of course it's going to be more) I remember that my insurance on a 1989 Ford Probe 4-cyl would have been about $3200 a year. I also looked at a couple Monte Carlo SS's, around '85-87, and it would've been the same...$3200.
Now, I'm pushing 31, and going from an old clunker to a new Intrepid only bumped the premium from about $250 a year to $560 a year (good driving record, multiple policy, low risk area, etc)
does that 20% count total car expenses, or just the monthly car note? If it's just the car note, I need to go out and buy myself a more expensive car
Mar 20, 2001 (5:13 am)
beanboy, We had a discussion about this in another thread a while back. One of the numbers thrown around was that you should probably buy a car that costs 1/3 of your annual income...certainly no more than 1/2. Again, simply a rule of thumb that you can follow or ignore at your whim, but don't forget to think about insurance, gasoline, registration, service, tire and battery replacement, etc.
lancer: I would hope at least that your 20% example is based on after-tax (take-home) pay, not gross income! If so, that's probably a fair number if you include insurance, registration and other auto costs in the calculation.
#6 of 390 Percentage...
Mar 20, 2001 (5:35 am)
If a single person, then opt for at least 20% of net income.
If a homeowner, then opt for about 15%, depending on family and other commitments.
I recommend that a person save up a substantial amount prior to purchase of a car. It is always nice to be one step ahead of consumer debt.
This is an unpopular notion with most... because most new car buyers are borrowing from the "other guy". In the short-term, this is the easy way. They are making someone else rich, they are being driven by the smell of a new car rather than the sound of reason.
If you save your windfall, then before you know it you'll have enough for a shiney new vehicle and you'll avoid the debt trap. Hard to do, but you'll feel better about yourself for doing it.
Another tactic to save money is to buy a nearly new vehicle. Let the other person take the initial 2 year depreciation hit. Many smart shopper use this method. My brother, who has a PhD, swears by it.
I know this discussion wasn't suppose to be about saving money...so I yeild to the next "Smart Shopper"....and remember..."HOW much can you afford to pay each month..?".
Mar 20, 2001 (5:47 am)
Ugh... dont remind me. Wife just totalled her RX300 in the rain yesterday... dammit...
There go the rates... Had the thing like 2 months to replace her last car which she also totalled!
"No problem Mr Weismann, your adjusted rate is now $850 per month" I can just see it coming!
Mar 20, 2001 (6:07 am)
Sorry to hear about your wife's accident. I hope she's okay.
I've actually been very lucky when it's come to accidents. I've rear-ended four people in my lifetime, but none of them ever reported it, as the damage was either minimal or nonexistent. The first time was when I was 19, two times were in the rain, and one time a lady slammed on her brakes on purpose. She was in a long line of cars that were running a red light around Christmastime, and I decided that enough was enough, so I pulled out into the intersection, cutting off a Mercedes that was about to run the light behind her. Well, I turned my head to make sure he wasn't going to hit me, and when I looked back, this lady stopped her car about 100 feet behind the car in front of her, and I bumped her. The first thing out of my mouth was "are you all right?" The first thing out of her mouth was "You just can't let anybody out, can you?" and then she drove off. So that pretty much told me that she was being a <expletive> !
I have had two cars get totaled by others, though, but thankfully, no bodily harm.
Somehow, over the years, I've been lucky enough and kept my record clean enough, that I'm only paying something like $560 a year for the Intrepid on insurance. I have a multi-car policy + my condo, so that probably helps, too. I know this 19 year old kid who, between his car payment on a stripper Saturn, and insurance, is shelling out $550 a month! But, at least he has the smell of a brand new car!! Well, he's a delivery driver like me, so he has the smell of a brand new car and pepperoni!
#9 of 390 How Much Should One Spend on a Car?
Mar 20, 2001 (10:11 am)
Depends on a lot of variables. How much monthly take home do you get? How much is your house mortgage/rent? Groceries and food? How much of your income are you planning of saving? Then decide how much of a car can you afford. I think a roof and food are more important than transportation.
#10 of 390 from what I heard,
Mar 20, 2001 (10:12 am)
you're suppose to put down at least 20% of cars purchase price, finance no longer than 4 years, and no more than 20% of your net monthly pay.