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Percentage of monthly income spent on a car?

390 messages,  Last post on Mar 21, 2009 at 6:50 PM

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#33 of 390 affordability index by gnl May 04, 2001 (10:58 pm)
That "affordability" index is outrageous! When I put in my true income, it said I can afford a car payment that's half again as large as my mortgage! But my take home income is almost exactly half of my pre-tax income, due to deductions for taxes, pensions, health insurance, Social Security, etc. When I put in my take-home income, it came out with a figure that I thought was reasonable, and is in fact close to the figure I'm currently saving to buy my next car. (I make car payments to myself and pay cash.) I think anyone using that index as given needs to take the results with a very, very large grain of salt.
#34 of 390 Affordability Index by justfind6 Jun 01, 2001 (6:22 am)
I also tried using the affordabilty index, and it tells me I can afford a vehicle with a purchase price of $212,846. That's almost what I paid for my house. I'd want to be making at least $1 million a year before I'd spend that much on a car. Maybe the calculator needs some work. Or maybe I should just go buy that Bentley...
#35 of 390 funny thing is...income fluxations determine car payments by roninjouten Jun 01, 2001 (4:05 pm)
If one is an aprtment dweller with monthly payments of say the norm in San Diego for a one bedroom $1k and makes $2k a month, then a $400 payment is a serious drain on the cash reserves. But if he's pulling down 4k a month, $800 doesn't really hurt at all. Everybody needs about the same cash to live, so the extra dough makes it gravy.
#36 of 390 ronin by mmcbride1 Jun 01, 2001 (4:13 pm)
But the more cash you have, the more cash you spend. While the guy pulling in $4k can afford the $800, it will still seem tight - trust me.
#38 of 390 that has got to be... by gnl Jun 23, 2001 (8:14 pm)
one of the funniest posts I've ever read! The disposable society has now created a disposable car! PLEASE tell us you're kidding, right?
#40 of 390 Depreciating Asset by lovethosesuvs Jun 25, 2001 (4:27 am)
Here's my issue: paying more than a quarter to a third of my home's value on a depreciating asset.   That's what makes the cute-ute class so attractive to me. A lot of bang for the buck--space, a V-6 in my case, not as hard on gas, and a payment that will leave you with a little extra for other things, like investments with good yields.
#41 of 390 ratios by morningglorie Jun 27, 2001 (8:43 pm)
When I was buying my first car, many, many years ago, I read some financial planning article that said most people can afford a car that's total price (not the monthly payments) is one-quarter to one-third of their gross income. Keep it closer to one-quarter if you've got kids, other debts to pay off, big mortgage and so on. Go to one-third if you've got adequate savings, no debt, mortgage payments no more than 1/4 of your income. Those ratios still make sense to me all these years later.
#42 of 390 by xfactor Jun 29, 2001 (11:37 am)
The Affordability Calculator falls short but has been programmed within the accepted industry practice. The industry practice of calculating what someone should/could spend is a joke and should never be relied on.   All the points here discuss % of income. Why not a % of net worth excluding home.   I believe that is what post #41 is getting at.

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