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Smart Shopper Percentage of monthly income spent on a car?
390 messages, Last post on Mar 21, 2009 at 5:50 PM
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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. Leo |
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| http://www.fool.com/car/Buyingacar.htm?ref=PFinAg | |
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20% of the purchase price down and payments no longer than 3 years. If you can't do this on the car you want, your probably can not afford the car. You also will stay at or around the depreciation rate which would allow you to get out of the contract without taking a bath at most any point. The only thing that would change my thinking would be if a very special finance rate is offered...example. Mazda is offering up to 48 months at 0% financing on some models. In this case finance 100% and any extra you can get at the longest term offered. Rich |
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If you go by Rich's last comment...then I shouldn't even by driving my '98 Monte! I bought it at SmartBuy 48mo w/1k + trade down. Anything shorter and the payments would be to high. But I've had no trouble making payments and can still afford insurance & stuff for it. I get the lowest insurance rates (clean record, age 35). On the car I want to buy, I have to look at the longest financing I can - like 72mo - otherwise the payments get too high. Is this foolish? Yeah I know its a Chevrolet. But I'm thinking, I want a car I will "enjoy" driving for all that time. The way I see it, if i keep the car full-term, then I'll own it. How much will a 6 yr old Camaro w/70K miles be worth? Well, my last trade was a 5yr old Sunbird w/87K mi and they gave me 3500 trade. So a Camaro's gotta be what, 3 - 4K trade at least? Maybe a bit more privately. So, then I'll have at least 3K right there for my NEXT car plus whatever I can save in 6 years. Is this the wrong way to look at it? bruce |
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| I agree with Rich. If at all possible, you should pay a car off in 3 years. That way, you are never upside down in case the car gets stolen, crashed or you simply tire of it. Also, if you pay it off in 3 years and keep it another 2 - and (this is crucial) save the payments you had been making in a money market fund - you now have a wad to put down on the next car. | |
| My goal was keeping my payments affordable over the past 25 years, and they are still under $300 each month. I always get 48 month loans and keep the car 4-6 years. Because Accords have such great resale value, I can usually get a new car and have my payments be only slightly higher than they were for my last car. In other words, for between $100 and $300 per month over the past 25 years, I have always driven a car less than five years old. Since I was single most of those years, reliability and resale value were my main concerns. This time I sold a 96 Accord LX for $11,000 and for another $12,000 purchased an EX-6 for $23,000. If I hadn't hung around Edmunds for a few months, I never would have gotten the good deal on the Accord. | |
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If every customer financed cars in a smart aggressive way my finance department would go broke...haha. But it would take alot of people down a few pegs in make/model and consumers prefer to be upside down until the very last of those 60 and 66 month payments are made and drive a more fashionable car. I see so many people who just bury themself so far for way to long to be anything short of financial insanity. People who should know better. In the last 2 days I appraised 3 potential trade-ins that totalled $22,000 up-sidedown. Rich |
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| rich:>>In the last 2 days I appraised 3 potential trade-ins that totalled $22,000 up-sidedown. << Astounding! As someone who is careful with money, that figure just floors me. On average, then, those three cars were $7,000+ upsidedown each. With the coming recession and a near-universal lack of money management skills, I can only imagine bankruptcies are about to go through the roof. BTW, did those "buyers" roll over that debt into new cars, extending their happy motoring? | |
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All three will be getting out the can of wax and keep making payments...Of course all wanted to lower their payments, had a max of $1000 down and were true payment buyers. If I could have offered them 84 month financing I suspect all three would have new cars today. Rich |
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wow! with your suggestions, I'd have to rethink my car purchase. Here,I thought 4 years was good! Any opinions/advice regarding get a used car? Leo |
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