How much "car" would you buy?

[Perspective_IHB]

If you have: 1) no debt, other than a mortgage (PITI) that's less than 25% of your gross; 2) emergency savings of six months' expenses; 3) and you're saving at least 10%-20% of your gross easily - How much would/should you spend on a car?

i.e. If you're on the right track financially, what's the most you should spend on a car? I'd prefer to accumulate a lot of capital relative to our income ASAP, but I know we need to find balance in our lives. My wife would like to buy a luxury car that costs the equivalent of 20% of our household income. Is 20% too much? Are there too many factors to create "rules of thumb" for car purchases?

I've shown her the numbers illustrating the cost to our net worth 30 years from now considering the different spending scenarios. She wants to enjoy some of the fruit of our labor today, rather than waiting 30 years.

 

[stepping_up_IHB]

I think the general rule of thumb is 5%-10%. Liz is pretty conservative. My car payment is 5% of my gross, but there are other areas where I enjoy my discretionary spending.

Ask Liz

 

[tmare_IHB]

I think it also depends on how long you intend to drive the same car. I generally give myself at least 10 years with a car and therefore I tend to splurge a little bit knowing that I won't be replacing it for a very long time. I usually go for the all of the "extras", leather, navi system etc.. It makes me feel better knowing that I've given myself a few extra luxuries.

 

[childplease_IHB]

If you have: 1) no debt, other than a mortgage (PITI) that's less than 25% of your gross; 2) emergency savings of six months' expenses; 3) and you're saving at least 10%-20% of your gross easily - How much would/should you spend on a car?

i.e. If you're on the right track financially, what's the most you should spend on a car? I'd prefer to accumulate a lot of capital relative to our income ASAP, but I know we need to find balance in our lives. My wife would like to buy a luxury car that costs the equivalent of 20% of our household income. Is 20% too much? Are there too many factors to create "rules of thumb" for car purchases?

I've shown her the numbers illustrating the cost to our net worth 30 years from now considering the different spending scenarios. She wants to enjoy some of the fruit of our labor today, rather than waiting 30 years.

I'd assume the least luxury of luxury cars costs at least 40k, meaning you make at least 200k if it accounts for 20% of your income. 25% DTI would mean 4k a month, saving 2.5k month on average and take home is roughly 10k -11k after taxes. Payments on a 40k car would be around 8 bills w/ no down on 5 yr payments so you'd only be saving 1.7 k a month on the minimum of salary/def of luxury car assumptions I'm making. I say go for it and enjoy.

If someone made 100k and bought a 20k car (hyundai elantra/kia optima) I don't think anyone would think that was out of line.

 

[stepping_up_IHB]

If you have: 1) no debt, other than a mortgage (PITI) that's less than 25% of your gross; 2) emergency savings of six months' expenses; 3) and you're saving at least 10%-20% of your gross easily - How much would/should you spend on a car?

i.e. If you're on the right track financially, what's the most you should spend on a car? I'd prefer to accumulate a lot of capital relative to our income ASAP, but I know we need to find balance in our lives. My wife would like to buy a luxury car that costs the equivalent of 20% of our household income. Is 20% too much? Are there too many factors to create "rules of thumb" for car purchases?

I've shown her the numbers illustrating the cost to our net worth 30 years from now considering the different spending scenarios. She wants to enjoy some of the fruit of our labor today, rather than waiting 30 years.

are you saying 20% for the out and out one time purchase? If so, that's totally reasonable. 20% for payments is not.

 

[Anonymous_IHB]

There's some fun in a luxury car before you have kids. After you have kids, doesn't make much sense (ie. kids will trash it, kid car seats don't fit well in a small fun car) and it's minivan time. Later in life when the kids are gone, the stereotype is the older person with a nice car - but not the reflexes/eyesight to drive it well and have fun. If you can afford it, get the car, and spend some fun time doing driving vacations in it instead of flying off somewhere.

Also, if you are an enthusiast of a particular brand of car, you can often find a local car club for that brand, and have fun going to do autocross or scenic drives or whatever.

 

[tmare_IHB]

There's some fun in a luxury car before you have kids. After you have kids, doesn't make much sense (ie. kids will trash it, kid car seats don't fit well in a small fun car) and it's minivan time. Later in life when the kids are gone, the stereotype is the older person with a nice car - but not the reflexes/eyesight to drive it well and have fun. If you can afford it, get the car, and spend some fun time doing driving vacations in it a few times instead of flying off somewhere and it'll pretty much pay for itself.

I sort of missed the earlier luxury before kids part, I just didn't have the money and once I did, I already had the kids. Oh well, like I said, it's the "luxury" minivan for me. I really do think everyone is missing the boat by not calculating the amount of time you intend to keep the car. Do most of you plan to have car payments your whole lives? I certainly don't. If I finance a car, I make sure I can pay it off within 2 years and then enjoy 8 more years with no payments.

 

[Perspective_IHB]

If you have: 1) no debt, other than a mortgage (PITI) that's less than 25% of your gross; 2) emergency savings of six months' expenses; 3) and you're saving at least 10%-20% of your gross easily - How much would/should you spend on a car?

i.e. If you're on the right track financially, what's the most you should spend on a car? I'd prefer to accumulate a lot of capital relative to our income ASAP, but I know we need to find balance in our lives. My wife would like to buy a luxury car that costs the equivalent of 20% of our household income. Is 20% too much? Are there too many factors to create "rules of thumb" for car purchases?

I've shown her the numbers illustrating the cost to our net worth 30 years from now considering the different spending scenarios. She wants to enjoy some of the fruit of our labor today, rather than waiting 30 years.

are you saying 20% for the out and out one time purchase? If so, that's totally reasonable. 20% for payments is not.

20% of annual income represents the price of the car in my question. Payments are fungible - we can pay cash or finance all or a portion of the cost depending on rates available. I'm having a real problem considering spending that amount of money on a car. It will provide some pleasure, but not that much for me. I guess I should stop worrying about it. We will very likely buy it, so I should stop fretting about the financial hit our net worth will be taking long term.

 

[Nude_IHB]

Rule #1: Make the wife happy.

Rule #2: Get all the doodads available.

Rule #3: Pay cash.

I don't really get the percentage argument because you can either buy the car or you can't. If you have to finance it, then you really can't afford it outright and probably shouldn't be signing up for 5 years worth of paymennts. If you buy your wife her dream car, chances are you won't have to buy her another one for a decade or so, if ever. And I always buy my cars loaded with all the options. I didn't do that on my first vehicle and I quickly learned from that mistake; 24 years later and my truck still doesn't have A/C.

 

[Daedalus_IHB]

My approach is I determine how much I want to save, then pay all the bills, and then spend anything left over any way I want. This helps me to prioritize my wants. I have separate accounts set up, with automatic transfers monthly. My savings goals are a bit aggressive, but doable, and after 3 years I'm still meeting them. I'm somewhat flexible in allowing myself to borrow from future play money (I know I can trust myself ), and I haven't yet faced exceptions to the bottom line. If I were to buy another car (thinking about it) I would probably have enough "play" money set aside for most of the cost, then allow myself to borrow any balance from future expected play money, to be paid back monthly, as long as it didn't take more than 12 months.

 

[bltserv_IHB]

How much car would I buy ?

Already have a couple great cars.

Now that I am in my second childhood. Over 50, Single, and pretty well set.

And Renting. (Thanks in part to this board).

I find that my cars are the "vice" of choice.

Last night we attended the launch of the new Maserati Grand Tourismo over at Shady Canyon CC.

Really nice convertable 4 Door Luxury Sports car.

Always pays to be on the Ferrari/Maserati Dealer potential buyer list.

http://www.maserati.com/maserati/en/en/index/models/GranTurismo.html

GF likes this one cause it fits with the 2 kids.

 

[gypsyuma_IHB]

There's some fun in a luxury car before you have kids. After you have kids, doesn't make much sense (ie. kids will trash it, kid car seats don't fit well in a small fun car) and it's minivan time. Later in life when the kids are gone, the stereotype is the older person with a nice car - but not the reflexes/eyesight to drive it well and have fun. If you can afford it, get the car, and spend some fun time doing driving vacations in it instead of flying off somewhere.

Also, if you are an enthusiast of a particular brand of car, you can often find a local car club for that brand, and have fun going to do autocross or scenic drives or whatever.

I'm in full-blown minivan mode right now - I have the decked out Honda Odyssey. For a large family like mine, nothing else will do.

But even after that, I just cannot see spending a large amount on a car, even though I could afford it, for the following reasons:

1. I do not believe in car loans - I always pay cash.

2. How much does the thing depreciate once you drive it off the lot - a whole hell of a lot.

3. The more expensive the car, the more expensive the taxes and insurance.

4. Someone is just going to ding it and scratch it in the parking lot anyway - my Honda has been scratched by other cars twice in the last three months.

Right now I am in love with Volvos. I would love a black volvo - but used. I helped a friend find her Volvo - she got a 2004 with like 40,000 miles and one owner for $9,000. It was sooooo nice. That is my kinda car, and price too.

 

[Perspective_IHB]

Rule #1: Make the wife happy.

Rule #2: Get all the doodads available.

Rule #3: Pay cash.

I don't really get the percentage argument because you can either buy the car or you can't. If you have to finance it, then you really can't afford it outright and probably shouldn't be signing up for 5 years worth of paymennts. If you buy your wife her dream car, chances are you won't have to buy her another one for a decade or so, if ever. And I always buy my cars loaded with all the options. I didn't do that on my first vehicle and I quickly learned from that mistake; 24 years later and my truck still doesn't have A/C.

You're right - you can either afford to buy a car, or you can't. The question I'm raising, is once you're in a position to afford a car, how much do you spend? The number you reach is relative to your income, hence the percentage argument.

If you're the average American family making $50k with two kids and $10k in credit card debt, the answer is easy. You don't buy a new car.

I did a good job controlling the wife's housing desires buying a house that cost less than 2.5x our income. Now I'm trying to determine what's reasonable to spend on a car.

 

[Nude_IHB]

I did a good job controlling the wife's housing desires buying a house that cost less than 2.5x our income. Now I'm trying to determine what's reasonable to spend on a car.

Look, you don't know me and I don't know you and the last thing I want to do is come off like a salesman, but here it is: when it comes to your wife, you need to indulge her sometimes. The occasional pair of new shoes, a new sparkly, flowers for no reason, and yes... a new car. The reality is she's put up with your nasty farts, your endless snoring, your gross ear hair, your addiction to (insert guy thing here) and she's still with you. How much is making her happy worth to you? Because that's all she's gonna feel when you hand her the keys... your appreciation, love, and gratitude rolling on wheels. If you come across as putting a price limit on a car, you are telling her that she's worth "X" and that's an invitation to marital counseling if not outright divorce.

So, take it from a guy who dotes on his wife like mad... make your wife happy. Find out what car she really wants, move an appropriate amount into your checking account, then take her down to the dealer and tell her to go pick one. After all, when you get right down to it this is what money is about; making life better for us and those we love. I understand your need to be careful and prudent, but sometimes it's ok to enjoy the rewards.

 

[gypsyuma_IHB]

Rule #1: Make the wife happy.

Rule #2: Get all the doodads available.

Rule #3: Pay cash.

I don't really get the percentage argument because you can either buy the car or you can't. If you have to finance it, then you really can't afford it outright and probably shouldn't be signing up for 5 years worth of paymennts. If you buy your wife her dream car, chances are you won't have to buy her another one for a decade or so, if ever. And I always buy my cars loaded with all the options. I didn't do that on my first vehicle and I quickly learned from that mistake; 24 years later and my truck still doesn't have A/C.

You're right - you can either afford to buy a car, or you can't. The question I'm raising, is once you're in a position to afford a car, how much do you spend? The number you reach is relative to your income, hence the percentage argument.

If you're the average American family making $50k with two kids and $10k in credit card debt, the answer is easy. You don't buy a new car.

I did a good job controlling the wife's housing desires buying a house that cost less than 2.5x our income. Now I'm trying to determine what's reasonable to spend on a car.

I disagree with your conclusion. I could afford a new Mercedes, probably could even pay cash if I wanted to put a large dent in my savings account. But for the reasons I gave above, I would never do that. So no, I do not agree that the car you should buy is a certain percentage of your income. Everyone has differing priorities that have nothing to do with how much money they make. I am a hoarder - I get off on a huge savings account. So even if I could afford it, I would never plolp down the funds for an expensive car. Plus, I am anti-credit, so any car I do buy I only pay cash. Hence, the reasons I gave above for the amount I am willing to spend on a car.

Now my husband is a different story........ men.

 

[gypsyuma_IHB]

I did a good job controlling the wife's housing desires buying a house that cost less than 2.5x our income. Now I'm trying to determine what's reasonable to spend on a car.

Look, you don't know me and I don't know you and the last thing I want to do is come off like a salesman, but here it is: when it comes to your wife, you need to indulge her sometimes. The occasional pair of new shoes, a new sparkly, flowers for no reason, and yes... a new car. The reality is she's put up with your nasty farts, your endless snoring, your gross ear hair, your addiction to (insert guy thing here) and she's still with you. How much is making her happy worth to you? Because that's all she's gonna feel when you hand her the keys... your appreciation, love, and gratitude rolling on wheels. If you come across as putting a price limit on a car, you are telling her that she's worth "X" and that's an invitation to marital counseling if not outright divorce.

So, take it from a guy who dotes on his wife like mad... make your wife happy. Find out what car she really wants, move an appropriate amount into your checking account, then take her down to the dealer and tell her to go pick one. After all, when you get right down to it this is what money is about; making life better for us and those we love. I understand your need to be careful and prudent, but sometimes it's ok to enjoy the rewards.

And you don't know me and I don't know you..... so just one thing to add:

Not all women are created equal.

If my husband overspent on a car for me, I would return it.

 

[Nude_IHB]

I did a good job controlling the wife's housing desires buying a house that cost less than 2.5x our income. Now I'm trying to determine what's reasonable to spend on a car.

Look, you don't know me and I don't know you and the last thing I want to do is come off like a salesman, but here it is: when it comes to your wife, you need to indulge her sometimes. The occasional pair of new shoes, a new sparkly, flowers for no reason, and yes... a new car. The reality is she's put up with your nasty farts, your endless snoring, your gross ear hair, your addiction to (insert guy thing here) and she's still with you. How much is making her happy worth to you? Because that's all she's gonna feel when you hand her the keys... your appreciation, love, and gratitude rolling on wheels. If you come across as putting a price limit on a car, you are telling her that she's worth "X" and that's an invitation to marital counseling if not outright divorce.

So, take it from a guy who dotes on his wife like mad... make your wife happy. Find out what car she really wants, move an appropriate amount into your checking account, then take her down to the dealer and tell her to go pick one. After all, when you get right down to it this is what money is about; making life better for us and those we love. I understand your need to be careful and prudent, but sometimes it's ok to enjoy the rewards.

And you don't know me and I don't know you..... so just one thing to add:

Not all women are created equal.

If my husband overspent on a car for me, I would return it.

Ahem...

Find out what car she really wants , move an appropriate amount into your checking account, then take her down to the dealer and tell her to go pick one .

I pick my words most carefully madam and, as you can see, my advice precluded any possibility of 'overspending' as his wife would be choosing the car herself. Presuming she is as intelligent and as capable as yourself, I am sure she would choose a car that she would not need to return for reasons of cost.

 

[Mcdonna1980_IHB]

I did a good job controlling the wife's housing desires buying a house that cost less than 2.5x our income. Now I'm trying to determine what's reasonable to spend on a car.

Look, you don't know me and I don't know you and the last thing I want to do is come off like a salesman, but here it is: when it comes to your wife, you need to indulge her sometimes. The occasional pair of new shoes, a new sparkly, flowers for no reason, and yes... a new car. The reality is she's put up with your nasty farts, your endless snoring, your gross ear hair, your addiction to (insert guy thing here) and she's still with you. How much is making her happy worth to you? Because that's all she's gonna feel when you hand her the keys... your appreciation, love, and gratitude rolling on wheels. If you come across as putting a price limit on a car, you are telling her that she's worth "X" and that's an invitation to marital counseling if not outright divorce.

So, take it from a guy who dotes on his wife like mad... make your wife happy. Find out what car she really wants, move an appropriate amount into your checking account, then take her down to the dealer and tell her to go pick one. After all, when you get right down to it this is what money is about; making life better for us and those we love. I understand your need to be careful and prudent, but sometimes it's ok to enjoy the rewards.

I love this so much I want to print it out and paste on my fridge!

 

[stepping_up_IHB]

I did a good job controlling the wife's housing desires buying a house that cost less than 2.5x our income. Now I'm trying to determine what's reasonable to spend on a car.

Look, you don't know me and I don't know you and the last thing I want to do is come off like a salesman, but here it is: when it comes to your wife, you need to indulge her sometimes. The occasional pair of new shoes, a new sparkly, flowers for no reason, and yes... a new car. The reality is she's put up with your nasty farts, your endless snoring, your gross ear hair, your addiction to (insert guy thing here) and she's still with you. How much is making her happy worth to you? Because that's all she's gonna feel when you hand her the keys... your appreciation, love, and gratitude rolling on wheels. If you come across as putting a price limit on a car, you are telling her that she's worth "X" and that's an invitation to marital counseling if not outright divorce.

So, take it from a guy who dotes on his wife like mad... make your wife happy. Find out what car she really wants, move an appropriate amount into your checking account, then take her down to the dealer and tell her to go pick one. After all, when you get right down to it this is what money is about; making life better for us and those we love. I understand your need to be careful and prudent, but sometimes it's ok to enjoy the rewards.

And you don't know me and I don't know you..... so just one thing to add:

Not all women are created equal.

If my husband overspent on a car for me, I would return it.

Ahem...

Find out what car she really wants , move an appropriate amount into your checking account, then take her down to the dealer and tell her to go pick one .

I pick my words most carefully madam and, as you can see, my advice precluded any possibility of 'overspending' as his wife would be choosing the car herself. Presuming she is as intelligent and as capable as yourself, I am sure she would choose a car that she would not need to return for reasons of cost.

Exactly... each of us have our things that give us pleasure. Obviously the poster gets a lot of joy out of building their net worth. I have no desire for a really nice car, but it gave me immense pleasure when my husband took me to Burgundy and the Cotes du Rhone for 10 days of wine tasting this year. I had to stop myself a hundred times from calculating smarter things that money could have been diverted to because it took away from the joy. It felt incredibly indulgent, but sometimes you need to indulge in yours or your spouse's indulgences so that there is a balance of joy and pleasure for both of you. Now that I understand what you're talking about, it sounds like your wife has been indulging you with the pleasure of building the net worth, so show her how much you appreciate how far you've come because she has sacrificed wants to reach the goals. All sacrifice and no indulgent pleasure isnt't very fun.

 

[tmare_IHB]

Yeah, but it would probably be a lot better if she were just into expensive shoes ;-)