How much of your NET income should you spend on a car?

[NYCSuits]

Correct, according to my calculations the golf is costing ~380 a month all in.

And that's far less than the 10% for me as well... but any other car I am considering will break 1k a month in expenses, which seems silly to spend on a car

No such thing as silly...a car can be a means of transportation from A --- B or a car can be a hobby,interest,passion,life....so if the car brings you those things, 1k isn't so silly anymore

 

[Stag]

Generally, you shouldn't spend more than 1/3 of your income of a car payment if the loan is for more than 3 years.

Just like you shouldn't buy a house for more than 3x your yearly salary.

 

[thedude4bides]

I don't wanna grow up

I don't have a car payment, and I pay $60 in gas and another $60 in insurance ... so $120 a month. But yea actual expenses are in fact higher esp considering depreciation... I figured I'd keep it simple and include car payment only because most folks don't seem to understand how much their car actually depreciated over time.

Can't lie... I do the whole "what if" thing every so often. As in, what if I kept my sexy Reflex Silver mk5 GTI and had no payment today. It bugs me a little, but only when I'm not driving

I hear where you are coming from and I totally understand. Given recent changes in your life a new car could mark a new beginning... But so could a new attitude about fiscal responsibility. No easy answer and especially if you are not endangering financial stability, it's going to remain a grey area. For some, it's black and white simply because of financial limitations but I don't think this is the case for you.

 

[maxtdi]

Can't lie... I do the whole "what if" thing every so often. As in, what if I kept my sexy Reflex Silver mk5 GTI and had no payment today. It bugs me a little, but only when I'm not driving

I hear where you are coming from and I totally understand. Given recent changes in your life a new car could mark a new beginning... But so could a new attitude about fiscal responsibility. No easy answer and especially if you are not endangering financial stability, it's going to remain a grey area. For some, it's black and white simply because of financial limitations but I don't think this is the case for you.

I suppose I was looking for a consensus from folks on this forum, seems to be at the 20% mark.

 

[troyguitar]

Correct, according to my calculations the golf is costing ~380 a month all in.

And that's far less than the 10% for me as well... but any other car I am considering will break 1k a month in expenses, which seems silly to spend on a car

Hard to say what's silly. I make less than you and could easily spend 1k/month on a car (in fact I'll probably be spending a little more than that soon), but I'm in a different situation.

 

[maxtdi]

Hard to say what's silly. I make less than you and could easily spend 1k/month on a car (in fact I'll probably be spending a little more than that soon), but I'm in a different situation.

Yea if you really enjoy it more power to you. I used to as well... When I was 22 I bought my C5 corvette granted for cash but still... it was nearly 1/2 the amount I made every year and it used up all my savings.

I can't imagine doing the same thing today.

 

[troyguitar]

Presumably your cost of living is a lot higher than mine too - maybe even enough that I effectively have more free cash.

That's why the idea of having a general rule for how much to spend is ludicrous. A single guy renting a $500/month apartment in the midwest and a dude supporting a wife and kids in a $5000/month condo will clearly have different comfort zones for cars.

 

[reelknead1]

Mine is 16.1% but that is after retirement and health insurance. If you don't couldn't those it should be around 10%.

Student loans on the other hand, don't even get me started on those.

 

[maxtdi]

Mine is 16.1% but that is after retirement and health insurance. If you don't couldn't those it should be around 10%.

Student loans on the other hand, don't even get me started on those.

Hmm all of those... should be counted...

 

[C4L]

Between me and my wife and both our cars it is about 12%-15%.

I still feel like that is a lot myself. When I think about the actual car payments it seems like a lot of money. But then I think we have appx. $60k worth of cars it doesn't seem so bad.

 

[troyguitar]

Hmm all of those... should be counted...

Presumably he means he pays for those pre-tax, so it's harder to estimate quickly what "Net Income" actually is if you mean after taxes alone and not after taxes and other pre-tax expenses.

16% of income after both taxes AND insurance/retirement == 10% of income after taxes alone is what he was guessing as I understand.

 

[C4L]

My general rule of thumb is to never have the value of your car(s) exceed 50% of your gross annual income. So if you finance over 5 years I suppose that would be appx. 20% if you were speaking in terms of payments.

If you are single and earn $70k/year, your car should be valued at no more than $35k.
If you are married and have a household income of $100k/year, your car(s) should be valued at no more than $50k total.

That always seemed to make sense to me as a modest rule of thumb.

 

[D Griff]

Man, I wish I made the type of money most of you guys seem to haha...

This can be hard to quantify but I'll give a couple of numbers.

My two cars OTD purchase prices added together equal about 75% of my annual income lol.

My monthly expenses (gas for the cars, insurance, GTI payment, etc.) equate to about 32% of my monthly take home pay after taxes, retirement contribution etc.

I also spend money on stuff for the Miata, but I'm too lazy to add all that up right now, but so far I'm probably averaging < $100 per month for that, since there's so much that needs to be done on it that doesn't require much in the way of parts.

Many of you guys may think it too much, but hey, it's my main hobby that costs. I also play music but I own all of my gear outright and rarely drop coin on that stuff. In all honesty, knowing what I know now about being an "adult" and supporting myself, the GTI purchase wasn't the greatest decision, but whatever, live and learn.

 

[C4L]

Presumably he means he pays for those pre-tax, so it's harder to estimate quickly what "Net Income" actually is if you mean after taxes alone and not after taxes and other pre-tax expenses.

16% of income after both taxes AND insurance/retirement == 10% of income after taxes alone is what he was guessing as I understand.

Just figure 'net' to be whatever your paycheck is. After everything is taken out, whether pre/post-tax.

Take your 2-week paycheck and multiply it by 2 and then divide your monthly car costs into that.

FOR EXAMPLE;
$2,000 paycheck = $4,000/mo and $500 car payment = 12.5%

 

[maxtdi]

Just figure 'net' to be whatever your paycheck is. After everything is taken out, whether pre/post-tax.

Take your 2-week paycheck and multiply it by 2 and then divide your monthly car costs into that.

FOR EXAMPLE;
$2,000 paycheck = $4,000/mo and $500 car payment = 12.5%

don't forget insurance fuel and maintenance