How Much Car Payment Can You Really Afford? (3 Simple Rules)

[@celticwarrior916]

Perfect timing! I've been looking to buy a car for a while. The used car maket is absolutely insane. Taking in to consideration your advice here, looks like I have to save more for my down payment and consider something older to fit the budget better. Thanks for the great information!

[@HonestFinance]

You’re welcome. You don’t need to follow it exactly, but I think it’s a good start

[@HonestFinance]

Enjoy the video! Here's a playlist to watch more car buying videos if you're interested: kzbin.info/www/bejne/qKiylHR-ia1nhdU

[@chodkowski01]

I stopped by cars. I’m waiting for when the 30 year or 360 month payments start. If I had that option then my payments would only be $191 a month with $37,000 in interest. That I could afford. Now if they could only build a car that could last that long.

[@danielzavalahuerta]

You are a really good teacher man

[@HonestFinance]

Hey thank you

[@jakes5530]

Generally speaking, as long as the interest rate is low (under 4.5%) and you intend to keep your car for 4-5 years before trading in, then a 72 month car loan isnt a bad financial decision. Even before car values got crazy like they are now, most cars kept about 50-60% of their value after 5 years (though now it’s more like 75%). Car depreciation tends to level off after the first few years. 99% of the time you’re gonna have positive equity for your trade-in after 5 or even 4 years on a 72 month loan. I do agree with putting at least 20% down and using 10% of your NET income as a guideline. Most articles base their calculations off of gross income for housing and car monthly expenses but that’s totally irrelevant. Net income like you said is the true logical way to compute what you can afford.

[@daltonwilliams2962]

COVID and buying my car in 2019 prevents from ever being upside in my car loan.

[@bingo2069]

What if you have a 84 month loan with a credit union at 2.8% interest? That’s an affordable deal!

[@Kyleach15]

Just got my car totaled. Truck in front of me, it's tire broke off and hit me head on. My car was paid off for the last 2 years and now I'm forced into a car payment again. This 10% rule leaves me with 236 dollars total to spend on a vehicle and it's associated costs. This just isn't possible. I feel trapped and with no options

[@HonestFinance]

I’m sorry. It’s getting tighter to pay for everything these days

[@richardtausch2]

I have a question. I'm looking to buy a Honda for 42K. I have great credit and all the cash but I would like to finance it and pay it off in a month. What I would like to do is put a huge down payment on my credit card and finance the rest and then pay off the card in one month (get the points rewards) and pay off the loan off after one month and owe nothing. What is the most a dealer would allow me to put down on a credit card and would you alter this plan? I don't want to owe anything after a month for some specific reasons.

[@jonathandeuire6962]

20/4/10 rule still makes sense to me. Not 20/5/10

[@HonestFinance]

5 year loan is more common. That’s all

[@OnyxVenator]

6% average interest? Jeez, that's why you max out your credit score asap! A good score can get you between 2-3% at most credit unions.

[@HonestFinance]

I agree. 6% is too high

[@DennnnnnnY]

1.99% at mine 👍🏻

[@poppyspitfire5372]

Acquiring a longer time to pay back your loan will lower your monthly payment, but unfortunately you’ll pay a lot more in interest!

[@HonestFinance]

That’s exactly right

[@lilreep]

What if you put down 50% even better?

[@HonestFinance]

Yes that’s much better

[@OP_-pk9hm]

50% is great for a car but a terrible idea. Save that for a home down payment instead! get a 150-200k condo with that down payment.

[@thewewguy8t88]

well you see my situation is kind of weird as i have a very low take home pay and i cant really see any car payment being less then 10% of my monthly take home net pay again my situation is complicated and one that i am not sure most people would fully understand very well. but yeah apart from somehow getting a better take home pay what would you recommend.

[@chodkowski01]

68% of Americans are in your boat. With rents doubling and tripling every couple of years now you may end up choosing between keeping that car or living in it in years to come.

[@HonestFinance]

Ya it feels like that’s where we are headed

[@chodkowski01]

You’re better off buying a vehicle that you can live in with rents doubling and tripling every couple of years. Hopefully you won’t have to decide whether to keep the car or the apartment.

[@b58lol]

First for the first time

[@chodkowski01]

What he’s saying is if you don’t make $5,000 a month don’t bother buying a new car. Today’s good cars start at $60,000 and up. $32,000 will only buy you a budget junk car.