How Much Should You Spend on a Car?
We live in a world today where everything seems much more attainable.
Our grandparents are quick to remind us about how a pound of rice used to cost a couple of pennies in their day, but did they also have cell phones, which pretty much everyone owns today? Did they also have the luxury to look up anything they wanted pretty much whenever? Were they also able to afford and own the amount of outfits we could keep in our closets today?
Advancements in technology and capitalism have made our world a comfy one, albeit more expensive if you want to enjoy all it has to offer. But in a world where things like subscription fees, internet, cell phone plans, and food delivery services drain our funds, some frugality needs to rear its head some way or another.
So how much should you spend on a vehicle? Your noble steed is taking you place to place because sadly American urban planning has made it pretty much a necessity to own a car. Some people think the majority of their funds should be put into owning a decked out super car and find themselves in financial struggles as a result.
I think our main goal as human beings is to live with a sense of financial freedom and comfort to make decisions like ordering food or purchasing media. With this in mind, a vehicle needs to cost a certain amount of money so that our lives are not bogged down by the stress and anxiety that comes from living on the edge of not being able to pay what we owe.
Let’s compare different percentages of how much income a car can suck up to see which is the right one. Of course financing a new vehicle also requires a down payment which should be taken into consideration but let us see some ratios for car costs.
If you are in possession of a damaged or totaled vehicle, it should be one of your top priorities to get rid of it. You also want to make money and not sign it off as a total loss. Selling your scrap vehicle online is now easier than ever as there are websites willing to pay a fair price for damaged and even totaled vehicles.
50% of Monthly Income
In order to justify this you have to be into cars. You are spending money on a vehicle that could be going to so many other things. Importantly, this is money that could be saved for emergencies or invested into the future. I’m not saying you should get into trading but even saving money away is a great idea no matter who you are because you never know when you’d need it.
If you are living with your parents and working a lousy job then maybe you can justify spending so much of your income on a vehicle but other than that, you will have to live the rest of your life very frugally because you just had to have an expensive car. You can also think about car hire as a cheaper option
35% of Monthly Income
This is a good place to be because generally, you are able to drive a decent vehicle, and you have some breathing room with the rest of your financial situation. You can save money, indulge yourself now and then, and live a normal life.
Remember if you’re not making that much money, used cars are such a wise investment because you don’t throw away as much money as you would driving around in a new car. If a used car is what you can afford at 35%, don’t be down as used cars today are way better then they were in the past and you shouldn’t have any problems.
20% of Monthly Income
If you are looking to save some more money on your car, 20% might be a good zone for you to stay around. This would allow you to drive a vehicle that isn’t too old or high in miles, and be comfortable to have the rest of your income for whatever you want.
You can use the money saved to try out a new hobby or just save up for someone you would really want. Some high end hobbies can require much financial sacrifice, and saving money in places like your car could help you make the purchases necessary.
10% of Monthly Income
This is for those hardcore about saving money. Expect high mileage and old vehicles. Luckily, cars age much better today than they used too so it’s not like your gonna be driving a complete hunk of junk.
If you do not care about what you are driving and the ability to save money and be free with your finances is important for you, 10% might be what you want to spend on a car.
Cars come in many different sizes and costs. You can rent the car as well. There is a car for anyone at any price point if you search and don’t care about driving older vehicles. How much you spend on a car depends on you and what you are comfortable with. If you know you need more of your income for something other than a vehicle, make sure your car does not take up too much money.