At Bankrate.com they state- “For most people, 15% of after-tax monthly income is appropriate for total monthly car payments.” So, that should determine how much car (or cars) you can afford in the family. If your household income is $4k after tax, then you can afford a $600 car payment. One expensive car or a couple of Civics.
Most people lose their mind when they enter a car dealership. My wife and I were buying a Mazda 626 years ago and the dealership was a Mazda/BMW place. In the cube beside us was this young guy, with I think his wife, and he really, really wanted this new BMW model. He was already upside down in some other BMW they had and was trying to work a deal on the new one, trading in the older one. I actually heard the salesman say to him that he would be crazy to buy the new car because they were going to add even more money to the loan to pay off the current car he was driving. He’d be so upside down that it just didn’t make sense. He’d be stuck in the new BMW for years and the car would end up costing him about three times the sticker price. The salesman asked him to not buy the car, but the young guy would not be swayed.
I restore old machinery and take it to tractor shows. I wanted a powerful truck to haul my tractors. My current truck is wearing out. I’ve been looking at Ford F250’s with diesel engines. New they sell for $46,000. I can afford the truck, but it is just too crazy to buy new. You lose so much money. I found a five year old F250 that had been very well maintained with only 32K miles on it. I paid cash and got it for $21,000. Less than half the cost of new and very low miles considering that the 7.3L diesel has a life expectancy of 300K miles. Plus, property tax will be much lower, as is insurance on the vehicle.
The best deal is a one to two year old vehicle. Let someone else take the hit on paying for the new car smell. People saw my truck and thought I had bought a brand new truck.
