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No its not ideal. There's enough (nutrients) to survive on it, just like a big mac and a Hyundai (two things I CHOOSE to have better than). Let me guess, you prefer bread and water?
not answering for the other user, but certain people prefer quality or luxury in some areas but not others. I really couldn't care less about my car as long as it reliably gets me from point A to point B, which mine has for 13 years. But when it comes to my guitar equipment or furniture or art, I am very picky. It's not all or nothing.
Last edited by Sunbather; 07-29-2016 at 11:03 AM..
Question is not about how people would like to spend their money, it's about what is considered affordable by the mainstream consensus in terms of financial prudence.
I believe that as long as you have your emergency fund and your retirement savings are on track, you're being "financially prudent", and how you divide up the rest is up to you and your priorities.
If you buy a really nice car because it makes you happy, and afford it by never eating out, that's fine. If you buy a cheap car so that you can splurge on nice vacations, that's fine too. If you can afford to do it all, and still stay on track, that's great.
Using a simple calculation like that of 25% is a flawed mathematical argument. If you make $100k, and you are capped at $25k using this 25% ratio as to how expensive a car you can buy, what happens in year two? You still have the car, paid for, but now you're making another $100k. So now over two years, you've made $200k, but you're driving around in a $25k car that even a kid straight out of college in their first job can afford.
The average time people keep a new car is now 78 months (based on 2015 data.) That's 6.5 years. In your example, you would have earned wages of $650k during that period... and you'd be driving around in a $25k car.
Using a simple calculation like that of 25% is a flawed mathematical argument. If you make $100k, and you are capped at $25k using this 25% ratio as to how expensive a car you can buy, what happens in year two? You still have the car, paid for, but now you're making another $100k. So now over two years, you've made $200k, but you're driving around in a $25k car that even a kid straight out of college in their first job can afford.
The average time people keep a new car is now 78 months (based on 2015 data.) That's 6.5 years. In your example, you would have earned wages of $650k during that period... and you'd be driving around in a $25k car.
You see why using 25% is a flawed argument?
It's a rough figure that gives you an idea of what would be fiscally responsible. It applies to a single point in time(when you purchased).
Not exceeding 10% of your monthly income on transportation expense(insurance and all) is a better way to look at it on an on-going basis.
Question is not about how people would like to spend their money, it's about what is considered affordable by the mainstream consensus in terms of financial prudence.
When I was born (1947), most people did not need a mortgage to buy a house. Houses were 1,000 sf or less, and had one bathroom. Then builders started putting up 2,000 and 3,000 sf homes with 2-3 baths, and the bankers offered mortgages to people to buy them ("financialization").
As a young man (mid-60s to 70s) I was able to buy a new car or truck for cash. There was no A/C, air bags, ABS, CD players, interval wipers, heated seats, OBD, wifi, or back-up cameras. Gradually, tons of luxury items were added to vehicles, and the cost has gone through the roof. Once again, the bankers were happy to step up with loans for people to buy these vehicles (more "financialization").
Every time another item becomes financialized, the price skyrockets and the average Joe can no longer afford to buy with cash. In the past few decades, we've seen the same thing happen with college loans. Now the price of a college education has outstripped the ability of young people to work their way through college.
This little trip through time by a senior citizen should be setting off alarms in your head. What will be financialized next? Food? Heat? Clothing? Utilities? Surprise! It has already been done, through credit cards. Without credit cards, many people in this country would not be able to eat, or heat their homes.
"Financial prudence"??? The day has long passed when any kind of financial prudence was practiced. Let he who has zero debt of any kind, be the first to cast stones at his neighbor. It has gotten to the point where no matter what your salary, or what your savings, you cannot buy a house or a car or go to college without breaking all the rules of "financial prudence". You can't even eat, if you need a CC to do so.
(In the interest of full disclosure, I have zero debt).
Cash rules . . . Purchase what you can afford with cash. If not, welcome to the club of long term debt.
Nope. There are very few good reasons to pay cash for a car.
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Let me guess, you prefer bread and water? 
