What Percentage of Income Should You Spend On a Car? (payments, debts)
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i think this is a good philosophy for someone like my mom's boyfriend. he is a very simple minded blue collar type guy. wouldnt understand the concept of how to use financing to your benefit.
Or my Dad who's a millionaire many times over and doesn't believe in debt...
I'm lucky that my job doesn't require me to drive a fancy car to impress others. So I spend as little money+time as possible on a car.
Get a cheap but reliable car.
I don't think many salaried jobs are in that category of requiring you to buy a fancy car to impresss (rather than being provided a fancy company car for your job..) if not, then please correct me.
i think this is a good philosophy for someone like my mom's boyfriend. he is a very simple minded blue collar type guy. wouldnt understand the concept of how to use financing to your benefit.
its funny how people believe debt is risk. its only risky if you are dumb and take on more than makes sense. for me, its riskier to take a big lump of your cash and sink it into a non-liquid asset. i will keep my cash and invest them in relatively liquid investments and they will earn a return for me and i will have access to them at all times.
of course, i could buy a POS car and not take on debt, but i dont want a POS car.
its funny how people believe debt is risk. its only risky if you are dumb and take on more than makes sense. for me, its riskier to take a big lump of your cash and sink it into a non-liquid asset. i will keep my cash and invest them in relatively liquid investments and they will earn a return for me and i will have access to them at all times.
of course, i could buy a POS car and not take on debt, but i dont want a POS car.
There is certainly risk in debt liquid or not. Most investment returns that are worth anything are long term holdings even if they are liquid. If those long term investments lose value in the short term it could put the investor in a bind if they suddenly need that money. Take the recent stock market crash in 2009. If you deferred some of your cash into stocks and mutual funds instead of equity into your home, you may be left stuck in the short term when your house is underwater and your investments are down in the short term and you suddenly need to sell.
Quote:
Originally Posted by CaptainNJ
i think this is a good philosophy for someone like my mom's boyfriend. he is a very simple minded blue collar type guy. wouldnt understand the concept of how to use financing to your benefit.
I reject the notion that everyone who is averse to risk is somehow simple minded. I know a lot of the enlightened who are just plain over leveraged.
I agree with posters who have pointed out that impressing others and satisfying one's ego is a primary reason for the purchase of certain cars; reliable yet modern transportation is available pretty cheaply. It's especially sad when people over-extend themselves because of this personal insecurity. Most of this discussion has revolved around what constitutes over-extending.
I also agree that one single formula will not work, partly because our priorities differ. This has already been touched on also: One can want a more expensive than bare bones car for reasons other than prestige and ego-stroking. I am referring here to car enthusiasts who derive real pleasure from performance driving. For us that pleasure is part of the enjoyment of life and it comes from cars which handle and accelerate well. Spending more on a car which meets these criteria is no different than spending on any other hobby or special interest, be it boating, traveling, live theatre, model railroading, and so many other things. Many people have some sort of hobby or special interest which constitutes the spice of life for them. Others not sharing a particular passion may consider the spending foolish and unjustified, but life is more than pure practicality. (And I speak as one who has always lived well within his means. I am just saying that within those parameters of not over-extending, our percentage of spending on various areas - housing, cars, clothes, travel, food, hobbies, etc. will vary considerably, and that is why one formula cannot work.)
I'm not a believer in the idea that one should purchase things based on their income. Just because you earn x, doesn't mean you should buy a more expensive car or home or whatever.
its funny how people believe debt is risk. its only risky if you are dumb and take on more than makes sense. for me, its riskier to take a big lump of your cash and sink it into a non-liquid asset. i will keep my cash and invest them in relatively liquid investments and they will earn a return for me and i will have access to them at all times.
of course, i could buy a POS car and not take on debt, but i dont want a POS car.
If you finance and take that 0% interest then you saved that lump sum money to invest elsewhere which can give you decent returns. This makes sense.
Leverage.
If you finance and take that 0% interest then you saved that lump sum money to invest elsewhere which can give you decent returns. This makes sense.
Leverage.
I rarely see the best rated cars at zero percent. Wonder how many let zero
% impact their car choice.
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It's a philosophical issue.
