How Much Can I Afford to Spend on My Car?

How Much Can I Afford to Spend on My Car?

Once a teenager turns 16, having a vehicle to drive is synonymous with having freedom to go wherever you want whenever you want. However, vehicles can be very expensive, no matter what you get. If you get a junker that continuously breaks down it will cost money to repair, but a nice new car with leather seats and a good sound system costs a fortune. So how much is a good amount to spend on a car?

 

If a Car is a Necessary Evil

For some, buying a car is a necessary evil. This is true of people who live out in the country and need one for transportation, or for people who live in areas with limited bus service. If you are finding the cheapest vehicle possible, be prepared to spend between 10-15 percent of your income. This means that if you earn $25,000 a year, you can get a high-mileage used car for $2500-$3000. However, unless you buy a good used car for cheap, this will not be an option.

 

If a Car is a Luxury

For other people, buying a nice new car is important. It is fine to love cars and intentionally spend money on the things you value most. But make sure you don’t break the bank by spending more money on a vehicle than you can afford. You will need to be vigilant about other expenses to ensure that the vehicle is always paid. Anything more than 50 percent of your income is probably too much to spend on a vehicle.

 

Somewhere in the Middle

For most people, the ideal vehicle lies somewhere in the middle. It will be affordable and reliable. 20-25 percent is a good halfway point, and will get you a decent vehicle. On a $25,000 salary, this will get you a vehicle for $5000-$7500.