Advertise on Bikeforums.net



User Tag List

Results 1 to 12 of 12
  1. #1
    Senior Member
    Join Date
    Dec 2001
    Location
    New Jersey
    Posts
    6,147
    Mentioned
    0 Post(s)
    Tagged
    0 Thread(s)

    How much car can you afford?

    Over the years I have seen quite a few people declare bankruptcy, drop out of college, move back with their parents etc. etc. because they bought a new car. Not many people know the actual cost of what it takes to afford, maintain and insure a new car. It shocks me at the ease of which creditors give tens of thousands of dollars to new car owners who are living right on the cutting edge.

    I just did a search on the net “How much car can I afford” and found nothing but bad advice. Here are some of the gems I found.

    1. >>>>>“In figuring out the purchase of a new vehicle, the CCCS recommends keeping your debt-to-income ratio below 15 percent. If your figuring shows a ratio already higher than that, CCCS recommends that you shouldn't attempt car payments at all until you pay off at least some of your credit bills” Add up all your monthly installment payments such as car payments and credit card payments (do not include regular living expenses like rent, mortgage, or utilities). Divide the total by your monthly take-home pay, after taxes and other withholdings have been subtracted. The resulting percentage is your debt-to-income ratio.” >>>>>

    This is insane. This is terrible advice. “DO NOT INCLUDE REGULAR LIVING EXPENSES LIKE RENT, MORTGAGE OR UTILITIES” ??? You got to be kidding me. I guess the writer expects my mortgage and utility company to stop sending me bills
    or my landlord to forgive rent payments while I make car payments!! Living expenses have to be included in the equation of buying a new car or else you will run out of cash real fast and start skipping payments. Madness.

    2. Here’s another one I found to determine how much car you can afford.

    Highest payment you can afford $300.00
    Cash down payment: $3,000.00
    Trade in: $3,000.00
    Interest rate 6.9%
    Loan term 60 months
    Loan amoun $5,186.76
    Total: $21,186.76

    Based on this information, the most expensive car you can buy is $21,186.76.

    This is insane. There are many so called calculators like this which do NOT take into account your current living expense or personal debt. Nor does this calculator take into account insurance, gasoline, tolls, repairs, tickets, fees, vandalism and parking. There is no question in my mind that this calculator and others like it are a recipe for financial disaster. How can a person tell what is the HIGHEST PAYMENT THEY CAN AFFORD? You will find in many cases the $300.00 is ALL THE DISCRETIONARY
    INCOME THEY HAVE IN THE MONTH!!

    No wonder we have so many bankruptcies in this country with advice like this. It’s a pity the humble bicycle does not fit into any of these equations as an alternative means of transportation.

  2. #2
    Senior Member
    Join Date
    Dec 2001
    Location
    Baltimore, MD
    Posts
    59
    Mentioned
    0 Post(s)
    Tagged
    0 Thread(s)
    The best advice I ever heard was that if you can't pay a car off in two years, you can't afford it. I assume that means take the highest payment you can afford, multiply that by 24 months, and there you have the price of the car you should buy. Then you can stretch that loan for 3 to 5 years and not be as worried about payments.

    Just make sure you don't walk into a dealership knowing only the payments you can afford. They love to tweak that and you never figure out exactly what you are paying for the car.

    Me, I want to buy my next car with cash (I hate debt). I just need to make my current car last for a few more years. Maybe by then I'll discover that I don't need a car after all.

    Teresa

  3. #3
    Senior Member
    Join Date
    Jan 2002
    Location
    Washington, DC
    Posts
    3,176
    Mentioned
    0 Post(s)
    Tagged
    0 Thread(s)
    Simple rule:

    If an asset is expected to appreciate in value (real estate), buy it on time. If the asset is expected to depreciate (car, appliance, etc.), pay cash for it.

    Worked for my grandma...works for me.

    Paul

  4. #4
    feros ferio John E's Avatar
    Join Date
    Jul 2000
    Location
    www.ci.encinitas.ca.us
    My Bikes
    1959 Capo; 1980 Peugeot PKN-10; 1981 Bianchi; 1988 Schwinn KOM-10;
    Posts
    14,784
    Mentioned
    4 Post(s)
    Tagged
    0 Thread(s)
    Teresa is right. Pay attention to fuel economy and long-term reliabilty (check Consumer Reports before buying), and buy something within your real-world budget. To save a few hundred dollars on a new car purchase with less haggling, read edmunds.com and seek out a direct fleet sales referral, such as through Costo or carprices.com. To save significantly more money, buy a well-maintained late model used car with a well-documented history.

    I did not even own a car until I was 26. Thanks to bicycling, public transportation, walking, and careful maintenance, my wife and I are easily able to keep our cars running reliably and economically for 15 to 20 years. Those of us who complete most of our shorter trips by bicycle or on foot avoid many engine-wearing, fuel-wasting cold strarts.
    "Early to bed, early to rise. Work like hell, and advertise." -- George Stahlman
    Capo [dschaw'-poe]: 1959 Modell Campagnolo, S/N 40324; 1960 Sieger, S/N 42624
    Peugeot: 1970 UO-8, S/N 0010468
    Bianchi: 1981 Campione d'Italia, S/N 1.M9914
    Schwinn: 1988 Project KOM-10, S/N F804069

  5. #5
    Forum Admin lotek's Avatar
    Join Date
    Dec 2001
    Location
    n.w. superdrome
    My Bikes
    1 trek, serotta, rih, de Reus, Pogliaghi and finally a Zieleman! and got a DeRosa
    Posts
    17,623
    Mentioned
    1 Post(s)
    Tagged
    0 Thread(s)
    ok, I get it...

    BUY A BIKE!

    this is a bike forum after all.......

    Marty
    Sono più lento di quel che sembra.
    Odio la gente, tutti.

    Are you a registered member? Why not? click here to register. Its free, and only takes 27 seconds!
    Want to upgrade your membership? Click Here.

  6. #6
    Carfree since '82. Grrr! JonR's Avatar
    Join Date
    Mar 2000
    Location
    Kansas City, Missouri, USA
    Posts
    1,548
    Mentioned
    0 Post(s)
    Tagged
    0 Thread(s)
    Originally posted by Dahon.Steve


    No wonder we have so many bankruptcies in this country with advice like this. It’s a pity the humble bicycle does not fit into any of these equations as an alternative means of transportation.
    Steve, do you think possibly the debt "counselors" could be influenced, under the table or otherwise, by the car manufacturers and/or oil industry? It wouldn't surprise me a bit.

  7. #7
    feros ferio John E's Avatar
    Join Date
    Jul 2000
    Location
    www.ci.encinitas.ca.us
    My Bikes
    1959 Capo; 1980 Peugeot PKN-10; 1981 Bianchi; 1988 Schwinn KOM-10;
    Posts
    14,784
    Mentioned
    4 Post(s)
    Tagged
    0 Thread(s)
    Originally posted by JonR

    Steve, do you think possibly the debt "counselors" could be influenced, under the table or otherwise, by the car manufacturers and/or oil industry? It wouldn't surprise me a bit.
    Interesting (and, unfortunately, rational) theory ...



    Debt-free and happy for 9.5 years and counting.
    "Early to bed, early to rise. Work like hell, and advertise." -- George Stahlman
    Capo [dschaw'-poe]: 1959 Modell Campagnolo, S/N 40324; 1960 Sieger, S/N 42624
    Peugeot: 1970 UO-8, S/N 0010468
    Bianchi: 1981 Campione d'Italia, S/N 1.M9914
    Schwinn: 1988 Project KOM-10, S/N F804069

  8. #8
    Every lane is a bike lane Chris L's Avatar
    Join Date
    Apr 2000
    Location
    Gold Coast, Queensland, Australia - passionfruit capital of the universe!
    Posts
    9,622
    Mentioned
    0 Post(s)
    Tagged
    0 Thread(s)
    Originally posted by lotek
    ok, I get it...

    BUY A BIKE!
    Hey, works for me! It really is very simple.
    "I am never going to flirt with idleness again" - Roy Keane
    "We invite everyone to question the entire culture we take for granted." - Manic Street Preachers.
    My blog.
    My bike tours. Japan tour page under construction.

  9. #9
    We drive on the left. Dutchy's Avatar
    Join Date
    Sep 2001
    Location
    Adelaide, South Australia
    Posts
    1,096
    Mentioned
    0 Post(s)
    Tagged
    0 Thread(s)
    Buying nice cars is an easy trap especially for young males. I have finally gotten that bug out of my system.
    I bought an Mazda MX-5 (miata) secondhand in 1993, it was a nice car but I hardly drove as I used to catch the train to work.
    I did a total of 20,000km/12,500ml in 2.5 years, hardly worth having so I sold it, I "only" lost about $3000 on that car
    but the insurance was very high.
    Then a few years ago my wife and I went to look at cars on a Saturday afternoon, we actually shook hands
    and agreed that we wouldn't buy anything, that we were just looking. Well 4hrs and $26,000 later we were the
    owners of a Nissan 200sx (sylvia), BIG MISTAKE. We borrowed the full amount. Even though we could afford it,
    after a while it just became a burden, constant mechanical problems, fuel had jumped 25¢ a litre more than when
    we bought it, it only used Premium Unleaded. Well after just 1 year we sold it for just $21,000. Lesson learnt.
    I'll stick with our little imported Daewoo Cielo, it's pretty gutless in the hills but at least we own it
    and it is very reliable.

    Think before you buy.

    CHEERS.
    I'd rather be riding.

  10. #10
    Senior Member
    Join Date
    Dec 2001
    Location
    New Jersey
    Posts
    6,147
    Mentioned
    0 Post(s)
    Tagged
    0 Thread(s)
    >>>"Steve, do you think possibly the debt "counselors" could be influenced, under the table or otherwise, by the car manufacturers and/or oil industry? It wouldn't surprise me a bit.<<<

    I doubt it. The debt counselors don't need to get paid under the table since they are making a killing on the current condition of debtors in this courntry. It seems like there are more and more credit counselors advertising all the time in newspapers and tv.

    People just don't know how much an automobile will cost them but AAA states the figure is closer to $6000 dollars a year. This is net income folks! Gross income is closer to $8000 bucks a year!!!

    If I had to shell out $8000 dollars a year for a new car, I would have some serious cash flow problems. All for an automobile that will spend 85-90 percent of it's life parked and rusting!!

  11. #11
    Sumanitu taka owaci LittleBigMan's Avatar
    Join Date
    Mar 2001
    Posts
    8,945
    Mentioned
    0 Post(s)
    Tagged
    0 Thread(s)
    Usually, if you can't save for it, you can't afford to borrow for it.

    Don't borrow unless someone puts a *** to your head. Even then, try running, first.

    No worries

  12. #12
    feros ferio John E's Avatar
    Join Date
    Jul 2000
    Location
    www.ci.encinitas.ca.us
    My Bikes
    1959 Capo; 1980 Peugeot PKN-10; 1981 Bianchi; 1988 Schwinn KOM-10;
    Posts
    14,784
    Mentioned
    4 Post(s)
    Tagged
    0 Thread(s)
    To me, the scariest part about driving a car is that most of the true societal cost, including local road maintenance and construction, resource depletion, pollution, carnage, etc. is subsidized by everyone, including nonmotorists. In the U.S., the quasi-fixed costs of vehicle ownership (capital depreciation, insurance, time-scheduled maintenance) greatly exceed the artificially-depressed per-distance costs (fuel, tyres, distance-scheduled maintenance). The net effect is that after one invests $25K in a car, it makes economic sense to use it heavily.

    As long as Americans select Chevy Suburbans or Ford Expeditions and drive them 15K miles / 25k km per year, it remains obvious that gasoline is way too cheap.
    "Early to bed, early to rise. Work like hell, and advertise." -- George Stahlman
    Capo [dschaw'-poe]: 1959 Modell Campagnolo, S/N 40324; 1960 Sieger, S/N 42624
    Peugeot: 1970 UO-8, S/N 0010468
    Bianchi: 1981 Campione d'Italia, S/N 1.M9914
    Schwinn: 1988 Project KOM-10, S/N F804069

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •