New car - how much can we afford?

Questions on how we spend our money and our time - consumer goods and services, home and vehicle, leisure and recreational activities
investingdad
Posts: 1406
Joined: Fri Mar 15, 2013 10:41 pm

Re: New car - how much can we afford?

Post by investingdad » Fri Feb 02, 2018 6:37 am

OP said combined assets, not net worth. Worth pointing that out.

Also...140k take home is good for a 40k car? So much for taking advantage of high income and investing to greatest extent possible while young and time is on your side.

I had a Nissan Sentra up until both kids were born and upgraded to full size sedan at that point. The marketing to parents by car companies is clearly working.

mouses
Posts: 3639
Joined: Sat Oct 24, 2015 12:24 am

Re: New car - how much can we afford?

Post by mouses » Fri Feb 02, 2018 8:07 am

Normally this board gives good advice, but the people saying toss $50K at a car are not taking into account that you may be one income and it's a waste anyway,

Exafchick
Posts: 133
Joined: Thu Nov 09, 2017 10:40 am

Re: New car - how much can we afford?

Post by Exafchick » Fri Feb 02, 2018 11:51 am

Watty wrote:
Thu Feb 01, 2018 12:13 am
One thing I would suggest doing is buying a rear facing car seat and taking it with you when you test drive cars.

Some big cars really don't work well because of the seat and door placement and they may be too high to easily get the baby in and out.In some situations a smaller car may actually be a lot better.

You might start another thread asking about which cars have worked good to people with babies. You really don't need a minivan and it you buy one now it will be getting old by the time the kid is in gradeschool and you might actually need a minivan.
Excellent idea! I would definitely lean more towards a sedan or hatchback rather than a coupe/2-door model. I've had my 2000 honda accord since I bought it new and don't plan to get rid of it for a couple more years.

Congratulations on the baby, btw!

mushyyy
Posts: 47
Joined: Tue Jan 13, 2015 1:34 pm

Re: New car - how much can we afford?

Post by mushyyy » Fri Feb 02, 2018 12:17 pm

investingdad wrote:
Fri Feb 02, 2018 6:37 am
OP said combined assets, not net worth. Worth pointing that out.

Also...140k take home is good for a 40k car? So much for taking advantage of high income and investing to greatest extent possible while young and time is on your side.

I had a Nissan Sentra up until both kids were born and upgraded to full size sedan at that point. The marketing to parents by car companies is clearly working.

I apologise for the lack of explanation.
We have zero debt nonetheless, as we rent and have the car paid for.

If it was not for the baby, I would keep my car. I'm not really willing to spend a lot of money on it.
A mini SUV or a standard sedan would be enough.

Thanks a lot!

Sandi_k
Posts: 773
Joined: Sat May 16, 2015 11:55 am
Location: SF Bay Area

Re: New car - how much can we afford?

Post by Sandi_k » Sat Feb 03, 2018 2:52 pm

Mazda CX-5

Small-ish (but not too small), reasonably fuel efficient, big enough hatch area for stroller. Tall enough to easily stash kid in car seat.

OldSport
Posts: 309
Joined: Tue Jul 25, 2017 7:01 pm

Re: New car - how much can we afford?

Post by OldSport » Sat Feb 03, 2018 3:52 pm

ny_knicks wrote:
Wed Jan 31, 2018 12:51 pm
30 years old saving $60k a year and $550k in assets and you want to buy a nice second hand car.

You could buy a new $50k Lexus/Audi and be just fine.

This board is too much sometimes lol.
Agree. You are extremely well off. You make $140k TAKE HOME. So assuming that take home does not include 401k/HSA, etc. you are making well north of $200k gross.

Sometimes the questions are ridiculous, I'm sure you know you could easily afford to buy much more than anything you're thinking about. You could buy a second-hand Lexus LX!!

If I were in your position I'd look for a good deal on a new heavily discounted 2017 Acura RDX or Lexus RX while they're still available. You know you can easily afford that and anything cheaper.

TheAccountant
Posts: 91
Joined: Sun Nov 05, 2017 4:21 pm

Re: New car - how much can we afford?

Post by TheAccountant » Sat Feb 03, 2018 4:06 pm

Buy something new for 30k that depreciates the least in your area and then run it into the ground. Do not even think about financing it, either.

shawndoggy
Posts: 109
Joined: Tue Sep 05, 2017 3:01 pm

Re: New car - how much can we afford?

Post by shawndoggy » Mon Feb 05, 2018 8:30 am

TheAccountant wrote:
Sat Feb 03, 2018 4:06 pm
Buy something new for 30k that depreciates the least in your area and then run it into the ground. Do not even think about financing it, either.
If the plan is to run the vehicle into the ground, why would depreciation be a consideration?

pochax
Posts: 1329
Joined: Tue Oct 21, 2008 11:40 am

Re: New car - how much can we afford?

Post by pochax » Mon Feb 05, 2018 10:44 am

Sandi_k wrote:
Sat Feb 03, 2018 2:52 pm
Mazda CX-5

Small-ish (but not too small), reasonably fuel efficient, big enough hatch area for stroller. Tall enough to easily stash kid in car seat.
+1. will retain some of the sportiness of your current car (compared to other small SUVs at least).

User avatar
William4u
Posts: 1306
Joined: Fri Jun 01, 2012 3:02 pm

Re: New car - how much can we afford?

Post by William4u » Mon Feb 05, 2018 10:57 am

1. Safety comes first. That means emergency braking, blind spot, and all that comes with it.
2. Reliability comes second. It is not good to be left on the side of the road.
3. Value comes third. No need to overpay for a commodity.

With one child it doesn't matter what kind of car you get. With two you might consider a larger car or minivan.

FriedFire
Posts: 61
Joined: Tue Nov 07, 2017 7:33 pm

Re: New car - how much can we afford?

Post by FriedFire » Mon Feb 05, 2018 11:13 am

Chuck wrote:
Wed Jan 31, 2018 1:41 pm
I agree you can afford whatever car you want.

However, unless you're driving a Miata, you don't need a bigger car for JUST ONE baby. You can easily have two children and get around in a Civic. Three is where you start to have comfort issues because of child safety seats (you can't realistically put more than 2 of those in a sedan).

Edit: HAHA I took so long before replying, someone already said Miata!
My wife and I are both working and we have two toddlers. We currently share a Civic and don’t really need a bigger car. If we have a third then yes we will “need” a bigger car.

I don’t want to discourage from getting a bigger/nicer car. Just wanted to point out that a Civic can satisfy the need up to two kids. Beyond that your satisfying a want which totally fine :)

User avatar
3CT_Paddler
Posts: 3222
Joined: Wed Feb 04, 2009 5:28 pm
Location: Marietta, GA

Re: New car - how much can we afford?

Post by 3CT_Paddler » Mon Feb 05, 2018 11:31 am

With one child any modern sedan works fine. No need for an SUV unless you just want an SUV.

It sounds like you are into driving a nicer car... I would look at a 3-5 year old Acura, Lexus or Kia Optima. Just doing a quick search on AutoTrader.com I see a 2014 Acura TL with 40k miles for $20k in my area. In your shoes I would pay cash for a nice, gently used $20k sedan.

Also, I would make the decision based only on your finances/income. Assuming that your incomes are somewhat equal, a $50-80k vehicle on a $120k/yr salary is probably not financially prudent in your situation. It's not a terrible decision as your savings rate obviously shows you could pay for it in cash... it just sets you up on a certain level of consumption going forward that will be at odds with other financial goals (retirement savings + saving for college + more children?).

BuckyBadger
Posts: 849
Joined: Tue Nov 01, 2011 11:28 am

Re: New car - how much can we afford?

Post by BuckyBadger » Mon Feb 05, 2018 12:24 pm

In 2017 we bought a low mileage 2015 Subaru Outback with tons of bells and whistles (including the EyeSight suite of safety features) for about $24k I think? It's a MARVELOUS car. YOu could certainly pay less than we did.

A couple months ago we found out we were expecting and that car is going to be perfect.

I'd recommend an Outback!

As a data point for size, my parents and their two kids (my brother and me) did many many road trips in station wagons. Several old-school boxy Volvo wagons, and then Ford Taurus wagons. You don't need a minivan for two kids unless you WANT a minivan or do tons of carpool or something.

Our second car is a well-maintained and low mileage 2008 Honda Element. Apparently a nightmare for rear-facing child seats but a dream when they are forward facing. We're keeping that car as well.




TL:DR - consider a station wagon, and the Subaru Outback is exceptional

User avatar
wander
Posts: 2501
Joined: Sat Oct 04, 2008 9:10 am

Re: New car - how much can we afford?

Post by wander » Mon Feb 05, 2018 12:45 pm

Op, you have good salary and are good with saving. You can afford any regular car you want and even some luxury models. For 1 - 2 kids, I think a full size sedan is more than enough for whole family; With 3 kids, I prefer a minivan than full size SUV but it's personal choice.

TheAccountant
Posts: 91
Joined: Sun Nov 05, 2017 4:21 pm

Re: New car - how much can we afford?

Post by TheAccountant » Mon Feb 05, 2018 8:34 pm

shawndoggy wrote:
Mon Feb 05, 2018 8:30 am
TheAccountant wrote:
Sat Feb 03, 2018 4:06 pm
Buy something new for 30k that depreciates the least in your area and then run it into the ground. Do not even think about financing it, either.
If the plan is to run the vehicle into the ground, why would depreciation be a consideration?
It's still an expense to be incurred.

I advocate keeping it not to keep depreciation low, but to keep $/mi. low. Cars last much longer than people give them credit for, and 90% of the time it is always cheaper to repair rather than replace the entire car.

shawndoggy
Posts: 109
Joined: Tue Sep 05, 2017 3:01 pm

Re: New car - how much can we afford?

Post by shawndoggy » Tue Feb 06, 2018 8:35 am

TheAccountant wrote:
Mon Feb 05, 2018 8:34 pm
It's still an expense to be incurred.

I advocate keeping it not to keep depreciation low, but to keep $/mi. low. Cars last much longer than people give them credit for, and 90% of the time it is always cheaper to repair rather than replace the entire car.
If the car is "run into the ground" isn't it fully depreciated tho?

"90% of the time it is always"... are you Yogi Berra?

sco
Posts: 771
Joined: Thu Sep 24, 2015 2:28 pm

Re: New car - how much can we afford?

Post by sco » Tue Feb 06, 2018 6:16 pm

Only reason depreciation would matter is if you sell it, intentionally or otherwise. For example, wreck the car on day 2 and cry at what the insurance payout is :)

User avatar
Cycle
Posts: 626
Joined: Sun May 28, 2017 7:57 pm
Location: USA

Re: New car - how much can we afford?

Post by Cycle » Tue Feb 06, 2018 9:14 pm

sco wrote:
Tue Feb 06, 2018 6:16 pm
Only reason depreciation would matter is if you sell it, intentionally or otherwise. For example, wreck the car on day 2 and cry at what the insurance payout is :)
Emergence of self-driving car fleets in 5-10 years may cause a lot of us to rethink personal car ownership. When 95% of city dwellers get rid of their cars to use the Waymo or GM fleets at $.90 a mile, what is going to happen to those cars? I could be wrong, but I think a lot of the cars bought new this year will be sold for pennies on the dollar in 5-10 years. In ten years, besides utility trucks / sport vehicles, why would anyone buy a car with a steering wheel?

sco
Posts: 771
Joined: Thu Sep 24, 2015 2:28 pm

Re: New car - how much can we afford?

Post by sco » Tue Feb 06, 2018 9:29 pm

Cycle wrote:
Tue Feb 06, 2018 9:14 pm
sco wrote:
Tue Feb 06, 2018 6:16 pm
Only reason depreciation would matter is if you sell it, intentionally or otherwise. For example, wreck the car on day 2 and cry at what the insurance payout is :)
Emergence of self-driving car fleets in 5-10 years may cause a lot of us to rethink personal car ownership. When 95% of city dwellers get rid of their cars to use the Waymo or GM fleets at $.90 a mile, what is going to happen to those cars? I could be wrong, but I think a lot of the cars bought new this year will be sold for pennies on the dollar in 5-10 years. In ten years, besides utility trucks / sport vehicles, why would anyone buy a car with a steering wheel?

What if it ends up being 20 years? 5 years seems awfully aggressive to me.

User avatar
Cycle
Posts: 626
Joined: Sun May 28, 2017 7:57 pm
Location: USA

Re: New car - how much can we afford?

Post by Cycle » Wed Feb 07, 2018 12:03 pm

sco wrote:
Tue Feb 06, 2018 9:29 pm
What if it ends up being 20 years? 5 years seems awfully aggressive to me.
It won't be 20 years, too much money at stake for car companies to be the first to market.

Self driving cars won't be the most disruptive tech in the next 5 years, it will be adoption of augmented reality. Colocation will be much less important in the work environment and so office workers may be going into work once a month if at all. For those workers, hiring a ride is going to be much more economical even without self driving cars. I'll still be stuck dragging myself into the lab a few times a week.

V1RTUS
Posts: 61
Joined: Sat Jul 12, 2014 4:36 pm

Re: New car - how much can we afford?

Post by V1RTUS » Wed Feb 07, 2018 1:23 pm

BuckyBadger wrote:
Mon Feb 05, 2018 12:24 pm
In 2017 we bought a low mileage 2015 Subaru Outback with tons of bells and whistles (including the EyeSight suite of safety features) for about $24k I think? It's a MARVELOUS car. YOu could certainly pay less than we did.

A couple months ago we found out we were expecting and that car is going to be perfect.

I'd recommend an Outback!

As a data point for size, my parents and their two kids (my brother and me) did many many road trips in station wagons. Several old-school boxy Volvo wagons, and then Ford Taurus wagons. You don't need a minivan for two kids unless you WANT a minivan or do tons of carpool or something.

Our second car is a well-maintained and low mileage 2008 Honda Element. Apparently a nightmare for rear-facing child seats but a dream when they are forward facing. We're keeping that car as well.

TL:DR - consider a station wagon, and the Subaru Outback is exceptional
I will second the Subaru recommendation!

My wife and I are expecting as well and I just bought a 2014 Forester 2.5i Touring with 24k miles for $21k including a lifetime powertrain warranty. It has tons of features including the Eyesight safety features and I absolutely love driving it so far.

I test drove several Outbacks as well and really liked them as well just couldn't find a used one with lowish mileage in the price range I was looking for.

Good luck and congratulations to you and your girlfriend!
"I will do today what others won't, so that I can do tomorrow what others can't."

anoop
Posts: 690
Joined: Tue Mar 04, 2014 1:33 am

Re: New car - how much can we afford?

Post by anoop » Wed Feb 07, 2018 1:28 pm

I have some thoughts in this post:
http://anoopsplace.blogspot.com/2013/01 ... g-car.html

Bankrate.com has an article titled "How much car can you afford?", which states:
How much should you spend on a new car? Not more than 20 percent of monthly income, say experts. "This includes payments on all the cars you may own, whether you have one vehicle or six," says Karl Brauer, editor-in-chief at Edmunds.com. "And we're talking about your take-home pay, not your gross income."

Another respected name in the financial planning world, Dave Ramsey, in response to a similar question, says:
The total value of all of your vehicles—things with a motor in them—should not be more than half of your annual income.

alfaspider
Posts: 1515
Joined: Wed Sep 09, 2015 4:44 pm

Re: New car - how much can we afford?

Post by alfaspider » Wed Feb 07, 2018 1:37 pm

anoop wrote:
Wed Feb 07, 2018 1:28 pm
I have some thoughts in this post:
http://anoopsplace.blogspot.com/2013/01 ... g-car.html

Bankrate.com has an article titled "How much car can you afford?", which states:
How much should you spend on a new car? Not more than 20 percent of monthly income, say experts. "This includes payments on all the cars you may own, whether you have one vehicle or six," says Karl Brauer, editor-in-chief at Edmunds.com. "And we're talking about your take-home pay, not your gross income."

Another respected name in the financial planning world, Dave Ramsey, in response to a similar question, says:
The total value of all of your vehicles—things with a motor in them—should not be more than half of your annual income.
I'd argue that these should be absolute limits rather than guidelines. I can't imagine spending 20% of my takehome on a vehicle or owning vehicles worth half my annual income.

Sandi_k
Posts: 773
Joined: Sat May 16, 2015 11:55 am
Location: SF Bay Area

Re: New car - how much can we afford?

Post by Sandi_k » Wed Feb 07, 2018 3:54 pm

I'd argue that 30-40% of your gross income is the max.

So, if you make $30k annually, you should be driving no more than a $12k car.

And it decreases the more you make. If you make $150k annually, a $60k car seems unreasonable. But a $45k car seems about right to me.

alfaspider
Posts: 1515
Joined: Wed Sep 09, 2015 4:44 pm

Re: New car - how much can we afford?

Post by alfaspider » Wed Feb 07, 2018 3:58 pm

Sandi_k wrote:
Wed Feb 07, 2018 3:54 pm
I'd argue that 30-40% of your gross income is the max.

So, if you make $30k annually, you should be driving no more than a $12k car.

And it decreases the more you make. If you make $150k annually, a $60k car seems unreasonable. But a $45k car seems about right to me.
Yeah, someone making $30k driving a $12k car makes more sense than someone making $300k driving a $100k car. The former just needs something reliable to get to work. The latter is just indulging.

User avatar
ram
Posts: 1052
Joined: Tue Jan 01, 2008 10:47 pm
Location: Midwest

Re: New car - how much can we afford?

Post by ram » Wed Feb 07, 2018 9:17 pm

Upto 3 months pre tax salary ( 35K +)
Ram

CppCoder
Posts: 827
Joined: Sat Jan 23, 2016 9:16 pm

Re: New car - how much can we afford?

Post by CppCoder » Wed Feb 07, 2018 9:38 pm

researcher wrote:
Wed Jan 31, 2018 7:32 pm
I can’t fathom what people are schlepping around that requires a minivan/fullsize SUV if they only have 1 or 2 kids.
Things I've heard people haul in a minivan (or have done myself): Grandma and grandpa, kids' friends, six for a carpool, large dogs, furniture, etc. We have two kids and an Odyssey; we love it. My wife was happy just to get the automatic sliding doors...

Personally, I can't fathom why anyone buys an enormous pickup truck as a commuter vehicle to an office job that never requires placing anything in the pickup's bed. Based on our work parking garage, though, this seems to be rather common (not to mention how many pickups are sold in the U.S.). Different strokes...

hightower
Posts: 501
Joined: Mon Dec 12, 2016 2:28 am

Re: New car - how much can we afford?

Post by hightower » Wed Feb 07, 2018 10:21 pm

I dont remember where I first heard it, but I like the 20% of salary rule of thumb. For you that would mean 28k and pay cash.
mushyyy wrote:
Wed Jan 31, 2018 12:34 pm
I know..standard thread that appears every other day on the board, today is my turn.

Me: 29
Girlfriend: 30

We are expecting a baby end of the year and we need a bigger car. Initial thinking is to buy a second- hand car, max 30k miles.

How much car can we afford?

-Our take home pay is 140k/year.
-We save 50-60k/year, this figure is expected to drop after the birth, she plans to take few months unpaid too.
-Combined assets: 550k

User avatar
snackdog
Posts: 314
Joined: Wed Nov 12, 2014 4:57 am

Re: New car - how much can we afford?

Post by snackdog » Wed Feb 07, 2018 10:39 pm

5% of take home pay is good rule of thumb on transportation during the critical saving years. That is around $5,000/yr which works out to something like a Honda Fit or Kia Rio. Both cars have a five year total cost of ownership around $25K (according to Edmunds). If you are feeling especially rich and expecting some near terms raises or willing to commit to owning for 10 years, perhaps a Honda Civic.

Post Reply