Do you think...

[Billy10mm]

We need to understand exactly what we are discussing:

1) Do you mean the cost of the car relative to your gross yearly income?

2) Monthly payment relative to your net monthly income?
2A) If so, what is the term of the loan

3) Total payout (including interest) relative to your gross income over the total loan period?

Cost of car relative to gross yearly income I'm at less than 20% and this is by far the most expensive car I've bought (relative to income) since I was 22 years old. Previous car was less than 10% at the same metric and the car before that was less than 5%

I haven't done a monthly payment on a car in over a dozen years (though we'll see about the 1LE - S&P is returning way too much for me to drop $40K when I could borrow it at 1.9%)

[Billy10mm]

And for the record, 60% in ANY of the above mentioned metrics is fundamentally asinine. You are living above your means, there is no other way to put it.

[sutherlacd27]

depends how you live. i would have spent more on a car if i didnt have student loans to pay and been over the 61% with ease. but i dont want a house right now, im not concerned with having a meaningful relationship, and most certaintly dont want kids ever. as long as you can pay your bills i dont see the issue

[knitetrain05]

Originally Posted by Billy10mm

We need to understand exactly what we are discussing:

1) Do you mean the cost of the car relative to your gross yearly income?

2) Monthly payment relative to your net monthly income?
2A) If so, what is the term of the loan

3) Total payout (including interest) relative to your gross income over the total loan period?

Cost of car relative to gross yearly income I'm at less than 20% and this is by far the most expensive car I've bought (relative to income) since I was 22 years old. Previous car was less than 10% at the same metric and the car before that was less than 5%

I haven't done a monthly payment on a car in over a dozen years (though we'll see about the 1LE - S&P is returning way too much for me to drop $40K when I could borrow it at 1.9%)

I'm talking Number one. Johnny makes $100,000 dollars a year. Has a house ect ect. He buys a corvette for $61,000. That would mean Johnny spent 61% of his yearly gross income. This is just keeping it very general here. KISS principle here guys.

[JTruck]

Originally Posted by knitetrain05

I'm talking Number one. Johnny makes $100,000 dollars a year. Has a house ect ect. He buys a corvette for $61,000. That would mean Johnny spent 61% of his yearly gross income. This is just keeping it very general here. KISS principle here guys.

Johnny made a horrible financial decision with only 100k income and buying a 61k car in cash. It's called financing. Unless you make more money than you can figure out what to do with, buying a car of that value of % is just stupid.

What scares me more is someone is making 100k a year and is asking this question.

[supasport]

i spend 80% of my income on my car lolol....

[Billy10mm]

Originally Posted by JTruckenbrod

Johnny made a horrible financial decision with only 100k income and buying a 61k car in cash. It's called financing. Unless you make more money than you can figure out what to do with, buying a car of that value of % is just stupid.

What scares me more is someone is making 100k a year and is asking this question.

Financing a car is only a valid option when the financing rate is lower than the return the person is making on that money otherwise. Blindly saying that you should finance is absurd. Credit/Financing is the significant factor in the massive debt this the average American is in and being "able" to do it doesn't mean one should.

On that investment note, it seems that every time I bring up this point in conversation, the guys financing their cars agree 100% with me as though that's exactly why they financed, but when probed to find out what they are investing in, the answer is "nothing" or "I don't know" which is just another way of saying, "I don't have any money to invest and I couldn't afford this car if I had to pay for it in cash."

As a general rule of thumb, don't purchase a vehicle you cannot pay for, right there on the spot, in cash.

Anyone's number one savings priority should be to have 6 months to a year with of monthly expenses saved up (this includes housing, utilities, food, gas, insurance, etc ... EVERYTHING) before they drop anything serious on a car.

[scott's45]

I live within my means, so I wouldn't even think of spending that kind of percentage on a car.

[Billy10mm]

Originally Posted by supasport

i spend 80% of my income on my car lolol....

I'm going to throw out a few assumptions here. To spend that much on nothing but a car, I'm going to assume that you live at home with mom and dad which means you're likely very young. Let's assume that you bought your 2010 SS when you were 18 and you spent $35K on it and financed that over 5 years. Let's be generous and assume that you got an awesome 0.0% financing deal.

So at 23 years old, you wasted $35,000 on a Camaro. Had you instead, saved up that money and at the age of 23 invested it in the S&P index, and assuming the S&P returns the same 7% annualized return that it's made since its inception in 1974, that one-time $35K investment would have been worth over $642K when you retired at the age of 65.

Young people spending money on depreciating assets is REALLY stupid, much more stupid than old people doing it. Compounding returns is the cornerstone of investing and your only friend is TIME. The earlier you are in, the more time you have to make returns.

I know, I know, "I'm only young once, I'm going to have fun now. I'll invest later." That's a dumbass statement and the amount of money one leaves on the table doing that is massive.

How important is time?

Johnny and Jimmy are twin brothers.

Johnny invests $100 per week every week starting on the day he turns 20 and stops completely the day he turns 30.

Jimmy doesn't invest a dime in his 20s but on his 30th birthday, he invests $100 per week every week until the day he retires at age 65.

Both brothers return an annualized 8% on their investments over their lifetime. Johnny retires with more money. Why? Because by the time Jimmy started investing, Johnny's investments were already making more money per month than Jimmy was putting in.

So go ahead boys and girls and spend that cash while you're young - but be prepared to be working while those around you are retiring to a beach home on the Virgin Islands.

Oh, and Supasport, move our of your parents house.

[Manbearpig]

This is lacking a lot of detail.

When you say 61%, do you mean annually, do you mean one time?

Do you have bills, savings, are you employed with a stable job?

What exactly are we plugging this number into?

[JAX CAMARO]

A salesman told me like 25 years ago when we were looking at something that was way more than I wanted to spend a month, quote "You may be looking at the wrong car"
61% really, are you going to live in it also and eat on the dollar menu at Mickie dees ?
I'm at 3% from my yearly gross but put a big hunk down to keep it low

[trashmanssd]

Don't ask the Government they always spend way more then they make. Hell if i had to guess 80 percent of people spend above there means and out of them 50 percent spend way above there means. we are a debt society now. Good rules of thumb house total price no more then 2.5 times your yearly income and must put 20 percent down. Home loan no more then 30 years (they now do 40 year loans) preferred 15-20 year loan. NO REMORTGAGING unless you meet this criteria new payment times total number of payments is less then current payment times current payments left. Car's payments total max 15 percent preferred 8-10 percent yearly income again 20 percent down or trade value. Car loan no more then 5 years preferred 3-4 years. If you need to take 7 year loan for a car you are spending way to much money. Put 10 percent of your yearly income away for retirement.

[OldScoolCamaro]

Originally Posted by knitetrain05

Spending 61% of your yearly income is too much spent on a car???

..how can that ratio be plausibly done, just askin'....

[jdsblueray2013]

.......oR sometimes you just got to say WTF, AND DO IT!