If necessary, are car payments ok? If so, what percentage of your income should be for that type of debt? What should I shoot to stay below?
2007-02-23 05:24:27 · 12 answers · asked by LG 1 in Business & Finance ➔ Personal Finance
the amount of payments depends on the price of the car & how long u finance it for.
2007-02-23 05:29:04 · answer #1 · answered by woody 5 · 0⤊ 1⤋
If you live in a big city with good public transportation, then car payments (and having a car) are NOT necessary and may even be a bad financial decision--since you may have to pay for parking and other costs too.
If you live in an area where you need a car to get around (like most of America) then it's ok to have car payments if you actually cannot afford to buy ANY car in cash. It can even boost your credit. But it's never necessary to finance a $20,000+ car. If you have to finance it, you should get a cheap, durable car that has good gas mileage and needs little maintenance. And it should be used!! At least 1-2 years.
If you finance a new car, you will owe more than the car is worth the second you drive off the lot--because the car will instantly depreciate in value by 20-30%. Also, it will be worthless years before you pay it off.
2007-02-23 13:40:20 · answer #2 · answered by lizzgeorge 4 · 1⤊ 1⤋
Only if you want to be like all the other broke people. If you don't have a car payment, what would you do with that money? Average car payment in america is $400/ month for 84 months!! That is huge!! What could you do with $400/month?
If you were thinking of a payment of $300/month save it up for 10 months plus any extra money you have and get a $5-7000 car; for cash!!
I agree with another poster:
Read: The Total Money Makeover by Ramsey, he shows you why saving the money first makes more sense
Also read The Millionaire Next door by Stanley
Great books!
Be weird, pay cash!!
2007-02-23 14:42:46 · answer #3 · answered by mldjay 5 · 2⤊ 0⤋
A study showed on average if you were to buy a good late model used car and keep it for 10 years before buying another late model used car you would have saved approximately $250000.00 by the time you reach 65 years old. Figuring the depreciation of a new car and the interest on an average new car loan amount. So it's up to you if a car loan is good, sometimes it may be necessary. That could only be decided by you. Don't fall for the I need a car loan to make my credit better pitch that many try to use. Nothing beats that money in a good investment making twice what you are paying out.
2007-02-23 13:38:19 · answer #4 · answered by tman 5 · 1⤊ 0⤋
Wow, thats a big step. If you have a steady job and you feel ready, shoot for it. Just make sure that some one go with you when you get financed. People can try to get over on you. Make sure that you know exactly what is under the hood of a car. Keep in mind that a car comes along with insurance, property taxes every year, gas money, an a oil change every 3,000 miles etc. So just know your ready before you do it. Always remember it could be the perfect car looking at it. But how far can it get you when it start.
2007-02-23 13:44:58 · answer #5 · answered by Lavender 1 · 0⤊ 1⤋
Having car payments simply builds your credit (if you are able to stay on top of your payments and make them on time). You want to try and have an interest rate below 3% if possible. Take someone that is car and business savvy (at least someone that is good at haggling and plan out what kind of car and payment you want before you go), go to a car dealership, and work them down to a deal that you are comfortable with. Be firm in what you want and don't easily give in to the car salesman. Be careful or he'll walk all over you. That's why it's best to take someone else with you to kind of "help keep the strength". Personally, I don't believe you should have any more than 10% of your income going into your car especially if you have a house payment, along with utility bills and other things of that nature. You want to make sure that you can stay with in a budget otherwise you'll end up in a deep hole of debt that is extremely difficult to get out of. So, yes, having a car payment is helpful to your credit (if you are able to stay on top of it), however, you do need to know and assess the risks before buying a car. Good luck and happy car hunting!
2007-02-23 13:34:54 · answer #6 · answered by pauldhass 2 · 0⤊ 2⤋
Car payments are NEVER necessary. Please go get a copy of the book below or go to the website & listen to some podcast before you do something foolish. I have had exactly 1 car note in my life & I will NEVER do it again. New cars go down in value "like a rock". Buy a nice used car w/cash.
2007-02-23 13:30:01 · answer #7 · answered by Tom's Mom 4 · 1⤊ 0⤋
Car payments are definitely OK, IF you must have a car to get to a job. Otherwise, try to do without and save for one.
Total payments on installment debt like cars.....I wouldn't go over about 15-20 of my take-home pay.
2007-02-23 13:30:36 · answer #8 · answered by AllTheGoodNamesAreAlreadyGone 3 · 0⤊ 2⤋
if you can afford to save about 10,000 dollars over the next few months, you don't need car payments.
for most of america, car payments are fine. you should look to have TOTAL payments (incl. tax, fees, gap insurance, etc) to be no more than 20% of your after-tax income depending.
2007-02-23 13:36:50 · answer #9 · answered by morequestions 5 · 0⤊ 0⤋
Most of us have car payments. I can't remember what percentage of your income it should take, but lets say 30%, or am I thinking of a mortgage? Hmmmmmm.....
2007-02-23 13:31:45 · answer #10 · answered by tombollocks 6 · 0⤊ 2⤋