Howcome people who don't make a lot of money can afford expensive cars???

Question

I mean not really expensive, but around 30 to 40 thousand. My dad makes a good bit of money.. around 100,000 a year. He bought a mustang for about 27,000 and said it was expensive and that anything more expensive is out of our budget or something like that.

Yet, I have a friend who works at best buy as just a sales person who bought a subaru wrx sti brand new. Which I believe is around 35,000 dollars.

How can he afford something like that and my dad didn't want to spend more than 30,000 cuz it's too expensive?

Is virtually all of my friends money going to go towards the car?

I guess I'm just wondering what is a good percentage of income to go towards your car so that you can still be living comfortably?

Answer 1

Well, if he works at best buy, I'm sure he is currently not paying rent or a mortgage, and I'm sure he does not have kids, etc, etc. If the only thing he is affording is the car, then there you go... I bet if he had to buy a house he will not be able to afford the car.

Answer 2

Your Dad is smart and your friend is stupid. The novelty of a new car wears off REAL fast. Then you're stuck with it. I don't care if it's a 100,000 dollar car. After a few months it's just a car. I have a friend who is paying a lease on an 85,000 dollar car. Wanted to get into something more reasonable. A car that was "only" 30,000. She makes less than 40,000 a year. How does she afford such things? She's always struggling to pay every bill and I've seen her literally cry over it several times. You want to live comfortably? Live BELOW your means. Drive nice used cheap cars that run well. If you want a flashy car for a while rent for a few days. It seems to me that every young person wants the most expensive of everything and expects to get it.
That stuff is all meaningless. That Suburu will be crushed for scrap in a few years. That same money could have been used for ten other better puposes. Most people never really get ahead financially. Be one of the few. Sounds like your father is a good role model. Buy 'em used and use 'em up.

Answer 3

I'm a guy raised by a single mother; no father. So, the only thing I care about is how others are able to pay for a decent car with stagnant low wages. Some aren't so privileged and only make $12.50 an hour hoping to get 40 hours or more a week. I have a college degree, but underemployed. Most of my money goes towards housing expenses -- property taxes, HOA maintenance & water, Excel Energy, Comcast and even a sewer/drainage bill. Ching, ching! Food, gas. etc. leaves me with not much for a used car. Actually, I hate thinking about it. I drive a clunker, so to speak. My next door neighbor in his twenties and has a two parents that don't live at the residence. He doesn't work and drives a late model KIA. Who's paying his property taxes??

Answer 4

Seems wrong, doesn't it? I would guess that your Dad has a much better grip on financial planning than your friend. A good rule of thumb is that your fixed expenses (rent/mortgage, car payment, insurance costs, etc.) should exceed no more than 35% of your monthly income. It is definitely possible to get a loan for more car than you can really afford, and then be "car poor". Sure, he may have a bitchin' car, but can he afford to do anything else? And by afford, I mean pay for it with cash, not credit? Also, FYI, he has to be paying through the nose for insurance! My hubs works in the industry, and the suburu wrx is in the top 5 of most expensive cars to insure (due to crash and driver statistics). I think your Dad has the right idea. Buy a nice, reliable car, and try not to blow the budget. I read somewhere that people spend more on cars than they put down on their house! Now that's insane. :)

Answer 5

Your description of a expensive car really suprised me. When I think of expensive cars, I think of luxury cars like Mercedes-Benz. But anyway, your dad has too save money for your future, and most likely has more bills than your friend that works at Best Buy. If you are planning to go to college or are already in college, your dad knows that he can't afford to waste money on a really expensive car. Your friend most likely shares rent with someone else, or lives at home with his parents. Nearly all of his paycheck is going towards the car. It wasn't a smart move for him to invest that kind of money in a car if he doesn't have a professional job of some kind.

Also, just because someone works at a Best Buy, that doesn't mean that they don't have another full-time job somewhere else, so don't underestimate anyone. Your friend could be making good money in a family business or real estate.

Answer 6

it is because your friend is probably single and still lives at home if he doesn't live at home he is probably living with roomates so he has almost no monthly expenses but this new car. Working at best buy I am going to guess that with insurance, gas and car payment are over 50% of his net wages so if your friend still lives at home with his parents he will not be moving up in the world anytime soon. Your friend probably does not have a true concept of money and responsibility yet like your dad does.

On the other hand your dad probably has a home, mortgage, kids to supports since you know his financials so much i am guessing you still live at home, a wife to support these expenses add up I live in an apartment and my monthly expenses come to 2300 a month with one infant and a 15,000 car so imagine the expenses of a home and multiple grown kids. Hey if I still lived at home with my middle class income I could afford a dodge viper truth is your friend is probably going to regret buying this car on his salary in a few years just watch and see.

when budgeting you do not want to spend more than 20% of your income on transportation becaus about 30% will go to rent or house payments and 25% will go to the government leaving you with only 25% to meet all your other needs groceries, electric, entertainement, phone, etc.

Answer 7

Here's the thing...your dad is probably budgeting money for things that your friends don't have to pay for, like your college education...also, you have no idea how overextended your friends are, yet aren't telling you. They could have credit cards that they aren't paying...on the other hand, if they aren't behind in other bills, do they have a mortgage, like your father probably does...do they have hefty health, auto, life, and home owner's insurance bills...see there are lots of reasons that one person can afford a car, yet another can't.

As to the percentage of income you should apply towards a car payment...you have to include car insurance, maintenance costs, gas, license fees, etc...my suggestion is to sit down w/your dad and have him help you budget for your own car.

Answer 8

It's called credit. He will be paying on that wrx for the next 5 years at least, and his payments are at least 500 a month including insurance. It's easy to say that basically all his money goes into the car.

Answer 9

It's probably an auto loan. Personally, if I have to pay anything over 15% of my monthly income to a car isn't worth it. Cars depreciate fast. Your friend's car may be worth 30-40% less in a year's time.

Answer 10

People can't. They get in financial trouble down the road. If a salesperson at BestBuy is in hock for a 35k car, you can bet most of his salary goes toward it!

Instead of thinking of a car as a "percentage of income", save money - and pay cash for one. You'll save thousands in interest. And you're more likely to spend less on a vehicle who's value drops significantly the moment you drive it off of the lot.