How Much Car Can You Really Afford? (Car Loan Basics)
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- เผยแพร่เมื่อ 7 ก.พ. 2025
- How much car can I afford? Follow my 3 car loan steps!
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Car buying can become a complete financial nightmare if you buy too much car and you can't afford it. Follow my 3 steps in this video and you'll know how much car you can really afford. Remember to always put at least 20% down, don't finance longer than 60 months, and don't have your total monthly car costs exceed 10% of your monthly net take-home pay.
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#honestfinance #caraffordability #carbuying #carloan
I get it in theory, but typically, insurance for a newerish car is around $100, gas per month is at least $100 (precovid), and repairs/maintenance comes out to around $75-$100 a month (tires, oil changes, brakes, etc). The theory is nice, but it’s practically quite challenging.
This advice aging well lol, can increase all those numbers you had listed 😓
Pro tip: call your car insurance company before you decide on a specific make and model of a car as the one you will probably buy. Insurance companies charge higher monthly rates on cars they have labelled as extra sporty or extra fancy. It's better to know the truth before the purchase than after so you won't be paying an extra high rate just because the insurance company thinks you are driving a "car for daredevils"
I like this content. I just wish I saw this video before actually getting a car loan this morning.
Its ok because i'm about to get a car loan... I think
Hahahaha
Been watching your videos for awhile now. Info is gold and straight to the point. These types of videos are what the internet should be, guides to help people navigate correctly through life without having to make costly financial mistakes.
Thank you very much 😊
This is very sound advice. I'm reading many complaints in the comments. This is a great starting point, if you happen to pay the vehicle off sooner, that's great! The last thing you would want is to get behind on other bills because your car payment is too high. If that ends up being the case, you risk falling behind on everything, and racking up credit card balances. :)
This definitely cleared up a lot of questions and gave me a good game plan to go ahead and look at purchasing a car off the lot. I usually just go through Craigslist or friends but now is a time to get something better. Thanks a ton. I know lots of other comments are adding this and that but this was clear and concise and a great EXAMPLE.
Better than paying cash is to tell the car dealer that you are financing so they can lower the price a bit then pay the payoff on the car when the 1st payment is due.
You "can" do this but must first find out if there is a penalty for paying off a loan before it's maturity date. I did this exact thing and even waited a few months and my credit got hit hard. Granted, it recovered quickly but just make sure you ask before doing this
While I’m very cautious regarding debt and especially car debt, I like your content here-thanks!
You’re very welcome :)
Finance a 3 year old car with no maintenance for around 24-48 months
Enjoy the video and feel free to leave any comments :)
Watch more car buying videos: th-cam.com/video/rwOcAHTH4Os/w-d-xo.html
Don't buy a nice car before you buy a house. A mortgage is like a forced savings plan in an appreciating asset, once you have one you can start safely looking at more expensive vehicles. If you're not a homeowner yet, go with a
This is impossible in Michigan. Full coverage alone on a car with a lien will annihilate your 290/month allowance.
Yup could cost you about $3700 or more a year for most insurance I have seen in CA. $3700 times 6 year for the duration of your loan keeps you $22,000 away from paying your loan alone not including maintenance in those 6 years as well.
@@Buddlebot yeah, I pay half that just for PLPD. Do an insurance quote for full coverage on a 2019 or 2020 vehicle and use a random address in the Metro Detroit area. Pick any one of the suburbs. You'll shit your fucking pants.
@@Buddlebot here's the first statement from me googling "metro detroit car insurance average cost". I shit you not, google it yourself-
"$5,471
The average annual car insurance cost in Detroit is $5,471. This amount is about 284.1% more than the national average and the same as that of the Michigan average. You can find cheap coverage in Michigan by getting a personalized quote.Jul 30, 2020"
And no, you cannot find cheap coverage in Michigan unless you're fucking a sugar daddy or money is no object.
Buy an old beater
For me I’d rather save until I got the whole purchase price. That way I won’t loose the car if I miss a payment.
This is interesting advice but I think as the salary in question gets higher this methodology starts to break down. Someone who makes $100k with only $1000 housing cost isn't too worried about spending significantly more than 10% of his net pay on transportation. Also, someone who takes care of their vehicle and saves upwards of 50% of the value of a new car is also not going to be too worried about exceeding the 10% rule. Lastly, you have people that commute long distances from their homes and are willing to pay more for a safe reliable vehicle. It would be useful if you made a video with real life examples. Not everyone has to be a slave to theoretical methods.
So true, that’s a great idea. There are a lot of variables to consider like commute, fuel economy, resale, reliability and safety
Yeah that 100k a year, 1k housing cost is me, I'm trying to figure out what I should do any suggestions ?
This was really helpful! I’ve never financed a car, I’ve only ever paid cash for cheap cars but will definitely take this advice when I go to the dealership.
You would be paying the same in the long run so you might as well buy something new with little to no maintenance rather than buying something old for cash but gotta spend a whole lot on maintenance
@@christophershanklin112 you're sooo wrong...
Don't do it why would you go from no payments to making payments that's dumb
how can my car value go down if i put gold rims on it?
%20 down
60 months or 5 years or lower
Interest rates lower better
No more than 10% of your total income
My associated car cost adds up to about $250. So I can only afford a car payment of $40..
That’s okay, just means you should pay in cash
I had absolutely no clue what you were talking about but I like the tips I'll have my boyfriend watch it and explain it to me lml
So I can buy a Chevy spark if I make 80k a year
Brah in fl car insurance is 200 a month
Exactly. Im in houston and full coverage can be $200-$300 monthly
Are you including gas in that monthly payment you can afford ?
Technically yes.
10 percent? What about gas, maintenance, and insurance? A free car will still cost you about 300 a month.
I disagree with what you said about getting 60months or lower I would say get the most months you can and just pay what ever extra money you get towards the car and pay it off sooner
Car loan is the worst investment you can get yourself into. Just save up and buy yourself a good beater that runs and drives great. Don't worry about what people think about you for the 5 seconds you spend at the stop light.
Webster Kollie I agree that cars aren’t a good investment if you can’t afford the loss in value. I also agree if you can, pay cash for your cars.
But also consider that a lot of people don’t buy nice cars to impress people. If you’ve ever driven a nice car, you know a fast car is way more fun than a beater Toyota. You look forward to driving your car every time you need to go somewhere.
I’m sure people enjoy the attention from driving eye catching cars, but they probably enjoy the actual car way more!
I have a wife and 2 children. Would you suggest i get a beater? If so, in this used car market, what would you suggest as a beater family car?
@@hughjassol2072 I need answers
Terrible advice. Beater broke down after 4 months. Put$10K into it. And it was a toyota Solara go and figure. Never buying another beater or used car again.
Ya there is risk w older cars. I’m sorry for the repair costs
Thanks for the video , I wish you could do a new video on this topic. Thanks
Love the info keep it coming 📚
Thanks for watching :)
Thank you!
You’re welcome
You're a saviour.
How much can I afford at 30 with $10k per year income working full time? Saved $1000 over the past 12 years, looking at Copart for a run and drive.
Probably $1,000-$3,000
My income is about twice that
My car payment is about half that
Besides the other 3 vehicles (that run like new) that I own outright.
🤓🤓🤓
//Learning to turn a wrench can save you hundreds of dollars per year
“Turn a wrench” lol you’re funny
Thank you very helpful . Thank you you I’m not doing a bad decision
Glad it helped inform you :)
Great info! Thank you!
You’re welcome!!
I’m in the market for a new car, this video came in perfect time! Gracias
You’re welcome :)
This helped me out a lot!
I’m glad it helped :)
Paying cash for car is dumb. If you have that much cash, invest it. That investment will give you a far higher rate of return than the interest rate on a car loan. Basic math
True, but there’s still risk
My philosophy on the subject is that if you can’t even afford half of it, don’t buy it (I.e take a loan out). You should only take out a loan if you can cover half to cost when it comes to houses, cars or anything else you need a loan for. Safest play.
Yes, being financially responsible in other areas allow for bigger savings so we can pay way more than the 20% down.
I acrually can't imagine a $500 car oayment a month. Not because i cant afford it but ifs absolute insanity. Its not like all $500 is going to the payoff. A good chunk is just interest and that disgusts me. I love owning my vehicle. Ive done payments and they suck. You dont need to get a beater. You can save up a bit and get a nice car for cash. It may take a little longer to save but its soooo worth it. That new car feeling will fade quick. That payment will linger for YEARS. Oh and the depreciation...
Ya I get it. Some cars lose value because of demand too. You remember the Chevy Avalanche?? Apparently , they're super cheap because nobody thinks they're "cool". And sorry for the late reply
Buy a car used and in cash
Coming here from the Ramsey show.. told me to spend no more that 50% lol
nah if this was real his advice would be to never buy a car since you can just walk the 50 miles to your job and save money xD
Great tips👍🏽
Thank you 😎
I make about 50k a year. I have no expenses besides a phone and food for when I go out. Can I afford a $40k car?
That’s a lot of car . I think it’s too much, but that’s me
Thank you
What kinda job do u have if you don’t mind me asking
I flip cars at Carmax which makes me anything from 10-20k a year and a manager at Walmart fulfillment center that brings me another 38-40k
I’ve got saved up nearly 30k already in the past 7 months and ima just drop it on a 2020 Mercedes glc coupe lol
Are you factoring gas as well?
The 10% rule is great
Thank you :)
although im not too farr off, I do wish I would have seen this video before I bought my car few months ago.
question, can add to my net income whatever I'm putting in my 401k and the amount I pay in health insurance? is this calculates in that 10% of what I can afford on a car ect?
Average us salary 45,000… I make less than 23,000… I can’t afford to buy a reliable junk car. So… I have to choose the bad option
That’s a huge problem these days because EVERYTHING is too expensive and most of us need a car
This is near impossible if you make less than 120k a year. The average medium suv is 12k a year which is 10% of 120k. This logic is near impossible
I hate this widespread assumption. The average household income in the US is not the average household income of new car buyers. Not even close.
The average income of new car buyers is over $118k.
These “finance” guys are good at looking up numbers and parroting each other, but they fall short on tying facts together.
.10 percent ain’t nothing for a new car. Sucks but I really don’t need a really nicer end car
I disagree with this advice
Only pay cash on a car. Plenty of cars out there $5000.00 give or take that will get you by while you save for a better car. The money you save on not having to get full coverage insurance can be saved for a better car
I make about 95K a year and plan on financing for a 45K car. Is this a smart choice following the 20% down rule?
It’s hard to say without the big picture. If you have good credit, not much debt and 20% down on a 45k car, it could work at 95k per year
Bruh 95k a year 45k car u can pay that payment in half of weekly paycheck lol
@@nickwagner9551 ikr lmao
I make less than you and I could easily afford a $45k vehicle. I think its more useful to look at the combination between housing and transportation costs as opposed to only one of them.
Is that gross or net? 95k gross is only about 70-75k net. 45k seems high
How about, if the interest is only 0.9%? Can I go longer than 5 years?
I get where you’re coming from. Just try to pay it off early, but 1% is an outstanding rate
@@HonestFinance can you explain this advice in more detail to me? Mathematically it makes no sense to try to pay off this loan early.
If my interest rate is less than inflation, if I pay my loan off early won’t I be net losing purchasing power? And if I have the extra money to try to pay off my loan early, wouldn’t it just be smarter to invest it in safer diversified stocks like an S&P mutual fund where your annual EV is a few % (much higher than your interest rate)?
I’m not a financial advisor so I’m curious what your opinion is on this
@@prestonrasmussen1758 . Agreed! Paying off a loan in advance with only .9% interest is very bad advice.
Not sure this is realistic as a 100k salary in somewhere like California is only going to be around $6000 monthly. Something like a Honda accord is going to run at least $200 after 20% down, with gas for someone who commutes often being another $200-$300, and with insurance your budget is reached. To say a 100k salary is enough to barely afford a Honda accord isn’t really rational. Because of this I generally apply to 10% rule to total car payments percentage of net.
You have a good point. Cars are getting more expensive too
i am paying about 22%(monthly pay + insurance + gas) of my monthly income after tax for my car and it is not pretty. :( i should have went with cheaper one but i wanted solid upgrade. yes, it feels good to drive my current car but now my monthly saving went from $2000 to mere $800 after buying this car. :(
I think your percentage of net income rule is overly strict. I would prefer to go up a little to 15 % of net pay.
I made a mistake and got a car lone without putting any money down.
Chet I want a 40k car and only make 50k a year lmaoooo
Yeah, I’m the year 2024, there’s no way in hell I as a 20 year old factory worker making 2,200 a month can follow that 10% rule.
I’m also 20 making around 3200 a month and there is no way I can do it either lol. I just got quoted 550 a month for full coverage insurance which is what most lenders want if you finance a car. So not only would I have to make a 350 dollar car payment, but now I gotta spend all together 900 for the car a month lol
@@Miller12704 I know!! This shit is insane.
underrated
Just remember depreciation is your friend
Im fresh out of college and make 70k a year. I want to buy a 45k truck with 30% down. That puts me at about 582 a month before insurance. Is that really that dumb? Im not married (yet), no kids, no real dept. whats your opinion?
Get a good rate and set the length at 60 months or lower. I think it’s expensive, but you’re on the safer side w 30% down , so it’s up to you and how much you want/need it
My car insurance is more than 10
Percent it self
Truth 🤣
Hi Jason, probably common sense question.... but what if I make 36,000K a yr, and the car I am looking at is 45k? Can you help me maybe brake down some numbers down. Just a little extra I have no other bills to pay my only expenses would be the car/maintenance?
The answer is no. 20k max probably unless you’re living rent free forever
No i did not lol I’m saving up and I was going to be stupid and make an impulse decision but I really fought it and let the car go
Somehow I missed this comment, but I’d say no to that car. Here’s a video I made on how much car you can afford. It’s my opinion, but maybe it’ll help. th-cam.com/video/dDzOJvRt838/w-d-xo.html
I am getting totally f@#% up the a$$ with my current vehicle. Should I refinance or take the hit and sell?
What’s your rate?
@@HonestFinance 8.99% 72mo 45k prince
@@TROllingNINJA2031 good Lord!!😬 You definitely got duped. I got outta car loan and bought myself a beater for 2k. Runs and drives like a new car.
@@webbie1891 I know its awful 😓
Sell. Now.
well, then 95% of people can only afford a honda civic or toyota corolla, especially with the current crazy inflation in cars market.
Ya, the math is worse these days because cars and rates cost more
So basically you're saying he cannot afford that car haha, NO WAY insurance, gas and maintenance is 100 a month?!?
I can’t afford anything then 😅
20% down on a camry is about $5400. I don't think anyone who wants to buy a camry has $5400 laying around. 90% of people have no money at all to put down. Car prizes are out of whack.
10%
Great advice terrible example 50k net is about 65 gross and to buy a 20k car new is a lower end model smaller car to midsize car i think your 100$ in maintenance a month is way too high for a new car unless your setting aside for new tires every 12-16 months.
Don’t do it... always pay cash for cars period. Cars go down in value like a rock and you’ll pay more for it over time with loans.
I’ve tried watching some of these videos and I still get confused about some of the concepts and terminology. I’m just tryna put down $6k on a used car that costs $13k and then finance the rest. I don’t understand interests rates or whatever. I just don’t want to be paying more than $250 a month. How many months will it take me to pay off a $7k loan? 🥴
If you get a 36 month loan with putting that much down you will be at like 195 a month but in my opinion (if you put down almost half unless you have terrible credit you should try to negotiate a cheaper price ) interest is how much your being charged for getting the car but not paying it all off so if you get a 7000 dollar loan the the interest with good credit will be around 3% of the 7000 for getting the car without paying for all of it which should push you to 210 in interest plus the 7000 if you have bad credit it can be as high as 20% or 1400 plus the 7000. Always get the loan from your bank dealership will charge you extra and watch out for unreasonable dealership fees like nitrogen tire fill up. Most dealers charge a processing fee of around 300
Gerald Green What if I need a co-signer? How will that affect my interest rate
You can easily afford a $250 payment. Even if you had a 6% rate at 3 years , you’d be looking at $213 per month
Payment doesn’t mean everything though. Watch this video too th-cam.com/video/5-eu8HZA5so/w-d-xo.html
Honest Finance Thank you. Another question: Do you have to pick out a car before you go and apply for a loan? I was just planning on getting a loan first and then looking at cars within that budget.
If you have to get a loan for it you can’t afford it.
Your numbers are so far off it’s ridiculous. $290 a month for a car? That doesn’t buy you shit. You can easily afford double that with a net income of 35K. I’d love to know what you do for a living because you clearly are not an accountant
Yeah, whomever came up with this concept is an idiot. People need reliable and safe transportation - especially women. There are plenty of ways to cut back on expenses and transportation is just one of those.
$190 car payment? What planet are you on?
Good point these days
I cannot afford to pay the interest and loan fee's on any vehicle. Instead I pay cash ; )
Good advice but unrealistic…
What about cleaning up your credit b4 buying a vehicle to get those low interest rates? Should I get a credit repair guy to do that?
Good point. Put as much down if you can , but you don’t need a credit repair guy. Just pay your bills and save
6% is very high interest.
Thanks to Bidenomics people can afford one half of a tire.
lol. Useless fucking advice. Car payment and insurance for me is gonna be around 700 a month easy.
And buy toyota nothing else
So true
Honda or Hyundai good too💪🏽
Pro tip: pay cash for the car there is zero reason to make payments on a depreciating asset.
This shit is unrealistic 😂
and heres me working at walmart making 1200 a month trying to pay $500 on a bmw😂😂😂 im 16 tho n my parents pay my insurance
You’re one of those kids huh? You’re not impressing anyone with your car jsyk
@@murkyturkey5238 not tryna impress anyone bum. just happen to be a kid who loves cars its for my enjoyment not others, stay mad tho😂😂
If you financed the car, you couldn't afford it. My philosophy is if you can't pay cash for 5 of them you can't afford to buy 1 of them. A house would be the ONLY exception to that rule.
@I. SInteresting perspective. You seem fine with paying interest on something that is depreciating, I find that absurd.
Then again if my car was destroyed I could very comfortably pay cash to replace it the next day. No stress. No waiting on insurance. No trying to figure out what I can afford. Just stroke a check and im on the road again. Funny you mentioned a CPO. That is what I bought, and incidentally it should last me 10 years or more. Best
@I. S if you want to finance your vehicles that is fine, many people do. Just don't try to tell me it's a financially wise move. The math is against you.
Also I don't know what you mean by "financial luxury"? I make an average salary. I just don't borrow money. Is there anything luxurious about a base model 2014 Mazda 3? Choices are precisely what my original post is all about.
@I. S I disagree entirely that the average Joe doesnt have a choice. They absolutely do have a choice, they just make poor financial choices. I work in the car business. I see it every day.
$4K - $10k buys a reliable daily driver. The issue is people think they "deserve" more car because they work hard, and use that as justification to go into massive debt.
You got a fantastic interest rate due to your credit, and im sure the cost of interest was negligible in relation to your income, out of people that finance vehicles it sounds like you did it the most responsibly you could.
However many people are happy to pay 8% 12% 18% or even 25% interest on a $20k - $30k car on a $40k income. That is pure Insanity, but extremely common.
😘
i’m the 1,000th like
Thanks for the like!!!
I make just under 120k a year at 22 with no degree. Kiss my ass. I buy what I want.
I’m just kidding, my car is paid off. Don’t waste money and buy what you can, not what you want.
Stupid car indeed!
$290 per month. Pfffftt!!! 🤣 and that's INCLUDING gas, maintenance, and insurance. Damn! Good luck finding a $350 per month car payment that's literally just the car. Lol
There no car for 200 a month lmaoo
I’d agree
Fuck you just made me depressed that I have to continue taking the bus but happy the it’s honest people out there thx man🥹
Thank you!
You’re welcome