What do you want your payment to be?
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The average new car payment in May was $712. Average new car price is still hovering around $47k.
https://www.msn.com/en-us/autos/news/monthly-car-payments-hit-record-high-of-24712-in-may/ar-AAYvM5x
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@nermal This is why my newest car is 8 years old. That kind of money used to be luxury car territory.
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@nermal I once almost paid 1k/month for 60 months on an M3. I didn't get approved for that loan.
That said I don't know how someone making the median income can afford to spend $712/mo on a car. I would like to see average car payment broken down by household income.
E90 M3
E92 328i -
@e90m3 they can't, but they do it anyway. My time as a bank manager showed me that a large percentage of the population is completely horrible with personal finances. I'd often have people come up, both making six figure salaries, million dollar house, wanting a small business loan or a home equity, they'd cheerfully hand over their personal financial statement, and it would show $100,000+ credit card debt, $100k in loans on two new vehicles, no retirement savings, $2k in the bank, a $950,000 mortgage, then they'd get all upset when I'd tell them their $30,000 business loan was declined or that they can't borrow more on their house because there isn't enough equity and want to bitch and whine that it was my fault.
There were cases like that all the freaking time.
2022 Ioniq SE
1964 Corvair Monza -
@ibRAD I'm driving my cars as long as I can....and since I only commute 1 day a week now, that may be my car for a VERY long time.
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@nermal Zero.
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@nermal I love cars, and I like nice cars but I also like not having all of my income tied up in a depreciating asset. That being said the first car I bought new had a $312/month payment for 48 months and I had an income of about $45k, scale that up to my income today and I could theoretically afford 2-3 times that. But damn a $900/month car payment just seems crazy.
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@ranwhenparked One of my close friends is a bank manager and she says exactly the same thing. I honestly can't figure out what people are thinking. Having a credit line isn't the same thing as having actual money, but they live like it is.
Mr.Ontop. Keepin' it real since before your were you were born probably.
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@ranwhenparked -- Some things never get old.
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@nermal I had to dig deep into some links to figure out what the basis on the "average" monthly payment is. Assumption used is 72 month loan, average interest rate, and 10% down.
The longer it takes for the Bronco to come in, the more attractive it looks to simply upgrade the GX and Mustang. But upgrading those basically amounts to a car payment anyway...the eternal financial battle of the car enthusiast.
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Mentally, $500 is my limit. We've always stayed below that, even if it meant using part of our cash from a refi to get there (though the rationale there was more about diversifying types of debt, and never being upside-down).
I also don't think I'd ever pay cash for anything over, say, $10k because debt is still relatively cheap and I'm all about diversification. Paying cash OR financing 100%+ are both forms of "putting all your eggs in one basket."
Edit: I'm 43 and, until a year or two ago when we sold our old rental house, paying cash for anything wasn't even in consideration. All of our savings went to retirement, not a slush fund. That's slowly changing as investments tank and debt costs increase.
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@Mr-Ontop the fact that nobody ever saw anything wrong with it and assumed they'd be an easy shoe-in for more loans was what always got to me. Like, when I have a heavy travel month and get my AmEx up over $1000, I get kind of nervous and want to pay it off as fast as possible, I don't know how you could be that deep in debt and not even recognize that it's a problem and want to go out and pile on more. The vast majority of the time, it wasn't even lower income people, middle class/upper middle class to technically wealthy, people who should be able to afford a very comfortable lifestyle and still live within their means, buy a $30,000 new car instead of a $60,000 one, buy a used Bayliner instead of a new Boston Whaler , etc, but no matter how much they make, they somehow find a way to overspend it
2022 Ioniq SE
1964 Corvair Monza -
@Huzer I think in my entire lifetime so far I've kept one car for more than 72 months.
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@nermal $712/month is getting very close to my mortgage payment...how do people think that's a good idea?
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@MasterMario said in What do you want your payment to be?:
@nermal $712/month is getting very close to my mortgage payment...how do people think that's a good idea?
Their mortgage payment is $4500/month.
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@nermal to me the saddest part is that there's not realistically a choice to buy a car or not. Unless you live in the middle of a large city, transit isn't really a viable option. So, it's just choosing whether to spend your money on housing or on transport.
Civic Si. LR3. Looking for a boat and yeti 3000 iced down w silver bullets
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@nermal That's what I expected to see, more or less. Thats about double what it was 15 years ago which tracks with inflation. The trouble isn't that things are more expensive, the trouble is that Im not being paid double what I was 15 years ago.
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@ibRAD said in What do you want your payment to be?:
@Huzer I think in my entire lifetime so far I've kept one car for more than 72 months.
I've never kept a car past 4.5 years. Now, if we include my wife's vehicle, we've had her Grand Cherokee almost 9 years.
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@ibRAD said in What do you want your payment to be?:
That kind of money used to be luxury car territory.
All cars are luxury cars now.
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@nermal Holy shit. I can't believe people pay that much for a car payment.
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I guess my judgment would have to be reserved for their other choices. A cheap house and low taxes mean you can afford a nicer car, if you so choose.
Not the best financial decision, but this is Oppo, where cars aren't really financial decisions
The vicious cycle is the "nice house, expensive area, nice car" trifecta. That's over-leveraging yourself just to get by.
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@ibRAD if that were the case then $712 seems reasonable...but the average loan is $712/month. I would bet the average new car buyer is not living in an $1 million house. I can't find if this is a true average or the median. The median would be more telling as the average might be pulled up by rich folks buying luxury cars.
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@nermal Ideally, my payment should only go up about 50$ or 100$ to 350$ a month with the bronco (72 months), thanks to my generous trade in value plus the amount I have planned to put down. Even that seems kinda high...
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@ranwhenparked said in What do you want your payment to be?:
Like, when I have a heavy travel month and get my AmEx up over $1000, I get kind of nervous and want to pay it off as fast as possible, I don't know how you could be that deep in debt and not even recognize that it's a problem and want to go out and pile on more.
We pay nearly everything on our Amex which means we have a balance over $2000 every month - which I pay off in full. We get hundreds of dollars back from Amex each year. So as long as you can manage your money so that you can pay your cards off in full each month then you should collect the money they will give you.
I do a kind of zero-sum/zero-based budgeting using moneywell.app so I know I have enough money in the bank to pay the bills.
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@e90m3 said in What do you want your payment to be?:
That said I don't know how someone making the median income can afford to spend $712/mo on a car. I would like to see average car payment broken down by household income.
The average cost of $47,148 works out to 41.3 weeks of median income according to the article. That puts the median income at $59,363 according to my math. Or $4,946 per month.
Remember, median is the number in the middle of the dataset, so half of the reported numbers are higher and half are lower. It's not the average, which is total amount (cost of all new cars / payments) divided by total number (number of cars sold / loans), and can be skewed by outliers. Yes, we're talking average payment against median income.
Best I could find is that average total paycheck tax rates are between 20 and 25%, depending on location. So figure 22.5% for easy math.
That leaves the median income at $4,946 gross and $3,833 take home. $712 is 14.4% of gross and 18.5% of net.
Using standard banking rules of 36% max debt-to-income (gross) for a mortgage, that means that with an average new car you could get a mortgage of up to $1,068. That's roughly a $150k house with 10% down and a 30 yr mortgage.
In theory you could get an average priced new car and a very modest house in the right area on a ~$60k income, and still have ~$2k per month to live on. Certainly doable in the right zip code, but not extravagant by any means.
