What percentage of your income goes to car payments

[MediaArtist]

Never going to have a car payment again. If I can't afford it by cash, I'm not owning it.

[ENGINE er]

4%, money is just damn near free right now, lots of good reasons to finance your purchase if you are smart enough to put the money not used to purchase a car to work for you. just dont over extend yourself on payments.

[grimlock]

Originally Posted by Mr Tonka

Never go full retard!!

Originally Posted by keepittrill

I find it hard to believe a stock 528i could even keep an M3 in its sight...

You need to work on your 'beliefs' then.. this is getting tiring

Originally Posted by Mr Tonka

Maybe it was an E36 M3.....

Don't get any of those around here.. it was THE "BMW M3" (-that was his license plate), a e92 so he wasn't nearly as fast as he thought the words "M3" would magically anoint him

HAHAHA its a 528i god some people really aren't too smart ...

[keepittrill]

^ That right there is an example of an unsuccessful troll.

[boostedTIAG335]

Originally Posted by MediaArtist

Never going to have a car payment again. If I can't afford it by cash, I'm not owning it.

My uncle said that almost word for word. Then a few weeks later, he cuts a check for a brand new Ghost. Lol

[Ehwnnc]

25%. Its just Money, piss on it, you cant take it with you and you could die tomorrow. Money is like hot chicks it comes and goes

[grimlock]

Originally Posted by keepittrill

^ That right there is an example of an unsuccessful troll.

If you stop making stupid comments perhaps I will help you out

[PSUSMU]

Originally Posted by Ehwnnc

25%. Its just Money, piss on it, you cant take it with you and you could die tomorrow. Money is like hot chicks it comes and goes

I disagree with your mentality in this regard. If I was spending 25% of my salary on something, it wouldn't be on a 135i.

Just read this recently and it's very, very true:
"I was always told that most people with money have money because they don't spend their money."

[MisterSkiMask]

Originally Posted by PSUSMU

I disagree with your mentality in this regard. If I was spending 25% of my salary on something, it wouldn't be on a 135i.

Just read this recently and it's very, very true:
"I was always told that most people with money have money because they don't spend their money."

true, they spend other people's money

[Mr Tonka]

Originally Posted by MisterSkiMask

true, they spend other people's money

I'm not sure why people pay cash for a vehicle. Just can't figure it out. Along with "people with money not spending money" someone with money told me that there are only 2 ways to get wealthy. Leverage people or leverage money.

Even when interest rates were in the low teens a healthy amount of debt was a good thing. In these days with low single digit interest a large amount of debt can make you a lot of money. Very few wealthy people got that way without being in a shit ton of debt.

[RandomHero]

Originally Posted by Mr Tonka

I'm not sure why people pay cash for a vehicle. Just can't figure it out. Along with "people with money not spending money" someone with money told me that there are only 2 ways to get wealthy. Leverage people or leverage money.

Even when interest rates were in the low teens a healthy amount of debt was a good thing. In these days with low single digit interest a large amount of debt can make you a lot of money. Very few wealthy people got that way without being in a shit ton of debt.

I said the exact same thing in one of the first pages of this thread.

Here's my thought process: "If you're a saver, save. If you're an investor, invest."

I debated on leasing a car or buying a newer used car. Ultimately, I wasn't keen on the idea of my vehicle depreciating at $5000+ a year.

I also debated on putting as much as 50% down on my car. However, when I was approved for a 2.9% loan with nothing down it made very little sense to do so. I'd much rather have that money available to me. Plus, it's very simple to invest with a 5-7% yield. Essentially, I have a car I'm happy with, extra money that is very liquid, and a loan apr that is easily offset.

[paradoxical3]

You guys are nuts. I'm 16% of post-tax monthly income and I thought I was insane given that I have some CC debt (but that is my only debt). I hope some of you are talking about car MSRP vs. yearly salary with those 25% and 30% numbers, not monthly payments.

If you are paying 30% of your monthly post income tax on a BMW, wtf are you doing? Someone making 70-80k a year could be driving a GTR or Maserati with that kind of payment - $1500/mo

If you are paying 30% monthly and make under 6 figures, how do you afford rent/mortgage and savings?

[amanda hor$t]

Originally Posted by Mr Tonka

I'm not sure why people pay cash for a vehicle. Just can't figure it out. Along with "people with money not spending money" someone with money told me that there are only 2 ways to get wealthy. Leverage people or leverage money.

Even when interest rates were in the low teens a healthy amount of debt was a good thing. In these days with low single digit interest a large amount of debt can make you a lot of money. Very few wealthy people got that way without being in a shit ton of debt.

when you finance, it gives you the impression that you have more money than you really have. and usually that means spending more.

a car is more like a shirt and less like a house. buy it cash, be done with it. and it doesn't really depreciate unless you sell it.

[PSUSMU]

Originally Posted by paradoxical3

If you are paying 30% monthly and make under 6 figures, how do you afford rent/mortgage and savings?

Dudes living at home, duh.

[Mr Tonka]

Originally Posted by mmahany

I said the exact same thing in one of the first pages of this thread.

Here's my thought process: "If you're a saver, save. If you're an investor, invest."

I debated on leasing a car or buying a newer used car. Ultimately, I wasn't keen on the idea of my vehicle depreciating at $5000+ a year.

I also debated on putting as much as 50% down on my car. However, when I was approved for a 2.9% loan with nothing down it made very little sense to do so. I'd much rather have that money available to me. Plus, it's very simple to invest with a 5-7% yield. Essentially, I have a car I'm happy with, extra money that is very liquid, and a loan apr that is easily offset.

Exactly. I've been driving this car since Feb 2009. Since then the $70K has been working it's ass off for me rather than BMW. If you subtract the amount of money that cash has made since Feb 2009 from the payments i've made; i've only spent $13,904 for the purchase of this car to date. If earnings keep the same average; when the loan term is over, i will have only paid about $11k for the car. At this point the car is an asset because it's worth more than i've paid for it. It's silly not to take advantage of nearly free money.

Originally Posted by R Grubba Balls

when you finance, it gives you the impression that you have more money than you really have. and usually that means spending more.

a car is more like a shirt and less like a house. buy it cash, be done with it. and it doesn't really depreciate unless you sell it.

It gives someone with little to no self control the impression of having more money. If you can't control your finances by all means, save up and pay cash.

When your car is worth more than some houses it's dumb to look at it like that. As stated, if earnings hold, i stand to MAKE $8 - $15k from owning this M3. And what effort have i put forth to do so? None. Filled out some finance paperwork. I know people who have bought and sold their house in the same time frame and haven't made that much money.

There have been a few pearls of wisdom shared in this thread. The big one that matters most is that; "Most wealthy people are wealthy because they think differently than the masses."

[b1aze]

14.8% of my income alone. 8.5% of my net household income monthly.

[JasonCSU]

Originally Posted by mmahany

Plus, it's very simple to invest with a 5-7% yield. Essentially, I have a car I'm happy with, extra money that is very liquid, and a loan apr that is easily offset.

I must say I am very curious as to where or what these investments are that are very liquid with these decent yields. I have read some various articles which highlight the same basic investment strategy, but fail to mention what these highly liquid, high yield investments are.

[RandomHero]

Originally Posted by JasonCSU

I must say I am very curious as to where or what these investments are that are very liquid with these decent yields. I have read some various articles which highlight the same basic investment strategy, but fail to mention what these highly liquid, high yield investments are.

5-7% is a number I threw out there. That number is actually much higher than what the loan is actually costing you.

For example:
A $50,000 loan with a 3% apr is going to cost a total of $3906.07 over 60 months. That’s a 7.8% cumulative return over 5 years or roughly 1.5% a year.

That means that in order to offset the loan all I have to do is yield a 1.5% annual return over that period.

Most trades settle in t+3. Obviously, if I needed the money instantly, I’d be at the mercy of its price on that current day. I’m not always going to be consistently above the APR of my loan, but the point is that I’m not locked into the money longer than 3 business days.

I do goals based wealth management for a living. Don’t focus on the micro picture and annual returns but instead look at what your goal is.
In the case of my example the goal is “How do I turn $50,000 into $53909.07 in 5 years?”

If it were me, I’d break that money further. This is a very basic hypothetical situation, and in no way am I advising you to go do this:

I’d keep $10k in a money market probably earning next to nothing- This would be my “emergency” money. I could have it whenever I needed it.

I’d invest $30k in fixed income mutual funds. If I had to, I could sell this and have the funds in 3 business days.
I’d invest $10 in mega cap consumer staples or other conservative equities.

Normal-Good scenario:
The money market might earn me .25%/year
The fixed income might earn me 4-7%/year
The equities might earn me 10%/year
Average annual yield: 6.45%

Very Bad scenario
Money market earns me .1%/year
Fixed income earns me 3%/year
Equities stay even
Average annual yield: 1.82%

Conclusion: In both cases I have managed to pay for the cost of the loan. I also have a healthy reserve of cash ($10k) immediately available and technically I could have the remaining $40k available in 3 business days.

EDIT- Again, this is purely hypothetical. This is not to be taken as financial advice. I'm only mentioning it for the sake of discussion.

[boostedTIAG335]

Originally Posted by Mr Tonka

Exactly. I've been driving this car since Feb 2009. Since then the $70K has been working it's ass off for me rather than BMW. If you subtract the amount of money that cash has made since Feb 2009 from the payments i've made; i've only spent $13,904 for the purchase of this car to date. If earnings keep the same average; when the loan term is over, i will have only paid about $11k for the car. At this point the car is an asset because it's worth more than i've paid for it. It's silly not to take advantage of nearly free money.

Originally Posted by Mr Tonka

"Most wealthy people are wealthy because they think differently than the masses."

This doesn't work for everybody. I doubt many people have $70k that's liquid in this thread. But if I did, I would have done the same thing.

Now on the other hand, a person like myself that is essentially debt free and has monthly expenses that equals 10% or less of net income, can easily swing a car loan that is 25% of their income. Is it a smart thing to do? No, not at all.

This thread is somewhat misleading because you don't know a person's full financial situation.

[JasonCSU]

Originally Posted by mmahany

EDIT- Again, this is purely hypothetical. This is not to be taken as financial advice. I'm only mentioning it for the sake of discussion.

No worries, and thanks for the detailed breakdown. I'm not sure why I was thinking of it as a single investment vs. a broader strategy to reach such a potential yield. I follow a similar method of having cash on hand, in a mutual fund, a little stock, and a 401K.

[Mr Tonka]

Originally Posted by boostedTIAG335

This doesn't work for everybody. I doubt many people have $70k that's liquid in this thread. But if I did, I would have done the same thing.

Now on the other hand, a person like myself that is essentially debt free and has monthly expenses that equals 10% or less of net income, can easily swing a car loan that is 25% of their income. Is it a smart thing to do? No, not at all.

This thread is somewhat misleading because you don't know a person's full financial situation.

Very true. It's not as if i had $70k sitting in a savings account. I already had that amount of money already invested. With relatively little penalty i could take that money out and buy the car.

My argument was with the people who stated that they felt if you should pay cash because if you can't pay cash you can't afford it. As mmahany stated it doesn't take much to recoup the interest even on at a 3% rate. All it takes to cover the interest on a $70k loan at 3% is an investment of $19k with an average return of 5.5%. $20k might very well be what someone would put down on a $70k loan. A simple investment of that down payment will get you that loan for free (as long as you can afford the payment) and you'll be left with something useful at the end of your loan other than your vehicle.

[boostedTIAG335]

Originally Posted by Mr Tonka

Very true. It's not as if i had $70k sitting in a savings account. I already had that amount of money already invested. With relatively little penalty i could take that money out and buy the car.

My argument was with the people who stated that they felt if you should pay cash because if you can't pay cash you can't afford it. As mmahany stated it doesn't take much to recoup the interest even on at a 3% rate. All it takes to cover the interest on a $70k loan at 3% is an investment of $19k with an average return of 5.5%. $20k might very well be what someone would put down on a $70k loan. A simple investment of that down payment will get you that loan for free (as long as you can afford the payment) and you'll be left with something useful at the end of your loan other than your vehicle.

Very well said. You actually read my mind. I was looking into putting the down payment on my next car into an investment to basically cover the interest on the loan.