That’s a big range, we know, so if we had to set a rule, it would be this: Spend no more than 35 percent of your pre-tax annual income on a car.

Drive your car for as long as possible until the market value is worth less than 10% of your gross annual income. If you make $50,000 a year, you shouldn't be driving a $40,000 car. In general, the answer to “How much should I spend on a car?” is “As little as you can.” Morgan Housel, a great writer for The Motley Fool, says saving money boils down to making good choices on the three biggest expenses in your adult life: the house you buy, the car you buy, and how much you pay for college. Then as you go from $550k to $5.5 M net worth, most of that growth (and all subsequent growth) comes from business investments. Think about most people who have say $25k in assets drive a $10k car. Interest on loan: Don’t forget to include the interest if you take a car loan.

However, because a vehicle is a depreciating asset, you should generally never spend more than about 15% of your gross income on a car. Next to buying a house, buying a car is likely one of the biggest purchases you’ll make in your lifetime. You can spend between 10 and 50 percent of your gross annual income on a car. And not let your total monthly vehicle expense, including principal, interest and insurance, exceed 10% of your gross income.

If you make $50,000 a year, you shouldn't be driving a $40,000 car.

It depends what your net worth is! ANSWER: The total value of all your vehicles—things with a motor in them—should not be more than half of your annual income. So if you own a $20000 car, and your income is $40000, you should not buy another car. How much should you spend on a car? If you’re preparing to purchase a new or used vehicle, you might be wondering, how much should I spend on a car? How Much to Spend on Luxury Items – Car, Watch, House, Mobile Phone & Ring?. We may receive compensation if you apply or shop through links in our content. If you are in the market to buy a new watch, the choice is getting harder. If you are worth $20mil then $1mil on a car probably not the smartest move.

If your car is driven 12,000 km in a year, and gives a mileage of 15 km per litre, you would spend Rs 5,000 on petrol (assuming Rs 75 per litre of petrol) and almost Rs 3,700 on diesel every month. Here are some things you can do if you’ve bought too much car already. I read it more like a timeline – as you go from $55k to $550k net worth, most of that growth comes from your primary residence. It can be difficult to answer the question of “how much should I spend on a car,” but using a combination of tools, like the 20/4/10 rule and an auto loan calculator, can help.

I’ve probably had that same percentage of my net worth tied up in cars, and regretted it. That makes your total monthly budget in this example $777. The exact amount you should spend on a car will vary significantly based on your financial situation.

FS’s other rule is you can spend up to 5% of your net assets on a car. The average price of car insurance, based on the top 10 insurers in the country, is $3,953 per year, or about $329 per month.

How Much to Really Spend on a Car. My net worth rule provides a guideline for the retiree to buy up to a $50,000 car instead. 1) Own your car until it becomes worth 10% of your income or less.

And if your net assets aren’t above $600K with an income of $300K, you certainly shouldn’t be spending more than $30K on a car. It all starts with what we call the 20/4/10 rule, which says you should: Make a down payment of at least 20%. Probably not as much as you might think. It says that your total auto budget, including fuel, insurance, and maintenance should not exceed 22 percent of your take-home pay. It’s time to live it up a little! This is the simplest solution if you’ve spent too much. 2) Bite the bullet and sell your car. The 1/10th rule says you can only buy a $6,000 car which seems much too onerous for a person of your stature. If you're worth $10 million, then you can probably afford a nicer car than your income would indicate. The guide below will walk you through the process of utilizing these tools to determine what average car payments and car price makes sense for your finances.

We’ll answer that question and reveal ways to make sure you’re not overpaying when you buy your vehicle.