Sounds like he traded down...but that's another story.
Years ago, in a former life, I was in the auto sales business and lenders didn't really like writing a loan where the monthly payment was more than 18-20 percent of your gross monthly income. To support a $1300 monthly payment (20 percent), a person would have to make $78K a year.
There are those types that always have it in their mind and in their budget where they will always have a payment; whereas, there are those that buy, pay off and drive them till the wheels fall off. I personally fall into that last part and keep a vehicle until I feel that it becomes too unreliable to drive on a regular basis.
Every person places a different priority on how money will play a part of their life. Their are those that save every penny that make forgoing life's pleasures for the belief that the future rewards will be worth the current sacrifices. Then there are those who are polar opposites and spend every penny that they make. They can't or won't plan for the future because they want it NOW.
I think there has to be a comfortable in-between somewhere. We are not guaranteed life past today and many plan for a future that doesn't materalize in the manner of fashion in which they envision it today.
A prime example is my dad. Many,many, many years ago when he was a geology student at the U of Texas, they went on a field trip to Marble Colorado. He bought a small piece of land on a handshake deal from the owner with the understanding that he would pay what he could, when he could. (Pretty cool part of the story, but not the main point)
He and my mom had always planned that after retirement they would put a cabin up there as a reward for all their hard work. To date, the land is still undeveloped and will eventually be left to my sister and I when he dies. +/- 30 years ago my mom was diagnosed with ovarian cancer and eventually passed away. He eventually remarried but lost all plans and desires to build on the land with his current wife because it wasn't his lifelong dream to do it with her.
Basically, in my ramblings, the point I'm trying to make is that there has to be a healthy balance between living in the present and planning for a future. If your neighbor is paying all his bills on time, providing shelter & food for his family, showering them with his love and generally raising/raised his children to be good stewards with what they are given....then can any of us really judge him based on the choices he makes with the money he earned? We might not make she same choices as another, but we all make the choices based on our own individual situations without undue influence from outside pressures of judgement.
To answer your original question. Don't let the car payment be more than 15 percent of their gross monthly income and NEVER finance for longer that 60 months. If they can't make the #'s work, then either save more or buy less vehicle.
Sorry for getting off track on the topic.
