How do you determine how much to spend on a truck?
A young friend of mine just traded his 2016 King Ranch F350 diesel in on a 2017 Lariat. He said they offered him a deal he couldn't refuse. They allowed him $63k for his '16 with 18k miles and it cost him $9000 to make the trade. I thought that is likely a deal I wouldn't be interested in. Then he said his payments will only go up $30 per month.
My kids are asking me for advice on saving and spending money and so I've been doing a little reading on how people should determine their budget for car buying.
Someone says you should be able to put 20% down; plan to pay it off in 4 years and not have to use more than 10% of your take home pay to make your payments. Another says you should not buy a vehicle that costs more than 10 or at the most 20% of your salary. I've also read that we shouldn't spendore than 5% of our networth on a vehicle.
If I apply these rules to my friends new purchase I come up with some pretty striking numbers.
If he were to follow the 5% of networth rule he would need a net worth of $1,440,000 before forking out $72k for a new truck.
If he followed the not paying more than 20% of his salary on the purchase price of a vehicle he would need to be making $360,000 per year before considering his purchase.
And following the 20/4/10 rule: If he has 20% down and is making payments to have the truck paid off in 4 years his payments would be close to $1300 per month which means he should be making at least $156,000 per year.
So even the most liberating of these rules suggests that there is likely way more Platinum, Denali or Longhorn trim level trucks on the road than what there should be.
My kids are driving 10 year old cars.
My kids are asking me for advice on saving and spending money and so I've been doing a little reading on how people should determine their budget for car buying.
Someone says you should be able to put 20% down; plan to pay it off in 4 years and not have to use more than 10% of your take home pay to make your payments. Another says you should not buy a vehicle that costs more than 10 or at the most 20% of your salary. I've also read that we shouldn't spendore than 5% of our networth on a vehicle.
If I apply these rules to my friends new purchase I come up with some pretty striking numbers.
If he were to follow the 5% of networth rule he would need a net worth of $1,440,000 before forking out $72k for a new truck.
If he followed the not paying more than 20% of his salary on the purchase price of a vehicle he would need to be making $360,000 per year before considering his purchase.
And following the 20/4/10 rule: If he has 20% down and is making payments to have the truck paid off in 4 years his payments would be close to $1300 per month which means he should be making at least $156,000 per year.
So even the most liberating of these rules suggests that there is likely way more Platinum, Denali or Longhorn trim level trucks on the road than what there should be.
My kids are driving 10 year old cars.
