4x4ord wrote:
time2roll wrote:
10%?? So a person making $50,000 should buy a $5,000 vehicle? Need to be making close to a million to get a new top line truck? Wow is that guru out of touch.
Or is that the payment? guru recommends payments?
I recommend the vehicle price should be less than 50% of your annual income.
The recommendation I read was to spend no more than 10% of your annual income on the vehicle purchase price. So someone making $120k per year would look for a $12k vehicle. (so they would buy a used vehicle most likely if they were going to follow his advice) The thing about it is if you’re building up a higher net worth by saving money you can afford a 50k vehicle when you have a net worth of $1 million if you spend 5% of net worth. It’s probably not bad advice .... the problem is most people aren’t willing to save and wait.
Even if I had enough money to pay cash for a $50k or more vehicle, I still would not do it if I was able to get a loan for less than 4% which is easily done with great credit. I can make a lot more investing that money than what I would pay on the loan over a 5 year period.
For instance, I paid $60k cash for a five acre plot about 5 years ago as an investment, and just sold it for $85k. Total interest on a $60k truck at 1.9%(the rate of my last loan) is $3k. So pay cash for a $60k vehicle to avoid paying $3k in interest over 5 years or invest it and make $25k in 5 years. I think I will choose to invest it and make $25k.
