plug that into an amortization schedule (there's plenty available on line)...eyeballing it, looks like you'll be paying almost $8k interest over the life of the loan.

so...you're paying $28k for a vehicle that will be worth probably $9k when you finally own it.

that may help your decision.

>I bring home $3200 a month and have $800 in expenses right now.

It depends on why you only have $800 expenses on $3200 income.

If you're in a two-income household with a $650 mortgage that you split and are otherwise frugal, $500 won't break you. If it's because you're living with parents, you have no "living" expenses, and $800 is all entertainment spending, it's unlikely the $500 will be continue to be affordable for the life of the loan.

That your interest rate is 13% suggests the bank doesn't think this is a good idea for you.

Yes, I would never exceed a car payment over 250.00 dollars

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How is your credit? If your credit is good then that rate is way to high and i would suggest looking elsewhere.

I wouldn't get a car loan for 13% interest unless I had zero other options. I'm struggling to accept 7% is the current rate..

This is entirely income based.

Me and my wife have a 375 dollar car payment. We also have 5000 left over every month after bills, food and 20% retirement investing. In our case, the car payment is hardly even noticeable.

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Your car payment in general should not exceed more than 20% of your takehome.

Correct I would never and I would make sure it’s something I could pay double and pay it off in a yr

With $2,400 extra in your budget each month, why are you financing a car?

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The car costs half of your yearly income, and that’s before accounting for the extra 8-9k that you’re paying in interest.

You need to be looking at a 10k car that you can pay off quickly.

This sounds like a dealership that makes money off financing, not selling cars.

Get a loan rate from your local credit union. A 7% rate would drop your payment $100/month. Thousands of $ in total interest over the life of the loan.

2 weeks ago, you posted about buying a house.

Yes, it’s too much, especially for 5 years at 13% interest. You’re 20? Have you priced full coverage insurance?

Do you own a car now? What’s your total budget for car, insurance, maintenance? Likely, you should be budgeting $200-250/month for the latter 2 items given your age.

Save your surplus for 6-8 months, find a used car you can pay cash for.

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If you have an extra 2400 each month, you can save enough for this car in 8 months. Do that instead of a 13% loan. Also work on your credit if that's all the better of a loan you can get

Respectfully, it would be insane to take a loan with a 13% interest rate and tie up 1/6 of your monthly income in that loan. I make mid-high 100s and I even have a hard time justifying getting a ~$500/mo car loan.

I mean in pretty much every case you’re going to have paid more by the end of the loan than what the car would be worth by then.

OP just needs to look at the interest rate. It’s too high. If their credit is shit, look for a cheaper car that they can buy cash (they should have plenty of cash on a $3200 salary with $800 expenses)

This. I have a feeling OP’s actual expenditures are not $800 a month.

Giving a set dollar amount doesn’t really make much sense here. What matters more is the interest rate and terms of the loan, your income, and your expenses.

Some people can afford much more than $250 a month. Some can’t afford a car payment at all.

Kinda sounds like a credit issue and could be a credit building opportunity

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Here is one quick trick to save yourself tons of money:

Stop talking about purchases in terms of monthly payments!!

An expensive credit building opportunity. I’d suggest OP look for a cheaper car, hopefully to buy cash or with a big down payment. Also shop around on the car loan. Might be able to get a better rate.

Agreed

I don’t have great credit as I’m 20yr old. I did take a 7k loan on a car 2 years ago to start building credit. It has gave me a total of 15 points. Never had a late payment always on time. I called my credit union and the lady said something about because the loan was to small to make a large difference in credit so she recommended a larger loan. I was offered 9% on a 36 month term which would be roughly 630 a month. My bills are low. Because I’m in a poverty ridden area so living is fairly cheap.

13% way to high if that’s the dealers fault find a diff one if that’s due to low credit score save up cash/improve credit for a while

$800 a month is extremely low. Can you give a quick breakdown of those expense amounts (rent, utilities, insurance, etc)

Is your credit score like in the 500-600s? Take out a credit card and start using it and paying it.

The 13% interest is killer. You’d be paying a lot extra by the end of the loan. Is it possible to look for a cheaper car or use a large down payment?

That’s through my credit union. I have a 688. It’s just been at a stand still for the last 6 months.

As others have mentions; that interest rate.

If it's credit related then I would opt for something cheaper. Esp if I'm paying > 10% interest. I would get that car, pay off ASAP and allow my credit to build and then buy a nicer car at a cheaper interest rate.

$500 too much is completely based on you. Is $500 a month too much for me? Yes and I bring home $7k/month with only $3k being expensive but that's cause I'm cheap AF. Is it too much for you is a you question.

Dang $250. Even my first car back in 2004 was slightly over $250/mo.

Now if someone is putting down a large down payment or stretching out the term then the monthly payment amount is meaningless.

I get the idea and see why many people don't value a car anymore than getting from point A to point B but man $250/mo in 2023 is crazy low.

Hmmm that’s not a great score but not terrible either 13 still seems high I’d def shop around see if you can at least get to high single digit. For the credit part are you using a credit card on the norm to boost it?

Get a secured credit card at a credit union to build your credit. Having a car payment is a ball and chain after you get over the glamor phase of having a new car

Just curious what do you make? By mid-high do you mean 150-180k or 500-800k? Cause technically 999k is still 6 figures.

Do you NEED it right now, or can you wait like 10 months and just pay cash, and Dave yourself a boatload on interest?

agree, 13% is ridiculous, even at these current interest rates. OP needs more info, like credit score.

My credit is 688 because I do have a credit card keep it under 20% usage and always pay it off. I also had tool payments from being a mechanic which helped. My current car I got a 14%. I don’t have any expenses in utilities besides electric due to having a well. Which is around 150$. I don’t have a car payment anymore due to double payments but that was 480$ a month in double payments. My rent is 200 due to my mother living with me and splitting the rent ( she is not moving out because she couldn’t afford it ). Car insurance is 200$. Phone is 40$. Credit card is whatever I spend on it. 75$ on internet then just small things.

Yes you can afford it, Yes it is high interest and you'll pay thousands extra, you should not ask yourself if you can spare 475,- a month, you should ask yourself the question if this car is worth the total investment.

20% down rule, 36 month financing, 8% gross to payments, I’m coming up with a maximum value of about $11,059. It doesn’t have to actually fit in that box, but the maximum value is what I think is reasonable. You can finance for longer, or have less down payment, but you shouldn’t spend $20,000 in your situation.

I would also research rates with credit unions. In my market you can get 4.5% for a car under 10 years old. If the car is old the rate is about 7.5%.

You could let it roll at 13%, but I would get a second job and work like crazy for 12-18 months to rapidly pay that down. It’ll still establish your credit and you won’t pay as much of a penalty from interest. Another thing is you could refinance to a better rate as your credit builds. Your credit will drop, but should be higher than when you started by month 12 with perfect payment timeliness and everything else being equal.

Yes idk what else to do beside a car payment. I can get 9% but on 36 months. So then I’d pay around 630$ a month.

I don’t need it no I have 2 cars already and a motorcycle. I was more the less gonna use it to help my credit

Yes it’s more of a collector car and holds valve really well. What I would pay In Interest would put the car around 28k the car currently is valued at 29k.

That is an extremely stupid idea. Get a credit card and use it for your expenses. Then pay it off in full every month, on time. That will build your credit without wasting $7-8k on interest payments.

Don't over emphasize your credit score, as it will naturally go up over time with consistent on time payments. Your score only matters when trying to make a big purchase like a house or car. And so you are doing this backwards.gwt your score up before you use it for a loan on a car, don't use the car to up your score.

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So interest rate and length of time is way to high. This is not a good deal. Sometimes putting 1/4 down on a vehicle can lower your interest rate down dramatically. Also, it is possible to become upside down on a loan, so I would not take a auto loan out for more than 48 months.

I got SUPER lucky and locked in .9% on a custom order in January of last year. I was peeved when my partner signed on for a 5% loan a few months later…

I pay $550/m for one of my cars and $232/m for the other. But I take home around $10k/m after withholdings and benefits and such (around $14k gross). I wouldn’t do this as a 20 year old at your income. Get a decent used car for cheap.

We're looking now.. and I'm hoping I get lucky and get something around 4% with dealer financing.. but I'm obviously going to show up with my 6.75% pre-approval just in case. If someone offers me 0% or .9% we can just end the negotiations and sign. 😂

Me personally 300 is my limit, plus car insurance. I would not wanna pay upwards of 800 a month on a car. Also 13% is pretty high interest, i would also look to refinance it with another bank or credit union.

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For the record, I make 300K, and I would never get a car loan at today’s rates. Right now it’s time to use a bicycle and wait for the repo rate to increase.

With a 688 credit score you surely should be able to get a better rate than 13%.

How about putting a large down payment? Or looking for a cheaper car?

The interest rate is really bad. Go to a credit union for financing.

Also, that payment is a bit steep for your income in my opinion. I think you'd be more comfortable with something in the $300s

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That seems like an incredibly high interest rate to me. I just looked up my bank and they're offering me 6% for a used car purchase from a dealer.

How much do you have for a down payment?

The only time a payment that high is okayish is when you're getting a bigger car like a truck or SUV that doesn't depreciate so quickly. That's mainly because these cars are worth $40k+.

To have that payment on a $20k car @ 13%? Nope. Not worth it.

Good interest rates for cars are usually under 5%. Seems like you need to improve your credit score more before you can look at cars like that.

I'd look for simple used cars that are around $10k or less if you really need a new car.

If you can swing it in your monthly that would be a bit better

This is the way. You have a ton of money to save. Save for a bit and buy a car outright.

Get a low limit credit card and use it and pay it off each month, there is ZERO reason to take this car loan.

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If I make 300K, since I value my health and time I would take a loan at the least rate possible (5% right now). A bicycle in the rain and sun is a no-no for me.

In the grand scheme of things, is $500 a month too much for a car when someone makes so much money? When do we start living life and stop penny-pinching?

What’s your credit score. 13% is obnoxious. 500 car payment isn’t the craziest part, paying that much to the bank is. I’d buy a cheaper car for now and plan on getting a nicer car in the future. We bought a one year old car through a credit union and still got the new car rate… I’d do that on a cheap/small car and then when credit improves buy something nicer

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Yea this guy claiming to make 300k but $500 a month is too much for reliable, safe transportation Lol. He is either lying or a very strange person that basically no one would want to deal with.

Go get a loan at a credit union for a cheaper car. That interest is waaayy too high for waayy too long.

Right. I would buy a bike without a seat if I wanted to screw myself while I ride.

OP, a relevant data point that is missing is if you have reliable transportation right now? If you do not have reliable transportation, you need that and cannot wait on a car.

Again, at your age and assuming you’re not tied down by a wife and kids, I’m going to say you need to get a side job to pay this car off as fast as you possibly can. Reliable transportation is critical to getting promoted, anxiety, etc.

If you’re going to commit to this car deal, at this interest rate, you need to dedicate all your free resources to paying it off. The reason is you’re basically putting the car on a credit card. (My credit cards have been under 13% all of my adult life (excluding rewards cards)). Paying it off aggressively as possible will help counteract that ridiculous interest rate, making it irrelevant.

That’s a whole lot of assumptions.

If you care about your health, it’s definitely better to bike. If you care about your time, combining your commute with your cardio is hard to beat.

$6000 a year is an awful lot to give up, especially considering the total cost of car ownership is another couple hundred a month on top of that, and more in my area, where a parking spot is $200 a month or more.

As you make more money, you start to get flexibility - you can reasonably do things like spending that additional money for a house near a train, where you don’t need a car. Then that $500 is an investment rather than depreciation. Rather than penny pinching, it’s strategy that can pay dividends for the rest of your life.

Save money for a large downpayment. 13% is absolutely insane. If you really only have 800 fixed expenses, can you get a 36 month loan? Should be able to get that rate way down.

What if you asked questions instead of making assumptions? See my other comment.

I could do 36 months at 9%

Yeah nah bruh ! Drive a beater for a few years it's not that bad. Let's say you buy a 5k car and it needs 2k in repairs that's still saving you 13k that's nothing to shake a stick at. However I will say @ 270k miles I'm about to put new tires and a power steering pump on a 2009 salvage title Nissan morons. That's not the best idea either. But it's still a he'll of a lot cheaper than a new car

Whoops, yeah. My bad. Meant mid to high 100s. Corrected that.

Do you need a car now? If not, given that you bought one a couple of years ago, I would keep the car you are driving and pay cash for something when you get to that point, and/or wait for interest rates to go down. There are other ways to build credit. You could get another credit card and pay it off every month. But if I were you, I would focus on building my savings and that includes saving for a car.

Buy something with cash and invest your money so you don't have to work until 67.

Novel idea. Thanks for not being crazy lol. I’m road tripping with my family right now so Reddit does not have my full attention.

A 60 month loan at that rate is a long time and a lot of extra cash for the car. You may want to wait and put down a bigger down payment, or look for a less expensive car. Maybe pick up a beater (Honda or Toyota for reliability) for 5k and let a year go by before picking up a $500/month 5 year loan.

Just IMHO. I tend to be pretty frugal.

Oh yeah, no worries! There are just plenty of sane reasons that higher earners don’t need to own cars. :)

We just bought a brand new van and made sure to do the finances with trade in and down payment to make it around $300/mo. Not opposed to car payments but man do I hate tying up income in rigid expenses. Something about that $500 mark (or half of one thousand in my eyes) is just so unappealing haha

Absolutely. And here in Seattle that probably means $1000 total cost for a $500 payment.

"I value my health, therefore refuse to do cardio." -you, basically.

Lol sounds like you have no clue how to improve your credit. Step one is NOT "take on bad loans."

out of context much?! It rains a lot here. No car and only bike means making dangerous choices.

Rains a lot here too. I bike commuted for three or four years in all weather and only got hit by one bus and not on a day it was raining. Cars are dangerous too.

My co-worker broke his hip last month, ardent biker. Any means of transportation can be dangerous, bikes lot more in my area.