Question 1

How much car can I afford?

Accepted Answer

A good rule is to spend no more than 10-15% of your monthly take-home pay on total car costs (payment, insurance, gas, maintenance). Your car payment alone should be under 10% of gross income. Avoid loans longer than 5 years to prevent being underwater.

Question 2

Should I buy new, used, or lease?

Accepted Answer

Used cars (2-3 years old) typically offer the best value since new cars depreciate 20-30% in the first year. Leasing makes sense if you want a new car every few years and drive under 12,000 miles annually. Buying new is best if you plan to keep the car 10+ years.

Question 3

What's the true cost of owning a car?

Accepted Answer

Beyond the purchase price, factor in insurance, fuel, maintenance, repairs, registration, and depreciation. The average car costs $10,000+ per year to own. Luxury and new vehicles cost significantly more than reliable used economy cars.

Question 4

How much should I put down on a car?

Accepted Answer

Aim for at least 20% down on a new car and 10% on a used car. A larger down payment reduces your loan amount, monthly payment, and total interest paid. It also helps prevent being 'underwater' on your loan.

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