Look, we’re all for a pinch or two of financial prudence around here. Springing for luxury items just isn’t in the cards for most of us, despite the lavish recompense* deigned upon us by our corporate overlords in Downtown Canada. (*note: the recompense isn’t actually lavish at all).
But even we feel comfortable calling out moronic fiscal advice when we see it. Case in point – a post on a website called Investopedia suggests that anyone making $100,000 per year should spend no more than roughly $15,000 on a car.
And, yes, the post seems to have been recently updated, with a dating of December 2023 and interest rates grounded in the current (horrible) reality we find ourselves. In order to reach this out-of-touch conclusion, the killjoys at Investopedia start with an assumption that one should limit their transportation expenses to 10 percent of an annual salary, including insurance, fuel, maintenance, and the car payment itself. Beyond that, they suggest making a down payment of at least 20 percent and financing the thing for no more than four years.
At the gross income of $100,000 annually, this shakes out to $10,000 per year or about $833 per month. Setting some variables in this equation, they propose a monthly insurance rate of $147, fuel costs of $260 per month, and maintenance pegged at $95.50 per month (about 10 cents per mile). Simple math leaves is with $330.50 for a car payment. To slide in at that figure over 48 months at 8.3 percent interest with 20 percent down, Investopedia suggests a total purchase price for your shiny new car – including taxes and whatever other fees a dealer feels like charging that day – at just $16,687.
Sixteen thousand, six hundred and eighty-seven dollars. On a car. In this economy whilst making a hundred grand. We’ll let that recommendation sink in for a second. To be fair, Investopedia does recognize the current state of the car industry elsewhere in the post, pointing out the unfortunate reality that the average transaction price of a new vehicle in America is nearly 50 grand whilst the average used set of wheels is in the $26,500 ballpark.
In fact, I feel my headline figure of $15,000 is actually generous, since the $16,687 estimate includes dealer fees and taxes. The latter generally ranges between 4 and 8 percent depending on location in this county, while anyone who’s been inside a dealership in their life knows the propensity of the business office to try and pad purchase prices with various and sundry items of questionable value. Don’t take the TruCoat.
Moseying over to AutoTrader, we find a rogue’s gallery of cars on offer for that sum. A ’17 Jag XF with 88K looks nice but is sure to cost far more than 10 cents a mile in maintenance. Same goes for the myriad of decade-old BMW X5s and Merc C-Class sedans. A fifteen-year-old Ram 1500 with 131k in near-base trim is a depressing thought to have in the driveway whilst making $100,000 per year, as is the two-wheel drive Tundra with 149k from Obama’s first term. The newest option is a Mitsubishi Mirage, of course – though you do have a choice of sedan or hatchback.
So – how about it, B&B? Am I being too snobby? Should I be resetting my sights to fiscal prudence and reality instead of thinking that anyone making six-figures shouldn’t be poked into an econobox or knackered old pickup truck? Perhaps my thinking is a root of the problem that’s caused note terms to regularly crest 84 months and debt loads to skyrocket.
Nah. Who am I kidding? If I made $100,000 per year, I sure wouldn’t be tooling around in a 2016 Equinox.
[Image: Jonathon Weiss via Shutterstock]
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