How much should your first car cost?

How much should I spend on my first car? After living in the city for so long and never needing a car, I am moving to the suburbs and want my own transportation. Since I’m 27 and have never made a big purchase, I need help figuring out the financials.

Answer
Buying your own car is so exciting! The only downside is… they’re expensive.
Experts recommend that you spend $5,000 to $10,000 on your first car. But honestly, it all comes down to what you can afford.
Here are a few simple tips to help you calculate a figure that would work well for you:
  • Don’t spend more than 15% of your gross pay or 20% of your take-home pay.
  • Ensure you can make a down payment of at least 20% of the car’s value if you’re financing it.
  • Your maximum loan term should be 48 months—even if the prices for longer terms are tempting.
But remember, buying the vehicle is just the first item on the long list of expenses that accompany car ownership. There’s also registration, insurance, maintenance, repairs, fuel, and so on. Sigh.
And if you buy a car in the $5K to $10K price range, it will likely be an older vehicle, so you should anticipate more frequent repairs and maintenance. Set aside funds in advance so you won’t find yourself in a bind when something goes wrong.
Speaking of which, as a used car owner, a roadside assistance membership can offer ultimate peace of mind. If you’re looking for roadside assistance at a great price, try Jerry.
Jerry’s membership provides you with industry-leading roadside assistance, including benefits like towing, lockout service, and a mechanics hotline. And you may qualify for a special rate of $50 for your first year!
Hana Sabah
Answered on Oct 20, 2021
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