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What's the rule on how much you should spend on a car?
"If I make $5,000 a month, how much should I spend on a car? I've heard that there's a rule on how much you should spend on a car based on income."
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“The rule is to spend no more than 10% of your gross pay on a car, so that would mean you shouldn’t buy a car that costs you more than $500 a month.
The reason behind this is to keep you from overextending yourself, ending up
upside down
on your car’s value, or putting yourself in financial dire straits. Plus, $500 will get you a pretty nice car without breaking your budget. A sizeable
down payment
will help reduce the monthly costs of your vehicle as well.”View full answer
- Gregory R.
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