Remember, regardless of whether you pay cash or finance, the purchase price of your vehicle does not exceed 35% of your annual revenue. If you finance a vehicle, the cumulative monthly transportation expenses – car payment, fuel, car insurance, and repair – do not exceed 10% of your gross monthly income.
Although automobiles are important modes of transportation, their rapid depreciation ensures that investing more than necessary on one is a guaranteed way to see your hard-earned money vanish unnecessarily.
A bank or automobile dealer would almost certainly accept you for far more than the amount you can afford. However, what the dealer thinks you can pay and what you really can afford are not right. Bear in mind that if you default on the auto loan, the creditor will repossess the vehicle. They win in any case.
Bear in mind that the more money you invest on a vehicle, the less money you have left for other expenses such as rent, food, transport, recreation, loan repayment, and savings.
Your vehicle is one of your biggest monthly costs – the less you spend on it, the quicker you will accumulate wealth in other ways.
