Bankrate is reporting that the average new car will cost half of the average family’s income. How depressing!
The average price for a new car is $28,200 in 2007, meaning that the average family has to work about 25 weeks to afford the car. It sounds bad but it’s nowhere near as awful as it used to be in the 1990s when families were working 31 weeks a year to afford a new car.
So how much should you really spend on a car? According to advice from Edmunds.com, it’s probably less than you think.
“People waste all kinds of money when purchasing and owning cars. It’s a depreciating asset. There’s no way to get around that,” Reed says. “So right from the get-go you will lose money, but the question is: How much? You want to control the bleeding.”
Reed is fairly strict about how much money people should spend on a car. He says a good rule of thumb is 20 percent of income. This means someone who buys a $20,000 car should be making $100,000.
Yay for used cars.