Can I Afford a $30,000 Car on My Salary?
Learn how to determine if a $30,000 car fits your budget and what factors to consider before making this major purchase.
Can I Afford a $30,000 Car on My Salary?
Buying a car is one of the largest purchases most people make. Before committing to a $30,000 vehicle, it's important to understand how it will impact your overall financial health.
The 20/4/10 Rule
Financial experts often recommend the 20/4/10 rule for car buying:
- 20% down payment
Income Requirements
To comfortably afford a $30,000 car following the 20/4/10 rule:
- Down payment needed: $6,000 (20%)
This means you should have a monthly income of at least $5,520 (or annual income of $66,240) for the car payment to be 10% or less of your income.
Total Cost of Ownership
Remember that the purchase price is just the beginning. You should also budget for:
- Insurance: $100-200/month
Real-World Example
Meet Jordan, who earns $70,000 annually:
- Monthly income: $5,833
To afford a $30,000 car, Jordan would need to either increase the down payment, extend the loan term (not recommended), or increase income.
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