How much should you spend on a Car?

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Good day subscribers thank you so much for joining me today i am jeremy and this is the financial education channel in today we’re talking about how much money should you spend on a car i’m gonna give you guys five steps to keep you in check as far as how much you should actually spend on a car and what some best practices are to save you a lot of money guys here i

See so many people buying cars they really should not be buying just because they can get approved for a loan for such-and-such amount that guys they’re way in over their heads on some of these cars these people buy and it makes me so sad so a lot basically because of that whole subject i felt like i might as well do a video on how much you should actually spend

On the car how much can you actually afford and kind of stick to these guidelines and it will help you a lot financially in my opinion guys hit a thumbs up if you enjoy this video today and leave me comments in the comment section i would love to hear what you guys have to say about this subject so let’s get into number one here guys the total of the car should

Not exceed 1/4 of what your yearly income is so let’s say you make $50,000 a year that’s what the average person makes in america right so $50,000 a year so you should not buy a car whether it’s you know secondhand or you know used or new or whatever that’s basically going to exceed 1/4 of what that yearly income you make is so 50,000 let’s say you make so you

Should not buy a car that’s more than $12,500 guys because that’s 1/4 so you need to stay under that $12,500 mark and that’s also the enol after taxes in dealer fees and all those kinds of things so if you go to dealer and you’re not buying it from a you know just a regular person on the street you’re going to a dealer you need to make sure that car is probably nine

Thousand or ten thousand before you you go through the all the ending process because taxes are going to get put on you know registration fees all that kind of stuff guys get tagged on there at the end you don’t want to exceed that $12,500 number now the reason i put it as that is because another another fourth year your income right and that in a year is going to

Basically go toward taxes you know state taxes federal taxes so really if you’re making fifty thousand you’re really only making thirty seven five you or 38,000 somewhere around there because that’s some money you’re actually going to get if you know back to you and what not because the rest is going to go out to taxes so that’s basically going to make one-third

Of that purchase price basically what that car is so i would absolutely say you should never spend more than a third you know after taxes then then what you want on that car because it’s crazy to think you know people spending as much as they actually make any here i met you i see people alternate maybe make 50k a year so that means that really after taxes getting

About 38 k a then they buy a car that’s like 40 50 thousand dollars you’re buying a car that’s that’s more money than what you’re actually getting in your pocket each year and you got rent you got mortgage you got all these other bills car insurance and all this stuff i’m like how can you do that how can you do that even if you’re stewing half that’s still crazy to

Me so you need to absolutely make sure that that number is one-fourth at the very max of what you’re in your total yearly income is and that will help put you in perspective of okay what can i actually afford for a car and if you can keep it under 1/4 and that’s great that’s phenomenal but do not go over that 1/4 number in my opinion guys i will save you a lot of

Money number two here make sure the payment do not exceed one third of what your rent or your mortgages now if you live at home basically think about what your parents pay for mortgage if your parents pay a thousand bucks a month for mortgage don’t buy a car that’s gonna the payments are going to be more than 333 dollars and if you currently live on your own let’s

Say your rent you know you rent an apartment for 800 bucks a month make sure that that car is not going to exceed maybe 275 bucks a month the payments this is another thing i think is crazy some people have car payments that are half of what their mortgage event is you know 500 plus dollars i’m like how can you spend now much money in a car it’s a car it’s meant

To get you from point a to point b to your job and back ordered order that restaurant of the mall and back it’s a car you know how can you spend that much money on a car it just puts you in a bad financial position the money could go towards savings and things like that guys or through a lot of other fun things other than just a car so never try to that 1/3 amount

Of money as far as what you would actually pay for rent or mortgage like i said if you still live with your parents try to find out what they pay for their rent or for their mortgage and then basically take that number and make sure you do not go over one third of what that number is guys for that they actually pay for rent or mortgage number three check kbb kelly

Blue book comm it’s a popular web site that i would say is very very accurate i would say it’s very very accurate ninety-five percent of time is very very accurate as far as giving you what that price actually is for that car so before you ever go to buy a car whether it’s from a dealership whether it’s from someone on craigslist or wherever ebay make sure you’re

Punching in all the the things in the kbb so punch in how what year that car is what model it is what mileage is it is well you know what type of condition it is and see what kpb gives you back for a number kbb says that cars worth ten thousand don’t go paying eleven or twelve thousand for that car paid ten thousand or less kbb is very accurate guys very very

Accurate so pay attention that number make sure you’re typing in everything accurately you know if it has a bunch of extra features and make sure you’re putting in those extra features because you want to accurate number so when you go to buy that car and go to negotiate for that car you know what price in your head kbb that so then you know what your top is

Basically at that point guys so pay attention and kbb do your research before you buy that car and then you’ll have a very good understanding of what you should actually pay for that car in what’s a good price for getting that car not what based upon what somebody else says our friend says or what the dealer says or what that person from craigslist says oh yeah

You’re getting such a good deal what’s kbb say does kbp say are you really getting a good deal or you getting jacked on that car guys so pay attention and kbb i absolutely recommend that site to anybody looking to buy a used car guys or new car for that matter number four make sure your interest rate is under 10 percent if you can’t afford an interest rate of

I mean excuse me if you can’t get approved for an interest rate under 10 percent then don’t get the car you know buy a used car you know just cash a junk or whatever so many times i see people get a car that’s got an interest rate of you know 15 20 even 25 percent that’s just absurd guys that’s just absurd run the numbers run the numbers on a calculator go to

Google and run the numbers on you know a calculator that’s basically the interest calculator for car payment type that in google and run numbers say okay if i bought a $20,000 car i got a seven year loan on that and i paid an interest rate of let’s say 20 percent you can see what the real cost of that car is and it’s just like mind blowing like that car would cost

Me that much money so make sure that interest rate is not over ten percent if it’s over ten percent then don’t do it and i know you could even say you know while jeremy will they should really do four percent five percent or something like that i know that’s unrealistic for a lot of people out there so under 10 percent it is safe you know yeah be better to have

A four percent loan or a 3 percent loan versus a 9 or an 8 percent loan but you got to be realistic i got to be realistic with you guys and if you’re under 10 percent it’s not the worst thing in the world you know you want to try to be lower and maybe refinance and the future you know once you made your payment’s and your credit gets built up a little bit and then

You can always refinance but don’t go get a 15 20 25 % interest loan guys that’s just absurd because even when you refinance you’re not going to bring it down a ton maybe you bring it down from a 20% to a 17 or 16 percent that’s still ridiculously high guys so don’t get an interest rate over 10 percent when you buy that car if you’re buying it from a dealership or

Buying it all alone number 4 here guys or excuse me number 5 we’re on the last one here negotiate the price now make sure you don’t go over your best and final and don’t be afraid to leave the leave the situation so before you go in there you need to have a best and final price in your head you never let that price get known unless it’s absolutely necessary at the

Very end so like i said do your research on kbb.com then before you even go into that dealership or before you even go to that person on craigslist or ebay or whatever and go to see them in person had that best and final number in your head maybe it’s $10,000 no it’s $10,000 and then when you go to negotiate the price don’t start at $10,000 at the same time don’t

Back then with a price that’s just absurd because then what you risk your wrist losing the entire deal because you gave them such a ridiculous price because if you’re going to see that car you still you want that car all you know ultimately you do want that car but you want it for the right price so say you’re going in there is $10,000 is your best and final you

Got that in your head you may want to start with an $8,000 and $8,500 um first bid price and that’s where you start and then you know they can come and work with you and whatnot maybe they take that price that would be awesome probably not going to take that price so putting on you know bid with you and whatnot and then if if you get to your negotiation you’re on

Your third or fourth bid you know kind of back and forth you say okay you know what best and final $10,000 you know take it or leave it and hopefully you get it for a better price in that you know you want to negotiate your way through that make sure you know you know why they want to get rid of it and those kinds of things don’t be afraid to leave if they’re not