Which Maverick SHOULD You Get?

[LeersMav]

I got the one I wanted: 2022 Lariat Hybrid First Edition Rapid Red (color discontinued).
Very happy with it, no matter what the % of monthly or yearly income. Emotional buy? Most likely!

Financed it through Ford Credit at 0% interest.
Could have paid in full, decided to finance to help boost the ol' FICO score (hehe, haha).

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[crgator]

Those numbers don't align with what I've read over the years. Here's what I've found from Chase about a mortgage.

The 28% rule
The 28% rule states that you should spend 28% or less of your monthly gross income on your mortgage payment (e.g. principal, interest, taxes and insurance). To determine how much you can afford using this rule, multiply your monthly gross income by 28%. For example, if you make $10,000 every month, multiply $10,000 by 0.28 to get $2,800. Using these figures, your monthly mortgage payment should be no more than $2,800.

The 35% / 45% model
With the 35% / 45% model, your total monthly debt, including your mortgage payment, shouldn't be more than 35% of your pre-tax income, or 45% more than your after-tax income. To calculate how much you can afford with this model, determine your gross income before taxes and multiply it by 35%. Then, multiply your monthly gross income after you've deducted taxes by 45%. The amount you can afford is the range between these two figures.

For example, let's say your income is $10,000 before taxes and $8,000 after taxes. Multiply 10,000 by 0.35 to get $3,500. Then, multiply 8,000 by 0.45 to get $3,600. Given this information, you can afford between $3,500 - $3,600 per month. The 35% / 45% model gives you more money to spend on your monthly mortgage payments than other models.

As such, saying a vehicle purchase price should be no more than 15% of your yearly gross income just doesn't sound right.

 

[RobCannaday]

the one you can afford with no loans required

 

[earlyhike]

First, the rule is to SPEND no more than 15-35% of your yearly gross income on car expenses (including gas, maintenance, insurance, etc). So the rule is more constraining than you might think.

Your math requiring someone to make $150,000/year to buy an XL Maverick is correct but assumes you plan to pay off the whole car within the first year of ownership. Obviously most people don't do that. If they do its because they usually have the money sitting in the bank which makes the calculation guideline irrelevant.

For the rest of us take your yearly income, calculate 15% of that, divide that number by 12. (To be more frugal I recommend using your take-home pay rather than your gross income.) Regardless, THAT number is how much you can afford MONTHLY to spend on ALL your car expenses.

Someone making $50,000 a year (at 15%) can afford to spend $625/month on car expenses. Calculate how much you spend on gas, insurance, maintenance, repairs, etc per month and subtract that from $625. The number that remains is what you can afford for your monthly loan/lease payment to be.

So if your car expense add up to $300/month, at 15%, you can afford a payment of $325/month. Technically you can buy a VERY expensive car and pay it off over 7 years at $325/month but that doesn't mean its "affordable".

I think this is all a rough guideline though. You still need to account for your other expenses and long term goals. Ie. If you are paying off school loans, saving for a house, or getting slammed by big rent increases then it might be better to keep your beater car and have NO car payment at all. So "affordable" can be subjective.

If you plan to have a car payment every month for the rest of your life, this rough rule becomes more important.

I personally like not having a car payment at all. So I pay within my limit as fast as possible so I can spend money on other things.

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