When you are debt-free, have at least six months’ worth of living expenses set up in an emergency fund, and can comfortably contribute between 10% and 20% to retirement savings and investments, you can afford a BMW.
You first encounter the realm of personal finance when you land your first real job right out of college.
So here you are, struggling to pay your rent, bills, student loans, credit card debt, and lifestyle that you are the only one supporting. However, you’re keen to afford a few extras. You are not a college student—you are a working person!
The worst investment you can make in your twenties is an expensive car, which you won’t be happy to hear.
It boosts one’s ego, gives one comfort and pleasure, and hoards a lot of discretionary wealth. Here are the things you need to take care of first so you can buy a BMW.
We’re not suggesting you shouldn’t get a brand-new, head-turning BMW, just wait till you can most easily afford the cost.
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What about a BMW M3?
How are BMW M3s made affordable? I almost have enough money to buy one, but I worry that the annual maintenance costs will be too high. How is the BMW M3 so reasonably priced?
In less than two minutes, find out if your auto insurance is being overcharged.
A good query! Even though the average annual cost of repairs for a BMW M3 is $1160, it is possible to afford one. Here are our top recommendations for cutting car expenses so you can buy a BMW M3:
- You can save a ton on depreciation by purchasing a used automobile. A new car will lose 20% of its initial value in the first year.
- You can save money on gas and maintenance by driving less. You will use less petrol and save more money if you drive less.
- In order to prevent engine damage or other internal issues, frequently check your fluid levels.
- Every 6,000–8,000 miles, rotate your tires and keep them inflated. You all have to pay to replace low-pressure tires because they are more prone to pop.
- You can also save money by locating an insurance plan that is less expensive than the one offered by your present carrier. Shopping around can pay off because you won’t really know how much you can save until you start looking.
Although there are numerous other methods to cut costs, following these suggestions, especially searching around for lower auto insurance, can ultimately save you thousands of dollars. A better plan could enable you to save hundreds each month thanks to better providers, greater discounts, and more comprehensive coverage.
Check out the Jerry app if you’d like to start saving but are feeling overwhelmed. The Jerry app, a certified broker, can help you quickly obtain and compare reasonable offers from leading insurance companies. We’ll even assist you in switching if you discover a new plan that you prefer!
How much income is required to purchase the car of your dreams
Not only are cars expensive to buy outright, but you can also end up paying a significant portion of your yearly salary on your vehicle due to running costs, insurance, maintenance, and servicing loans (if you have your car on financing).
The average cost of owning and operating a vehicle in the US is $10,742 per year, according to the US Department of Labor. That’s a lot of money when you realize that the average wage in the United States is $56,310.
What about cars that are better than average, though? Vehicles that are fast, off-road, luxurious, or vintage… How much income do you need to have in order to buy the car of your dreams?
Using the new BMW M3 as an example, Humphrey Yang, a former Merrill Lynch financial advisor with over 2.6 million followers on TikTok, has broken it down employing the assumption that you’re obtaining the car on finance and using a cunning financial gimmick known as the “20/4/10 rule.” [Watch it here]
In case you missed it, here’s how the 20/4/10 rule operates:
- Deposit at least 20%
- No more than four years may be spent financing the car.
- Maintain a monthly car spending total under 10% of your gross income, including principle, interest, and insurance.
For a $69,900 automobile, $181,740 looks overly conservative – and challenging to reach – but it’s important to keep in mind that 1) the BMW M3 is a high-end performance car, they’re not designed to be cheap, and 2) the 20/4/10 rule’s entire purpose is to provide yourself contingencies (and ultimately save you money in the process).
Lifehacker says this: “Your ability to pay off the car sooner and with more manageable payments depends on having at least 20% saved up in advance. Short financing terms allow you to sooner cancel pricey comprehensive insurance coverage while limiting the amount of interest you spend.”
Last but not least, keeping your monthly spending under 10% of your income provides you a bit more flexibility if you get smacked with an unexpected payment or lose your job.
Yang’s video naturally assumes you don’t have any savings. If your annual income is $181,740, you can definitely afford to save aside some money and buy your ideal car outright after only a few years of saving, which is ultimately a less dangerous or challenging option.
There are alternative options to obtain your dream automobile if you don’t want to take out a loan or save for years, including a novated lease, but good luck trying to get one of those going with your boss for a Ferrari…
Alternately, select a card that loses value more slowly.
Cars don’t all lose value at the same rate. Honda Accords are reliable and in high demand, and they lose value more slowly than American sedans. Pick-up trucks typically lose value more slowly than cars and SUVs because of their great demand and utility. On the other end of the spectrum, luxury vehicles lose value the quickest; this is particularly severe for German manufacturers like BMW and Mercedes.
How much money must you earn to buy a car?
Observe the 35% Rule. Your spending cap shouldn’t be any more than 35% of your gross annual income, regardless of whether you’re buying, leasing, or financing a car. In other words, the car shouldn’t cost more than $12,600 if your yearly income is $36,000. If you make $60,000, the car should cost less than $21,000.
What vehicle can I buy with a $60k salary?
Most experts advise buying a car that costs no more than 35% of your gross annual income, meaning that if you earn $60k a year, you may afford a new automobile that costs no more than $21,000.
What automobile can I buy with a salary of $75,000?
The “20% Rule” certainly seems straightforward. However, if you consider it, using 20% of your salary for only your car payment still leaves you with 80% for everything else.
Take into account your mortgage, consumer debt, healthcare costs, food costs, utility costs, and the cost of life. You might go beyond with your spending plan.
- 10% of your salary: If you want to buy a car on a tight budget, limit yourself to 10% of your yearly income. If you earn $50,000 a year, you have $5,000 available for spending.
Probably not realistic for the typical driver. This rule might only be applicable if you actually require an automobile to travel from Point A to Point B.
- The 36% Rule states that no loan payment should equal more than 36% of your gross income. Your mortgage, auto loan, personal loans, student loans, and minimum credit card payments all fall under this category.
Your monthly loan payments shouldn’t be more than $2,250 if you earn $75,000 a year.
- The 20/4/10 rule states that you should put 20% down, finance an automobile for no more than 4 years, and keep your car payment to 10% or less of your gross income.
This comprises the loan’s principal, interest, and ongoing insurance costs.
Checking prices online could be a better option than splurging at a nearby dealership. CarsDirect is one reliable supplier. To find out how much cars actually cost in your area, you may find discounts on both new and used cars.
“People frequently don’t consider their credit score when seeking to buy a new automobile, but because of the interest rate, it can affect what car you can afford.”
Can I buy a car with an income of $75,000?
According to the 10% rule, you shouldn’t spend more than 10% of your annual wage on car payments. You should try to spend no more than $7k a year on car payments if your yearly salary is $70k.
Considering my financial wealth, what kind of car can I afford?
Do you need some advice on buying a car? Do you believe my one-tenth rule is too strict? No need to worry if so! Let me also introduce to you the net worth rule, which is a good rule to follow while buying a car.
The net worth criteria for car purchases is often reserved for wealthy individuals or retirees with significant assets but low incomes. In the end, we all aspire to financial success based on a high net worth that is taxed more kindly.
In 2013, my 13-year-old Land Rover Discovery II was starting to give me fits, so I devised the net worth automobile buying criteria. His cruise control had just stopped working, and since having a family is everything, I was beginning to worry about driving safety.
That summer, I had just spent $800 on a new steering pump, timing belt, and tune-up for a vehicle with 125,000 miles. It was upsetting to see yet another problem arise.
Along with the cruise control not functioning, other issues with the car include mushy brakes, airbags that haven’t been serviced in ten years, traction control and ABS lights that are on, and a couple of balding $220 M+S tires.
Oh, and there isn’t any Bluetooth either, of course, nor does the CD player work. My dependable mechanic of 12 years indicated Moose was in good working order. Due to a broken fuse that is deeply embedded in the control panel and not worth fixing, the dashboard lights are only currently on. Even so, I was not certain.
I wanted to purchase a new vehicle! But in 2012, I had also just retired and was no longer making six figures in the finance industry. In other words, I had a lot of assets but little free cash flow.
I may purchase a brand-new compact car using the 1/10th guideline for auto purchases. The issue is that I intended to get the most recent, $90,000 Range Rover Sport! Let’s look at some automobile purchase advice to see if it can help me and you get what we desire.
If I earn $300,000, how much should I spend on a car?
My 1/10th Rule for car buying should be followed as a first rule. According to the rule, you shouldn’t spend more on a car than one-tenth of your gross annual salary. A new or used car is OK. It doesn’t matter as long as the car costs no more than 10% of your gross annual salary.
Set a $4,200 maximum for your vehicle purchase price if you earn the median annual per capita income of $42,000. Limit your car purchase at $6,800 if your family makes the median household income of $68,000 per year. Do not go out and spend the excessively expensive median new car price of $39,950!
Aim for a household income of at least $399,500 per year if you must purchase a car that costs $39,950. You might laugh at the need for making such a huge sum. However, today’s middle class lifestyle with a family requires at least $300,000 a year.
According to my income, how much car can I afford, Dave Ramsey?
I don’t want to spoil your desire to own a showy sports automobile. To be clear, however, this proportion also covers the price of the aforementioned extras, such as maintenance, gas, and insurance.
A balance sheet approach is used by Dave Ramsey. Dave suggests that you buy autos that won’t cost more than 50% of your annual income rather than focusing on monthly transportation costs. Consequently, you should not buy a car for more than $25,000 if your annual income is $50,000. (s).