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.
In This Article...
Monthly Salary
Monthly income is the primary determinant of affordability. One should have a net income that is at least six times the yearly payments. Therefore, a person’s monthly income must be at least $3000 if they wish to finance a BMW that costs $2,000 over 12 months. Those who receive commissions or have unpredictable income may have reduced income. In such circumstances, the down payment can be increased to account for the increased risk.
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…
Is owning a BMW worthwhile?
When BMW began promoting its cars as the “Ultimate Driving Machine” in the 1970s, the company soon grew to become one of the world’s top luxury automobile manufacturers.
BMW has a long history of producing eye-catching vehicles and SUVs that receive high praise from automotive writers.
Both auto fanatics and everyday people who just want the best for their vehicles greatly prize them.
Because they are high-performance luxury vehicles with excellent interiors, a smooth ride, high levels of comfort, and some of the best technological features available, BMWs are a good investment. BMW is a brand that embodies high status, and their cars offer an exceptional driving experience.
Are BMWs costly to maintain?
When you buy a BMW, maintenance is another issue that will be on your mind. Owning an automobile requires regular maintenance. It implies that you won’t have to spend as much money on repairs and that the automobile will keep a decent resale value in the event that you decide to sell it.
Due to their higher original cost, BMWs will inevitably cost more to maintain than, say, a Nissan. Their repair work could be more challenging and their parts are more expensive. This may increase the cost of maintenance.
Let’s see how the BMW models compare to the average repair costs provided by ReliabilityIndex for a variety of makes and models;
We might conclude that maintaining a BMW is pretty pricey. But that’s because they are pricey automobiles. Particularly if you need someone to fix your performance M3, the parts and labor are likely more expensive.
Are insurance costs for BMW high?
How much does insurance for a BMW cost? The price of a BMW goes beyond its higher-than-average MSRP. BMW car insurance runs $1,788 a year, or 25% more than insurance for a regular vehicle. You should exercise caution when looking for a policy because BMW insurance is more expensive than the average.
How much income do I need to have to buy a BMW?
The annual household income of a buyer of a new BMW vehicle or SUV is $124,800. In order to put that into perspective with the US populace, in 2020, the median household income in the country was $67,521. It should be noted that the median income in 2019 was $69,560.
Since the MSRP of the BMW product line varies widely, it stands to reason that the typical household income also varies widely. For example, the 2022 BMW 750i of the BMW 7-series has an MSRP that starts at $103,000, while the rather rare 2022 BMW Alpina B7 has an MSRP that starts at $143,200. Buyers of new BMW 7-Series vehicles make an average household income of $184,170.
The popular BMW 2022 3-Series, on the other hand, starts at an MSRP of $41,450 for the 330i model. A new BMW 3-Series owner makes an average annual household income of $116,550.
Keep in mind that these are national averages. When contrasting car ownership with “average household income,” geography factors. For the New York Times, Kantar Media TGI recently conducted research on owners of premium vehicles. They discovered that a luxury car owner made around $100,000 on average, but that average varied from $83,891 to $155,548, depending on the state!
Our total sample size is little over 3,000 brand-new BMW owners, and our error margin is +/-2.5%.
How much does a BMW require in maintenance?
BMW owners spend, on average, $968 annually on maintenance and repairs, according to RepairPal. BMWs are costly to maintain compared to the $652 industry standard. The maintenance costs of BMW are comparable to those of other German luxury models like Mercedes-Benz ($908) and Audi ($987).
The cost of owning a BMW varies based on the car. Compared to its normal commuter line, BMW’s high-performance M line and SUVs are more expensive to maintain. One of the reasons the BMW 3 Series is so well-liked is that it’s one of the most cost-effective versions to maintain.
Using information from RepairPal, the following table compares the cost of maintenance for a select BMW models:
You’ll be glad to learn that a few BMWs include a free maintenance term. Under BMW Ultimate Service, maintenance is included for four years or 50,000 miles on vehicles from the 2015 and 2016 model years. BMW Ultimate Care offers three years or 36,000 miles of maintenance on models made in 2017 and after. If you’re wondering how the two plans differ, BMW Ultimate Service covers more wear and tear and maintenance-related items than BMW Ultimate Care.
Free maintenance programs can initially reduce the cost of ownership, but you’ll need to be ready to pay maintenance and repair fees once the program has ended.
Who purchases a BMW, and why?
According to YouGov, East Anglian men between the ages of 40 and 59 make up the majority of BMW drivers. They are probably conservative political partisans who work in the business, finance, or consulting fields.
What automobile can I afford with my salary?
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.
The current top spending ceiling is 35%. Not everyone should invest more than a third of their earnings in a vehicle. People who only need a vehicle to get to work may be content with spending far less money, while those who grew up watching Top Gear will probably want to spend closer to the maximum amount.
I would like some luxuries, like heated seats and an excellent sound system.
“I love driving and automobiles, and I want my whip to be as elegant and enjoyable as I can afford.”
How durable is BMW?
With the right care, almost any BMW has the ability to last up to 200,000 or even 250,000 miles, and there will always be outliers that go even longer. It’s simple to get off to a good start because every new BMW comes with free factory-recommended maintenance through BMW Ultimate Care.
Who purchases a BMW?
The average age of its primarily male customers is 46 across the board, ranging from roughly 43 for the entry-level 3-series to barely 51 for the top 7-series model.
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.
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.
How much automobile can I get for my $50,000 annual salary?
Your auto payment should be estimated based on a variety of factors. How much money do you have coming in and how much of it do you spend on rent, a mortgage, and/or student loans? These are generally fixed costs that are more difficult to alter than, for example, deciding to cut back on dining out or canceling your cable TV subscription.
It ought to be lower for many of us, though. According to McBride, the 15 percent cap only applies “if you don’t have any other debt other than a mortgage.” Be wise about how much money you’re setting away because not many first-time purchasers can say that.
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.