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%.
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.
The agreed-upon amount: 20% of your revenue
For me, the ideal new car is one that is as secure and dependable as is practical for my purposes. Reliability is essential, especially with a young family and two working parents who are busy; it would be inconvenient to constantly take the car to the shop.
My most recent two purchases had 20,000 or fewer miles on them and were two to three years old. The fact that the automobiles were used cut the cost thousands of dollars compared to purchasing a new one, despite the fact that their newness was excellent for their dependability.
A distinct question from “How much should you spend on a new car?” is “How much car you can afford?”
You can pay $650 a month, a loan officer will conclude after reviewing your salary and credit history. If they extend the loan long enough, you could finance a brand-new Porsche for $650 a month, but you shouldn’t spend that much money on a vehicle.
10-15% of your salary is about right if you take pride in being economical. 20-25% is a good benchmark if you appreciate the reliability that a newer, more expensive automobile delivers.
On a $25,000 salary, you can earn $5,000 to $7,500 this way. Though it’s still not much, you’ll have more choices. With a $50,000 salary, you may spend between $10,000 and $15,000, which is more than enough to buy a basic used sedan with under 100,000 kilometers on it.
Once more, only spend what you can afford. However, if you need to finance your purchase, Monevo’s online rate comparison tool makes the process quick and simple. With customised loan offers accessible in as little as 60 seconds, this website allows you to compare loan rates from more than 30 different banks and lenders.
It’s critical to compare lenders to make sure you obtain excellent prices. Utilizing Monevo is cost-free, and exploring your alternatives won’t negatively impact your credit score.
What about a BMW? Let’s Dissect It
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.
If I earn $60,000 a year, how much should I spend on a car?
If I make $60,000 a year, how much should I spend on a car? If your monthly take-home pay is $750 and your annual take-home pay is $60,000, you should spend no more than 15% of that amount on a car.
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.
If I earn $100,000, how much should I spend on a car?
Do you know what a “debt-to-income ratio” is? It’s just a percentage based on how much you make compared to how much money you owe overall. Your debt-to-income ratio is 50% if your total debt is $30,000 and your take-home pay is $60,000.
Many professionals utilize a 36% maximum debt-to-income ratio as a general guideline. But remember, that’s just a suggestion. With a DTI of around 50%, many lenders approve auto loans (and refinancing loans).
Simply multiply the combined income of your family by 0.36 to get how much car you can buy using the 36% rule. Assuming you have no other debt, if you make $100,000, for example, you might afford to take out a car loan of up to $36,000.
If I earn $400,000, how much should I spend on a car?
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.”
What kind of car can I afford, given my income?
You’ll be better prepared to buy a car if you enter the auto-buying process armed with a few crucial figures. And the math isn’t that complicated. You have fixed expenses like housing, health care, and food in addition to your income. You can spend the money you have left over after covering these costs on interesting stuff, like vehicles!
If you’re wondering how much of your money you can spend on a car, keep the 20% rule in mind. According to financial experts, you shouldn’t spend more than 20% of your monthly income on car-related expenses. Let’s assume that you earn roughly $2,500 every month. You should spend approximately $500 on your automobile in total, which includes the loan payment, gas, insurance, and maintenance. You shouldn’t have any trouble paying for your ride as long as you abide by these restrictions. If you want to spend a bit more, you can always make savings elsewhere.
However, depending on the expenses you have, everyone has a different budget. Make sure that adding a new auto payment won’t result in added stress by considering your personal budget.
If I make $70000 a year, how much should I spend on a car?
The most thrifty financial gurus advise adhering to the a1/10th and a1/20th guidelines when determining how much is a safe amount to spend on a car, regardless of whether it is new or old.
In other words, you should aim to spend between 10% and 20% of your annual gross revenue. That implies that whatever you bring home after deducting any necessary savings will be subject to taxation.
For instance, if your annual income is $55,000, your car budget should cost between $5,500 and $11,000. Your budget, if you earn $70,000, would be between $7,000 and $14,000. Even though it might not seem like much, staying as close to that amount as you can will help you avoid future financial difficulties.
What vehicle can I buy with my salary?
A good guideline is that your monthly car payment shouldn’t be more than 10% of your annual gross income, and your car should cost no more than 30% of that.
How much money ought I to have set aside before getting a car?
Once you’ve decided on the money and the car you want, it’s time to start saving and move a step closer to having your new wheels. You may start saving right away by using some of the expert advice listed below:
- The ONE-SIZE-FITS-ALL criteria for any large purchase is 35% of your gross revenue. Spend 35% of your yearly income on your automobile to make saving simple. You can also determine whether you can afford a brand-new car or a used car that will fit well by subtracting 35% of your annual income.
- Even 10% of your annual gross income will suffice for some of you. The thrifty rule applies to this.
- It is advised that young working parents with a young family set aside 20% of their salary for the car. Sending your car to the shop every other day may upset you more than the majority of people nearby, so this is for the sake of dependability. If not a brand-new car, a trustworthy quality vehicle will be yours using the 20% rule.
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.”