10 Signs a Car Purchase Is out of Your League

Anne-Marie Hays

Last Updated: December 8th, 2020

Expensive car on the road at sunset

1. You need more than 60 months

Jake McKenzie, Content Manager, Auto Accessories Garage
“You know a car purchase is out of your league when the loan terms exceed 60 months. A lot of dealerships eager to make a sale will convince you that anybody can buy any car as long as they finance over a long enough period of time. But ultimately in these cases, you’ll end up paying so much in interest that you could have bought two cheaper cars in the same amount of time, and you’ll never make back that amount of interest when you try to sell the car.

If you can’t find an affordable monthly payment that will allow you to pay a car off in 60 months or less, you can’t afford the car.”

2. Loan payments exceed 10%–15% of your monthly pay

Becky Beach, Finance Blogger, MomBeach
“You know a car purchase is out of your league when the monthly payment is your entire paycheck!”

Igor Mitic, Co-Founder, Fortunly
“You know a car purchase is out of your league when you need to spend more than 10 percent to 15 percent of your net monthly pay solely on the loan payments. Add the monthly expenses of insurance, reparations, and gas, and all these expenses combined should not exceed 20 percent of your monthly paycheck.”

Valerie Coleman, Automotive Sales, 5miles
“The generally accepted rule is that you spend no more than 15 percent of your pre-tax income on your monthly car note.”

3. The downpayment is too much

Laura Gonzalez, Marketing Manager, Audi Peoria
“[It’s out of your league if] you barely have enough money for the downpayment. Unless it’s an emergency situation and money is extremely tight, it's a smart idea to save some cash to more than cover the down payment and associated fees.”

Coleman
“You can’t put down a significant downpayment. Be prepared to put $1,500 down on a vehicle that costs between $23,000 and $34,000 (good buys like Chevrolet Malibu, Mazda 3, Nissan Rogue, Subaru BRZ, Toyota Prius).”

4. The cost-to-own is too much

Coleman
“The ancillary costs add up (and up, and up). Gas mileage, maintenance, etc. are not things to be taken lightly. Cars can look great and still be prone to mechanical issues. Educate yourself by researching consumer reports and user ratings/reviews.”

Evan Reeves Alonzo, Certified Public Accountant
“You know a car purchase is out of your league when...you would have to take out a loan to cover a major repair.”

Eric Anderson, Co-founder and Organizational Development Manager, elMejorTrato.com
"You know a car purchase is out of your league when you can't put 10 percent of your gross monthly income toward car expenses.

The moment you own a car, you are taking up new monthly car-related expenses. There are a lot of fees when it comes to buying a car that people don't take into account. These costs (like gas, insurance, repairs or fines) come attached to your new car."

5. Insurance is crazy expensive

Coleman
“The cost of insurance = more than 10 percent of your gross income. Interest.com recommends that you limit your total monthly vehicle expenses to 10 percent of your gross income to include your insurance.”

6. You lose perspective with monthly payments

Beach
"You know a car purchase is out of your league when you can buy a home instead with the money! I have a friend that paid $150,000 for his Lambo. I could pay off my home with that amount of money."

Robert Barrows, R.M. Barrows, Inc. Advertising & Public Relations
"Over the years, I’ve handled the advertising for a lot of car dealerships. One time, after going to an auto show, the dealer asked me if I saw anything I liked.

I said 'Yeah, the Bentley and the Lamborghini.' (Both of which would be way, way, way out of my league…) So...to fill in the blank...I know that purchase is way out of my league when I have to ask 'How much is that a month on a Bentley. Or...How much is that a month for that Lambo?'"

7. Your mileage limit is too low

Coleman
“There may be strings attached. If you have good credit, you may get a lower payment for a higher-priced car (but not necessarily). If leasing, remember that you have a limited number of miles you can drive, so a lease may not be a good deal for you if you are, for instance, a heavy commuter.”

8. You are already in deep on a car loan

Jeff Rose, Certified Financial Planner, author, and self-proclaimed numbers geek, GoodFinancialCents
"You are upside-down on your current vehicle (meaning you owe more than it's worth). It's not that dealers won't sell you another car. They will. But that deficit you still owe on the previous car (if you trade it in, for example) will just be added into your new car loan. It doesn't go away. So now, you owe more than your new vehicle is worth, too. And that's on top of the fact that you likely didn't get a good deal and paid full price. Why? Because the dealer already took a car off your hands that can't be sold for the price owed on it. They aren't going to pay off your debt for more than they can get out of the vehicle and then also give you steal on the new vehicle.

To fix this, you need to pay down the debt on the car you own before buying another one. You won't financially recoup the fact that you paid too much but at least you won't be dragging a deficit into the next purchase with you. Plus, you'll regain a stronger position when negotiating your next vehicle purchase."

8. You have to prioritize car payments over savings

Rose
"You can make a car payment but not save toward retirement. Car loans are one of the biggest killers of retirement savings. They are so large and for such a long time these days, people are finding themselves unable to save toward retirement. They have car payments instead. If you can't do both, you shouldn't be buying a new car.

To fix this, you need to figure out how to cut expenses so you can both save toward retirement and replace an old car. You may need to take on a side gig to supplement your income to make the new car happen."

Matthew Woodley, Founder, UpgradedDollar
“Your monthly car payment exceeds your monthly savings amount”

9. You haven’t a clue what your budget is

Rose
"You don't have the extra every month to consistently save toward a new car. Before actually shopping for one, you should be working your budget every month. Money should be set aside toward a down payment and other costs, such as starting new insurance. If you're not able to currently set aside money every month, you can't afford it in the near future either. If you're already paying for a car loan and figure that you'll just be trading in and have the same payment, you need to check some facts before moving forward. Things such as current interest rates, loan terms and lengths, and the true value or your current vehicle can alter what kind of monthly commitment you'd actually have.

To fix this, you need to rework your budget and figure out how you can afford to set aside money every month. Then consistently do it for at least a few months. That way, you can test the new budget and know if you can stick it out for the long haul."

Marco Baatjes, personal finance blogger, Bottom Line Cents
"You know a car purchase is out of your league when you simply can’t afford it! The best way to determine if you can or can’t afford that new shiny car purchase is by doing a budget analysis and putting the things you need first over the new car you want.

Most people don’t like creating budgets; instead, they would rather have a “wing it” personality thinking that they can afford something they can’t. This kind of mentality could lead you spiraling into debt quickly, without you knowing it, and that new car that you may have bought could get repossessed quite easily. Budgeting will allow you to see into your personal finance and provide more insight into whether the car purchase is out of your league or not."

10. You’re tempted to lease, just for the decreased monthly

LeeAnn Shattuck, The Car Chick
“You know a car purchase is out of your league when... you are considering leasing the car because that is the only way you can afford the monthly payments. If you are leasing a car only for the lower monthly payments, you are looking at too much car.”

The bottom line

Consider this advice from Woodley:

“Whilst it can be very tempting to purchase your dream car, it's important to remember what Warren Buffett famously stated “If you buy things you do not need, soon you will have to sell things you need.” And this is certainly true when it comes to buying a vehicle. In fact, Warren Buffet, one of the richest men in the world, drives a Cadillac XTS worth only around $45,000.”

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