How much should you spend on a car?

Posted at 5:26 AM, Mar 01, 2016
and last updated 2016-03-01 07:26:20-05

The subprime mortgage crisis really made a mess of the U.S. economy causing the great recession of 2008. Now credit is flowing again, especially for auto loans.

But just because a bank is willing to give you the money doesn’t mean you need to drive off a budgetary cliff when it comes to your next car purchase.

As Americans, let’s face it. We love our cars!

And it doesn’t take very much to get us to switch thing up for a new ride. Did you know that Americans have never bought more automobiles than last year. 17.5 million is the final tally for 2015. We've never paid more for those cars. And we've never taken on higher monthly payments. The average new car cots $28,711 and the average monthly payment is now close to $500 a month at $488, to be exact. And we've never taken longer to pay off those loans with a third of new car loans extending out to the 7 year range for repayment.

“As a monthly payment, it might seem like ‘oh, that’s such a great deal but it’s actually a lot more’.”

“It’s just to get you from point A to point B…”

“Kind of a waste of money… not an investment. Not a good one.”

Dana, Allyson and Travis along Mill Avenue in Tempe gave me their opinions.

So that’s the word on the street but Sulie Richardson with Desert Schools wants everyone to stop using the word "investment" when it comes to cars.

“Your cars will depreciate… I don't believe in spanking brand new because of that.”

If you want to buy “spanking brand new” there is an exercise to see if it’s right for your budget.

“Practice making that payment for three or four months and see what it feels like.”

If it feels like you can afford it and if your total transportation costs don’t go higher than about 15 percent of your expenses per month then you might consider buying a car.

Check for the latest auto sales statistics.