how's it going today guys so today we're
going to be talking about whether or not
you can afford either the car you're
currently driving or a car that you may
be looking at because I know that you or
I'm guessing that you if you're a young
person watching this video you have a
dream car in mind and I'm sure there's
someone out there who will extend you a
line of credit and allow you to buy that
car but is that a good decision
in most cases absolutely not now I went
through this myself I bought a car that
was not super expensive
but I ended up losing about ten thousand
dollars on a car in the course of one
year due to depreciation and I made the
wonderful decision of driving two cars
you can have two that was my whole
mindset it was a huge financial mistake
cost me about ten thousand dollars so I
kind of want to give you guys an idea of
what kind of car payment you can afford
based on your income all right and
there's a very practical model I want to
teach you and it's not one that I
created myself it came from interest.com
I'll link them up in the description as
a source that way you guys can check
that out
but they have something called the 2410
rule of buying a car and we're going to
talk more about that and how that would
work in your situation and how you can
crunch the numbers on this but so we're
gonna kind of figure out what you could
afford for a car and we're gonna look at
the average numbers out there and get an
idea of can the average person afford
the average car payment so the average
car payment out there I believe it's 503
dollars last time I checked but we're
gonna use 500 dollars a month as easy
numbers sake that's the average car
payment $500 per month now the average
salary on the other hand is forty-four
thousand one hundred forty-eight dollars
per year all right so could the average
person earning the average salary of
forty four thousand one hundred
forty-eight afford a $500 a month car
payment so in order to answer this
question we're gonna look at this 2410
rule and I'm gonna explain it to you
guys right now I highly recommend you
guys go to that site and bookmark this
or possibly write this down somewhere
else for reference that way you guys can
look back to this if number one you're
looking to buy a car or a number two
maybe a friend of yours is looking to
buy a car and he asked you for your
advice point them towards the 2410 rule
of buying a car number one the 20 stands
for a min
of a 20% down payment on the car itself
so if you can't afford 20% down in that
car then you can't afford that car
number 2 4 is a maximum of a 4-year term
on that loan now you can go out there
you can get a 5-year term you can get a
six-year term on your loan but your best
bet is to stick to 4 years because if
you can't pay it off in 4 years then you
probably are buying more car than you
can afford
now that 10 stands for 10% so the total
vehicle cost and I'm not just talking
about the monthly payment I'm also
talking about the insurance on that car
and maybe you're gonna get all let's say
a car wash membership because I have a
car wash membership it's like 30 bucks a
month any of those expenses that are
relevant or related to your car that's
what counts as your total vehicle cost
so that $500 a month is just for the car
payment you have to add on the insurance
cost for that car and maybe you're
somebody who has a car wash membership
that all factors in to your total
vehicle cost and that should be less
than or equal to 10 percent of your
gross monthly income now that means your
pre-tax monthly income so just to
refresh guys 20% down minimum four year
term maximum on that loan and no more
than ten percent of your gross monthly
income is the 2410 rule of car buying
and I highly recommend that you guys
follow this rule yourself to avoid
buying a car that you just can't afford
and being stuck with a car payment and
ending up with no money because you're
dumping all of your money into a
depreciating asset known as a vehicle
all right so let's go ahead and go over
an example of this just to give you guys
an idea let's say you have a thirty
thousand dollar car so first of all we
know we need to put 20% down minimum
let's say we're gonna do that we put six
thousand dollars down which is our 20%
and we're gonna get a four year loan on
this car because four year is the
maximum term for a loan on a car
following this rule so $24,000 at three
percent interest for four years gives
you a car payment of 531 per month that
would be your payment on that car and
that's probably higher than what you
guys are used to looking at because most
people factor in a five or six year term
loan so how much money would you need to
be making to afford this car so first of
all the 531 is just
payment we also have to factor in car
insurance and I'm gonna say 100 dollars
a month is your insurance and that may
be low so you probably know what the
insurance is on the car you're driving
now so if you guys are doing the numbers
yourself just use your own number but
understand that the more expensive a car
is in most cases it's going to be more
expensive to insure that car so let's
say it's a hundred dollars a month to
insure it and this person doesn't have
anything extra like a carwash membership
or something like that their total
vehicle cost is 631 a month all right
now following the 2410 rule that your
total vehicle cost can be no more than
10% of your gross monthly income so if
we multiply that by 10 that means you
need six thousand three hundred ten
dollars a month of gross income or
pre-tax income in order to afford that
twenty four thousand dollar car so it's
at well $30,000 car with six thousand
down so a twenty four thousand dollar
loan so what does I equal out to per
year that is seventy five thousand seven
hundred twenty dollars is would need to
be your salary in order to afford this
car payment all right so let's think
about this for a minute okay we just set
up here that the average car payment is
five hundred dollars a month while the
average salary is only forty four
thousand one hundred forty eight dollars
per year this is not much more expensive
especially when you think about the fact
that when you add on a hundred dollars
for insurance the average vehicle cost
is probably around six hundred dollars
or more depending on your insurance and
we know that the average salaries forty
four thousand one hundred forty eight
and that is a far cry from seventy five
thousand seven hundred twenty which is
the amount you would need to
realistically afford that car payment
all right so what that tells us is most
people out there are buying much more
car than they can reasonably afford and
as a result they're dumping all kinds of
money into this car and it becomes a
money pit and they have no money left
over at the end of the month because
they're putting five or six bills into
their car now I want to go through a
chart that I made just to give you guys
a reference all right so over here it
would be your salary or what you make
per year and that is your car payments
so if you guys are looking at a car and
this is your total vehicle expenses
remember so you have to include both
your insurance and your car payment and
any other expenses which would factor in
to your total vehicle cost so if your
total vehicle cost was $200 per month
you would need to make $24,000 a year to
afford that for $300 a month you would
need 36,000 for $400 a month you would
need $48,000 of salary okay so we said
right here the average salary is about
44,000 148 dollars a year that means the
average person out there could
realistically afford a car payment
between 300 and $400 a month of your
total vehicle expenses so insurance plus
the car payment actually all right so
this is the problem we have of people
spending way too much money on a car
going forward let's say you want a $500
total vehicle cost you need to make
60,000 for $600 you need to make seventy
two thousand four seven hundred dollars
you need eighty four thousand dollars of
gross income per year for $800 you would
need 96 thousand for $900 you need 108
thousand and if you wanted a one
thousand dollar total vehicle cost you
would need to have a salary of $120,000
a year to realistically afford that car
anyways guys that is all I got for this
video if you know someone who's about to
buy a car please send them this video so
they can have their eyes open to this
and hopefully not buy too much car if
you enjoyed this video please drop a
like if you're new to my channel please
consider subscribing to be notified of
any future uploads and as always I thank
you for taking the time to watch this
video
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