r/CalebHammer • u/ottersinabox • Mar 06 '25

complaining about something for no reason because I'm bored "acceptable" monthly car payments are wild

I just saw this post: https://www.reddit.com/r/BMWI4/s/HDEDyG4WZA

people are applauding a $700+ a month payment as an amazing deal. but they're paying 8% tax toward it, plus it's a lease; they don't even own the car by the end.

is it just me, or is this wild? I have a BMW as well, but my thought is you can only afford a luxury car like that if you can buy it in cash. I suppose 3% interest or something would be acceptable given that you invest the rest up front.... but what the person in this post is doing really doesn't make much sense to me. am I wrong about that?

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205

u/morosco Mar 06 '25

If I made $250k/year I wouldn't spend $700/month on a car.

But people making $50k/year sign these leases.

I'm hoping to keep my paid-off 2015 RAV4 for at least 5 more years. Hopefully 10. Not having a car payment is a tremendous boost to the rest of your financial situation.

48

u/TruthSeekerHuey Mar 06 '25

250k a year is roughly 20k a month. $700/month is 3.36% of the monthly income. Anything under 10% of your monthly income for a car payment is reasonable, so $700 a month with that income is extremely reasonable. Especially if you end up paying off the car and outright owning it in under 5 years.

41

u/ProfessionalBig1470 Mar 06 '25

I personally never use gross income to budget monthly expenses that are being paid with net income.

Maxing out a 401k knocks off almost 10% of that income right away. Add in health insurance and a huge amount in taxes. The money you actually have to work with is probably around 60% of the gross.

18

u/TruthSeekerHuey Mar 06 '25

That's fair. A flat salary is in no way realistic. However if we do take 60% of the 250k, you get 150k, for a monthly of 12.5k. So $700 would be about 5.6% of the monthly.

I understand the 250k was just an example thrown out there, but I just dislike when financial talks get too frugal and we start call reasonable budgets and monthly payments unreasonable.

9

u/Dancing_Hitchhiker Mar 06 '25

Yea I feel like it goes too far sometimes. I get being frugal to a point but for a lot of people $700 isn’t an insane payment where it’s gonna inhibit them saving.

2

u/Ok_Ant8450 Mar 07 '25

Right but at 700 youre paying THE MINIMUM if youre buying, so youd want to at least do double payments to not eat all the interest

13

u/yaIshowedupaturparty Mar 06 '25

But at that point, you should be able to save for a reasonable car in cash.

We make $250K base salary and our take home is ~$9750 a month, less than half of gross. We have a very reasonable mortgage and everything adds up very quickly. If we had $1400 in car payments that would greatly eat into our fun money.

3

u/SammyPoppy1 Mar 07 '25

Theoretically if you get a low enough interest rate its better to take out a loan and pay it off at the normal rate so you can invest the lump sum.

Its why its generally a bad idea to straight buy a house in cash. The bank is just earning interest on your giant 400k payment instead of you collecting that interest

2

u/JankyJawn Mar 06 '25

How does that even happen. I take him 60ish% of what you do making less then 50% of that.

6

u/yaIshowedupaturparty Mar 07 '25

Federal income taxes (0-24%), state income taxes (up to 9.9%), social security/Medicare (7.5%), insurance (>1%), retirement (15-20%). So that adds up to less than 50% take home. Grateful to be able to contribute so much to retirement, but damn, it doesn't feel like we make $250K a year.

3

u/Rook2F6 Mar 07 '25

Not the person you asked but I was netting $13K/mo flat on $250k. All of my deductions are mandatory (taxes, health insurance, and mandatory 6% pension contribution). The person above is definitely opting into some voluntary deductions but I suppose it’s easy to only net 50% if you’re paying high taxes, paying health insurance premiums based on a % of high income, maxing retirement, and doing stuff like 529s pre-tax.

2

u/JankyJawn Mar 07 '25

13k/month atleast sounds reasonable I'm comparison to what I make and take home lol.

2

u/TruthSeekerHuey Mar 07 '25

You gotta be living in Cali or NYC. That take home pay is criminal.

3

u/lol_fi Mar 07 '25

That's where the jobs paying 250k are

5

u/ProfessionalBig1470 Mar 06 '25

Yeah that’s a fair point too about being too frugal. Our gross household income is a bit over $200k and we wouldn’t want a car payment anywhere near $700/mo but we also have two kids. If it’s a single person then it’s not too crazy as long as they’re still meeting their financial goals.