Hear me out. I don’t love many things, but one thing I am pretty passionate about it cars. Another thing I’m passionate about is keeping my finances in a good place. I currently have a car, mostly to get around after work. I use it maybe 4-5 times a week. But I don’t NEED it. I live in a big city, where I work remote, and most people don’t have cars. But it does make my life easier, and I love them.
Lately I’ve been itching for a different car, something I can have a better driving experience with. (Think sportier/better handling) it’s been really hard nailing down a budget because after all, it’s not something I NEED as my car is fine. Looking for recommendations based on my finances, of what is a reasonable amount to spend on a (new to me) used car.
Im 26, no kids, 810 credit, pay $1400 a month in rent, and gross $90k a year. I do about 10% in retirement, and save about 1.8k a month. I have about $70k in stocks, $30k in a 401k and 5k in savings. My car insurance is about $150 a month. My current car is worth $4-5k if I sell it, or $2k dealer trade in. I have no debt at all, no loans, no student payments. I’m kinda anti auto loan and would prefer paying for something in cash, unless there is a sub 4% rate out there (doubt).
How much should I really spend on a car, as a remote employee?
byu/elacoollegume inpersonalfinance
Posted by elacoollegume
11 Comments
Try to buy cash, and I wouldn’t spend more than $20k on anything based on your finances.
But ask yourself, do you actually need a new car? I know you said you have a passion for cars, but $20k on something you only use 4-5 times a week might be better served elsewhere
You seem like a good candidate for an older roadster that you can get relatively cheap (~$10k), like an older Miata or Z3, maybe an Audi TT
How many miles do you put on your car in a month?
Pretty much regardless of rate, you should probably pay cash.
Auto loans tend to influence people to spend more.
I’d build up savings to 6mos of expenses and then save for the car. I’d be comfortable spending $20-$25k in your shoes.
The answer is always Mazda Miata/MX-5
I think car person and personal finance are basically opposites. From the best personal finance perspective the answer is keep the car you have if it is working well. Pay it down and then start saving for when you have to replace it because of mechanical reasons.
But as a car person that is not the answer you want. I would say at minimum pay the car off and then probably an older Miata would be the answer if you are not in a big snow area
Zip car (I know they are or were in Boston) and save the money?
What’s your parking situation like? That’s usually the biggest auto challenge living in big cities. If you have to leave expensive cars on the street it increases your risk level as well as your insurance costs. Are you mechanically inclined or have a desire to be? That effects how much you can spend, and what marques you should consider or consider avoiding.
Cars are one of the easiest ways to quietly wreck good finances. Big upfront cost, ongoing expenses, guaranteed depreciation, and lots of emotion that makes it easy to talk yourself into spending more than you should.
You’re in a good spot, but step back. Your net worth is about $105k. A $40k car is ~40% of that tied up in something that only goes down in value and isn’t required for income. That’s not automatically wrong, but it’s a conscious trade. You also don’t actually need the car. You drive a few times a week in a city where plenty of people don’t have one. This is a want.
A few ways to look at it:
Net worth allocation: Keeping the car under ~15–20% of net worth is the “safe” zone. For you that’s ~$15-20k.
Income framing: You make $90k. A ~$20-25k car is very comfortable. $30k is a stretch-but-fine lifestyle choice. $40k+ is a statement purchase.
Cash impact: You only have $5k in cash. Paying $30-40k in cash means selling investments or wiping liquidity, both of which have real opportunity cost.
If you upgrade, sell your current car and land around $20-25k all-in. Don’t force all-cash if it means draining savings or selling investments, either wait or finance part of it.
But also, consider flexing your “my car is fine” muscle, because that one compounds in your favor. If you keep the current car another 2-3 years while continuing to save ~$1.8k/month, you’re adding ~$40-65k to your net worth before market returns.
There are two components to investing: time and money. You’ll have plenty of chances to make more money, but at age 26, you’ve got the most compound interest runway you will ever have, and you’re in a position to use it and use it well. Blowing that up for a marginally better driving experience is a trade, not a free upgrade. Because that $40-65k left alone is $300k at age 46 and over half a million by age 56.
If you wait 6 months and still want the car just as much, and you can buy it without touching investments or draining cash, then it’s a considered decision and not impulse layered on top of being passionate about cars.
Get a mazda for around $10k. If you like roadsters and don’t mind all that comes with them, get a miata. If not, get a 3.
Unmodified, you can drive either one as hard as you want and it won’t get you in trouble. Or you can modify and get into lots of trouble.
Check out the money guys guide for how much to spend on a car [https://moneyguy.com/guide/20-3-8-rule/](https://moneyguy.com/guide/20-3-8-rule/)
It’s ok to spend money on something you want but don’t need as long as your financial house is in order.