Affordable wheels
A simple rule of thumb to help you decide how much you can spend on a car.
Planning holiday spending and cash gifts? Here’s how to boost your budget
Sponsored By
Simplii Financial
[brightcove video_id=”6023943602001″ account_id=”6015698167001″ player_id=”lYro6suIR”]Almost everyone has a dream car. For some it’s a sporty coup, a luxury sedan or a sleek convertible. For others the ideal car might be a pickup or even a minivan (although less likely). While everyone is drawn to a particular vehicle, the question you have to ask yourself before walking into a showroom is: what can I afford? To be blunt: the car you want may not be the one you drive off the lot.
It’s a difficult question to answer. To complicate matters, there aren’t many guidelines on determining how much we can afford to spend on a vehicle. Manisha Thakor, a personal finance expert and author, attempts to fill the void. Thakor has devised a clever rule of thumb to figure out how much someone can spend on that new set of wheels.
According to Thakor, the average person can afford to spend about a third of their after-tax household income on a vehicle. This assumes you’re putting 20% down and plan to finance the car over a five-year period at a fixed rate (she assumes 6% in her models).
Some, of course, will choose to spend more than Thakor suggests with her rule of thumb, but doing so will mean cutting back in other areas—like housing and travel.
To learn more about buying an affordable set of wheels, watch Bruce Sellery as he gets in the drivers seat to take Thakor’s thesis out for a spin.
Share this article Share on Facebook Share on Twitter Share on Linkedin Share on Reddit Share on Email
Related Articles
GST holiday break: Is it good for Canada’s economy?
Economists share how the temporary tax cut and relief cheques may play into Canada’s growth picture.
Money-saving gifts that keep on giving: MoneySense’s 2024 holiday guide
Looking for gifts with great value? Our editors share ideas that are thoughtful, useful and even cozy—plus they can...
Inflation is on target in Canada, so why is food (and other stuff) still so expensive?
Why Canadians are still feeling the squeeze of high food costs, and what to do about it.
Deal or no deal: What to know before shopping Black Friday and Cyber Monday sales
If you’re one of the many Canadians looking for Black Friday and Cyber Monday discounts, here’s how to know...
The best no foreign transaction fee credit cards in Canada for 2024
Cards that waive or refund the fee for foreign currency charges are few and far between—but if you’re a...
Should you buy or lease your new car in Canada?
Looking for a new car? What you should know about leasing versus owning.
The best travel credit cards in Canada for 2024
These impressive travel cards can help turn your everyday spending into flights, hotels and more.
“Everything companies”: How Amazon’s playbook is reshaping competition in Canada
In this excerpt from The Big Fix, authors Denise Hearn and Vass Bednar argue companies increasingly want to collect...