And I would prefer to pay everything upfront (max what the dealer will put on a rewards credit card and write a check for the rest), math be damned.
I look at the cost of owning a car beyond basic transportation as an entertainment expense, and I generally haven’t splurged on entertainment without knowing that I’m on track (or have already met) longer-term financial objectives.
We also don’t intend to leave behind much of an estate (none if possible, but that isn’t easy to plan), so the discretionary spending decisions will likely get more egregious over time.
After typing all of that I’m wondering why I bother with rewards credit cards, because it isn’t the money.
And you’re not wrong.
This is why the premise of the thread is so challenging.
I would argue that a regular person can get all of the car they possibly need for $400/month in a regular climate for basic transportation (lets not get into drive offs and MSDs) and anything above that is, as you put, an entertainment expense. In my view, the purpose of Leasehackr is to value engineer the incremental entertainment expense of driving a nicer vehicle in order to have more resources for discretionary spending. The value of the vehicle derived entertainment is highly dependent on the individual so there can’t be a hard and fast rule since that $350 someone spends every month on East Romanian throat singing lessons can be use to upgrade their commuter car to something with ventilated massaging seats. The rewards card is just a cherry on top- it’s being able to say that you drive a significantly nicer car for a marginally larger payment AND got a free flight to Europe. Everyone loves a good deal.
If you need a formula like this to know how much car you can afford you probably cant afford that car. This is how people end up with WAY too much house than they can afford by stupid equations like this.
We have a 14 year old Lexus RX that we bought 7 years ago
It’s ugly as sin and handles like a bucket of snot, but I assure you it hasn’t cost 84*$400=$33,600 to own… so I consider most of my lease cost as discretionary / “entertainment expense.”
Your viewpoint has merit; I just look at this through a different lens.
I like this method because it slows for flexibility with other investments. Knowing that 10% is out every month allows me to organize the finances to maximize where my money is going. If it was 20%, for example, that just means that more money is not being invested and will lose value. There has to be a sweet spot between spending and investing.
No one is claiming 10% is all that is available. More like finding a percentage that is logical when considering all investments and portfolios. What percentage is best when you know it will lose 50% over a few years. 20% is double that loss!
There is no right answer for everyone, correct. But, yes 8%, 9% these are all options and can be used in the formula depending on your own status. If I was older, had my savings set, a good job, and a steady income, I may not be investing or Saving as much so it could be 11-13%.
I think 10% is just a nice balance for most people. 10% of your monthly income shouldn’t make that much of a dent in most situations.
Every situation is different - but you still need. Abase to move off of. Otherwise people start at 40% or something silly.
Personally, I can’t fathom spending 10% of my income on a lease payment.
I also feel like the type of people that are starting off financially and looking to rules of thumb as to how much to spend are the exact people that have no business looking to rules of thumb.
I get what you’re saying about need a base to start with otherwise people start at a ridiculous number, but that’s the point. If someone is that fiscally irresponsible, the right thing for them to do is to actually figure out what is an appropriate number for their financial situation. Now, that may be asking a lot, but I don’t think it does the people that need to do the real work a misleading shortcut to avoid getting the real number.
Agreed. And those same people snear at the BMW parked next to them in the parking lot (as if its an uppity car) without realizing its actual cost is like 30-40% of theirs
Those percents are useless. Different people have different priorities. For some, those priorities really are the cars! They might be spending a lot of their income on cars, because it is what makes them tick.
I know people who spend a lot on Porsches, and do weekly drives upstate to race on tracks there. They would not understand if you tell them that they need to limit their cur budget to 10%.
