Let’s say they are when they sign — what happens when their income drops to $8k/mo? The rule of thumb said they could afford it.
It’s as much a sales technique as a personal finance one, “don’t worry you can afford it”.
You’re not wrong. For most of my leases it’s been a number/ceiling. I can (on paper) afford wayyy more than $500/mo, but going into my last lease that was my inflation-adjusted ceiling (up from $350 in 2004). For the rented utility of driving, that’s as much as I felt a lease in my driveway was worth.
And in many ways I’m jealous of the people who at the same time were leasing 200-300/mo hacks and checking the same box.
Yeah, I think the only rule of thumb is that one should tread very carefully when accepting guidance via “rule of thumb”.
Great point. I think too often people take advice as literal, when it is supposed to be a generalization. There are so many other factors that come into play, if a person simply goes off of a percentage of their income… more power to them, I suppose. Bless their finances.
Generally, I think that the people that could follow a rule of thumb generally know better and the people that don’t know better have no business following the rule of thumb.
This reminds me of what Mike Tomlin said after the Steelers tied the lowly Lions yesterday…
“I acknowledged the fight, but I didn’t congratulate them for it,” coach Mike Tomlin said. “That’s going to be required when you are trying to do and be what we’re trying to do and be.”
It depends on which rule of thumb you use. I could have also said, I can afford more than my number, but I have banged my top hat and monocle against that ceiling (and bounced) many, many, many times.
Now that Jeeves has cleaned my spats, I’m off for the day.
. Aside from looking at everything financially with greater scrutiny, this is how I also approach leasing.