Car vs. House - what's a good number?

[Doctor Mugen]

I remember one of my friends in college/medical school who had an M3 (back in the late 90's) remarked to me once that while he had enough money to buy a used Ferrari 348 (remember, late 90's), he couldn't justify spending money on a car that's worth more than 10% of his house. Of course, being the hypocrite he was, he bought a new M3 and had no house at the time

So for you finance types, what's a good percentage of what car you should buy relative to the worth of your house?

Or I guess if you're a renter, what are good percentages of car monthly payments vs rent?

[takeshi]

he couldn't justify spending money on a car that's worth more than 10% of his house.

That mindset just seems odd to me. I can see worrying about amounts when budgeting or buying a house but even then I don't compare ratios among things except for debt/expenses to income (not one specific item versus another specific item). However, my S definitely far exceeds 10% -- both with the current and former houses.

Under that rule, when I was renting for a brief period of time, my car payments should have only been $70/month and I guarantee that my S's payments aren't that low.

[meat]

Buy what you can afford.

[tmarshall]

I think I'm a pro choice guy. If you want to drive a Veyron and live in a trailer, knock yourself out. It's just a matter of deciding what's important to you.

[kevos2k]

just remember tom... you can always live in a car... but you cant drive a house

[HG_S2K]

just remember tom... you can always live in a car... but you cant drive a house

I'm going to have to use that one on the wife

[bjurasz]

I agree -- spend your money where your priorities lie. Besides, 10% just seems too low to me. I couldn't "justify" my Accord at that figure.

[Geo02s2k]

I don't think so much in terms of what percentage of your house your car should be. (Although, given real estate prices, it explains how people in higher housing cost markets seem to have nicer cars than the general populace in lower housing price markets.)

The thing that will be hard for me is when I buy a car for the first time that costs more than my first house did. I think that will be a very hard mental hurdle to clear even if I can afford the car.

[Doctor Mugen]

just remember tom... you can always live in a car... but you cant drive a house

true

[My_yella_s2k]

Economy stimulation FTW.
Buy what you think you can afford, then buy .25 more off of that #

[Chris S]

I'm a finance guy, and I've never heard of thinking in those terms. If I had, I'd probably be violating that rule of thumb right now, and would be in no position to give sound advice on this matter.

I say buy what you can comfortably afford as long as you're taking care of priorities like retirement, college savings for the kiddo, emergency savings, etc.

Look at it this way. My # is waaay north of 10%. I could buy a more expensive house to bring that ratio back in compliance, but why should I? My family has all the room and amenities we need, w/ a comfortable mortgage payment. A more expensive house would just cost more in pmts., taxes, insurance, utilities, upkeep, etc.

Oh yeah, don't take financial advice from doctors - they're not known for their financial acumen!

[Doctor Mugen]

Oh yeah, don't take financial advice from doctors - they're not known for their financial acumen!

AMEN!

I'm not posing this question for my own ruinous personal finances, but just recalled my friend telling me this for some reason. Just not sure if there's some magic number or not. As a reckless spender, I could care less.

But one personal observation I've noticed, at least in Houston. When I drive through really nice neighborhoods here (say houses > $600k), most of the time I see just regular cars in front of the house (yes, I suppose they probably parked their Bugatti in the garage :LOL. On the flip side, I remembered visiting some of my friends who live in neighborhoods that a snob could consider "ghetto" and seeing Porsches, NSXs, and Benzs parked in the front

[Geo02s2k]

AMEN!But one personal observation I've noticed, at least in Houston. When I drive through really nice neighborhoods here (say houses > $600k), most of the time I see just regular cars in front of the house (yes, I suppose they probably parked their Bugatti in the garage :LOL. On the flip side, I remembered visiting some of my friends who live in neighborhoods that a snob could consider "ghetto" and seeing Porsches, NSXs, and Benzs parked in the front

There are certain socio-economic segments of society in which conspicuous items can be considered a symbol of standing. Often times, these items don't seem to make any sense relative to the rest of the lifestyle. People in these areas will often times sink a disproportionate amount of their wealth into one of these status symbols, but it will be all they've got materially.

[kevos2k]

in my hood Aurora, CO its more likely to see escalades and hummers on 26" rims parked in the 'projects' than anywhere else... i would say in aurora 7/10 people have rims no matter the car... while in Denver where the housing cost is almost double you see none

[Doctor Mugen]

in my hood Aurora, CO its more likely to see escalades and hummers on 26" rims parked in the 'projects' than anywhere else... i would say in aurora 7/10 people have rims no matter the car... while in Denver where the housing cost is almost double you see none

so is Aurora considered ghetto now or something? Just curious since I used to live there back in 1979 and don't recall my parents saying the area was a dump (damn I'm old )

[kevos2k]

I dont think its ghetto... but there are definitely areas where that are considered lower class i wouldn't put it in the ghetto category tho its basically where the minorities live so most people think its rough lol

[Chickwithastick]

Damn 1979... you are old!

I've never heard of that way of thinking though... that's odd.

[Justin6264]

I think that your total debt load is more important. How you break it down is really up to you. Some people like to have large expensive houses with every amenity, while others may think that using the majority of your debt for a vehicle is more important. I'm outside the norm I guess...I keep my debt under 30% of my income.

[JonBoy]

There are certain socio-economic segments of society in which conspicuous items can be considered a symbol of standing. Often times, these items don't seem to make any sense relative to the rest of the lifestyle. People in these areas will often times sink a disproportionate amount of their wealth into one of these status symbols, but it will be all they've got materially.

Dang, George, you almost sound intelligent.

[Geo02s2k]

Dang, George, you almost sound intelligent.

Shhhhh! Don't tell anyone.

Just the economist in me peaking out.