You’ll spend over $1M on cars! Ask yourself “how much car can I afford”?

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How much car can I afford? It’s a question my buddy should have asked himself. He didn’t and now he owns a Tesla.

Teslas are sweet but he’s now a dummy with a cool car. In fact, every time I see a Tesla or an F150 on the road I see a dummy with a cool car who is probably in financial pain. Worst of all I don’t even think they realize it. 

I will show you why cars are the biggest expense in your entire life, tell you what your limits should be, how to stretch that limit, and what to do about it if you’ve already blown your budget.


Today I will end the pain by showing you:

Cars cost more than houses?!?

Cars are expensive and you have to keep buying them. 

That’s what causes most people to spend much more money on car ownership than homeownership. That’s why you need to ask “how much car can I afford?”


People always think of mortgages as the be-all and end-all of financial commitments. Cars, on the other hand, are actually far worse. They are expensive AND destroy themselves. Meaning that over your life they end up costing as much as a house, but in the end you have no asset, just scrap metal!

To put some numbers to it:


Even ignoring gas/insurance/maintenance a $30,000 car that you replace every 10 years will still cost you $433,471 over 30 years

That’s a huge amount of money!

But even worse. The median US household has 2 cars! Double that money!

AHHHHH! $866,942 over your family’s working life to just own then destroy standard sedans!

Add in gas, maintenance, and insurance and you, the standard US family, are blowing over $1,000,000 shuffling their big butts (not in a nice way) from A to B.

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It sounds horrible right. It is!!! But there is a solution…

Three Ultimate Rules: how much car CAN I afford

Lucky for you there are 3 simple rules to answer “how much car can I afford” once and for all:

  1. 10-year cost of ownership less than ½ your salary.
    (easily calculated with a calculator and pull maintenance costs from here
  2. Keep your car for at least 10 years.
  3. Don’t finance it. It’s a trick!

Am I insane? That means on a $60,000 salary you can only afford a 5-year-old Prius! 

Yes. Even with a 5-year-old Prius, you will spend 2 weeks a year working just to pay for your car (or 1 ENTIRE year of a 20 year career…).

So is it insane? Yes, but cars are insanely expensive. 

So we need some tough rules to keep you under control. 

These rules are achievable. Achieve them.

They didn’t just come out of nowhere. Let me explain:

5 Year Old Prius 10-year Pricing

how much car can i afford - calc
how much car can i afford - calc2

That’s sad. 

Rule #1 – 10-year cost of ownership = less than 1/2 salary.

Why exactly half a year’s salary?

You work hard.

Whether you spend your days king-crab fishing, or you’re an ultra-cool finance blogger, B-) I know that you work hard. If you waste away all of your working hours just to pay for your car, that would make me sadder than my wife watching the sad part of Lion King.

If you follow this rule, you can also think of it as your yearly car-ownership is equivalent to two-weeks pay. Two-weeks’ pay to own a car is a palatable amount that doesn’t make you feel like you’re just working to pay for your car… to go to work. 

It’s also achievable. 

Look, I get how easy it is to be talked into getting something flashy. 

For just an extra hundred bucks a month I can zoom around the highway like Vin Diesel!

But if I can resist the urge to buy a cool car, so can you. And if as a result I can buy a bunch of rental houses in cash, you can as well. And trust me, I love the Fast & Furious movies but living without those expenses is better than pretending to be Dom.

Regardless of your income, this is a rule you can follow. 

10-year costs put things in perspective

I like using 10-year cost of ownership for one big reason. Looking ahead a little bit forces you to look at ALL of the expenses, including gas, repairs, and insurance.

There are huge lifetime cost discrepancies between cars. Don’t get sucked into buying something that will just be a money pit for the next ten years. That’s stupid. 

When I did my ten-year cost calculations, I realized that Hey. Over the past decade of work – I spent HALF A YEAR to just pay for my car. 

That hurts. But it also motivated me to not spend more than that. Even though my friend’s Tesla is pretty cool. 

So there you have it. “How much car can I afford?” but this is an achievable goal, I’ll even list out 

See my infographic above for the jaw-dropping numbers.

Rule #2 – Keep your car for at least 10 years.

An old colleague of mine would buy a new car every 4-5 years. “I want to drive in a new car” was her reasoning. 


By switching it up over and over again, you’re essentially just buying it to see it depreciate and then do it over again. Everyone knows their car’s value drops pretty quickly but do you really know how brutal it is? New cars lose an average of 11% of their value the moment you drive them off the lot. Over the next 5 years, they lose 60% of their value.

Keep your car for ten years and give it the luxury of being a carefree grandpa. Sure, power through expensive part of its lifecycle and keep it around until it’s so depreciated it can’t depreciate any further. Woohoo! Free car! (Kinda.) 

The amount of money you lose over time significantly increases the newer your car is

This is why you need to keep your car for at least 10 years.

You can dodge the expensive part altogether by buying used but that’s not a rule. That’s a tip for later!

More fees with more purchases

The other reason to hang onto a car for a long time is that transfer fees can heap on some real pain if you make repetitive car purchases.

Taxes alone can cost an arm and a leg if you don’t keep this under control.

See infographic above for the jaw-dropping comparison – you can save over 75K over 30-years by swapping your car every 10 years instead of every 5.

It’s clear, constantly switching your car can really surprise you with a hefty bill when it’s time to transfer those tags. Forcing yourself to keep your car for a while can help you keep the hidden costs down.

Rule #3 – No Financing Allowed!

As a whole I love debt

I think it’s great if you can make it work for you (like an investment) and horrible if it’s working against you (like a credit card).

Cars are not investments so, therefore, taking on debt for it is a big no-no. Plus the interest rates aren’t great like you can get with a mortgage. So don’t finance it. 

Even if you want to start crunching the numbers at me, I still have two fundamental issues:

  1. The whole reason for those loans is to trick you into buying a more expensive car than you can afford.
    It’s worth the inconvenience of saving up cash to avoid the mind games those car sales people are going to try to play with you.
  2. A loan is a loan, and it adds some mental load. If you’re busy you likely have better uses for your brainpower.
    If you follow my rules, you should be able to save up for your car in cash. (And if you don’ t believe me, then maybe you just need some extra motivation.)  

I’ve bought every car I own in cash. It makes the pain of owning a car very real and keeps me from getting spendy.

Tips to get the most for your car budget:

So, you asked yourself “how much car can I afford?

I told you a sad number.

Well, we have rules and you have goals.

Now I will tell you what can you do to maximize the car you can buy without feeling like you’re just setting fire to a pile of your hard-earned cash? Here are my 5 tips:

1 – More cars = less money!

I have to start with this one because it has the biggest payoff. 

Save money on car ownership by not owning one.

It’s easy to calculate the cost of something you don’t own. If you need a little hint, it’s always going to be $0 which is a great number to start with when you consider how much money you could dump into something that will end at $0 of value.

If you used the calculator from the first part of this article, you know what you save over time by owning one less car. I can guarantee it will be a big number. 

The beautiful thing is that it’s possible:

  • Start biking or move closer to work to give you the option to ditch that expensive liability.
  • Through the gig economy, there are so many options for transportation, at your fingertips. 
  • Best option: Be married, live close to work, and keep one car for the furthest commuter.

I know not having a car can be a pain (I’ve done it!) and maybe you aren’t willing to live close to work but you could generate a lot of freedom with the extra cash from owning one less car.

It can totally make the pain worth it.

If ditching your car isn’t an option, it’s okay. We started with the most radical but making some of the following car-buying choices also help you keep your car costs down too. Hooray!

2 – Used for an easy/effective discount

We already talked about how cars lose their value incredibly quickly. 

Owning a car for its first 5 years is financially disastrous which sounds bad. But it’s actually amazing because…

Over the next 5-years, your car will lose very little value.

Then even better, the loss over the NEXT 5 years is a big fat zero! Kind of like driving a free car!

The beauty is, it’s easy to take advantage of:

  • Receive a 20% discount by buying a one-year-old car which still smells new.
  • Get a 60% discount by buying a five-year-old car still has that modern style and new features.
  • Get almost 100% discount by getting a 10 year old car and driving it until it falls apart. 
Image courtesy of Edmunds

QUICK TIP: I buy cars at 1 year old. It’s usually the showroom car from the dealership. 1 year old without a huge number of miles is a win for high-mileage me.

3 – Maintenance varies A LOT brand to brand.

There are two main factors to consider when determining how much it costs to maintain a car.

  1. The change in maintenance cost over time
  2. The total average cost to maintain it over time

For the first ten years, a car typically costs the same amount to maintain each year. After the 10th year, powertrain warranties expire and parts wear out, and you can expect the cost of maintenance to jump significantly.


Unless you buy Japanese. Japanese cars are different. 

Why Japanese? Japanese people tend to focus on dependability because it’s part of the national psyche

In fact, the three values engraved in the minds of most Japanese children are:

  1. Keeping your word.
  2. Being respectful.
  3. Being on time down to the minute.

These values carry over to the products and design mentality of their car corporations because an unreliable car can make you late which is disrespectful and causes broken promises.

If you make a car that breaks those rules you are disrespecting all your customers. 

So the trade-off for Japanese cars in comparison to cars manufactured in the US or Europe has been dependability over snazziness and over time it has actually changed the outlook of the whole car-buying world.

You might be wondering if I am an undercover Toyota, Honda, etc. salesperson? No, but it’s a no-brainer when you face the facts. 

The only reason, Ford gets away with it is that no one crunches the numbers.

The average 10-year cost of maintenance between a Chrysler Sebring and a Toyota Prius is almost $13,000 ($17,100 vs $4,300). You can almost afford a second used car with those savings!

4 – Gas adds up! At least buy a hybrid!

That larger sticker price may trick you into thinking an eco-friendly car is too expensive, but in a small amount of time, you’ll get that $2,500 difference back in gas savings. 

For example, a fuel-efficient Chevy Cruze gets an average of 32 mpg while a Hybrid Toyota Prius gets an average of 56 mpg. 

Let’s say you put the US average of 15,000 mi/yr on your vehicle. You would use an extra 201 gallons/yr of gas if you choose a Cruze over a Prius.

Gas prices are ever-rising, but let’s pick a set price that most Americans are paying right now. If gas is $2.60 per gallon, you are paying $523 more for your gas each year. That means you can save a whopping $5,230 (likely much more) in 10 years.

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If that’s not doing it for you, maybe think of the impact you can have on global warming?

Or more cynically, you’ll be ahead of the game once eco-friendly vehicles become mandatory.

“Environmentally friendly cars will soon cease to be an option … they will become a necessity.”

Fujio Cho, Honorary Chairman of Toyota Motors

Also, don’t forget to look for government kickbacks on green vehicles!

5 – Expensive cars are very expensive!

There are so many emotions and ideas around purchasing a new ride. One of the biggest reasons people buy expensive cars is to impress relatives, friends, neighbors, yadda yadda. 

When you are on the road, you aren’t seeing the Corollas or Accords, but what you are seeing are the F150s that sell for around $50,000 for a reasonable trim.

HEY!: Speaking of trim options, nobody buys the basic package, right? The basic trim usually sucks. It is just for the manufacturer to trick you into thinking the new car is affordable, then upselling the real package. Don’t get caught!

A normal car actually doesn’t have such a high price tag.

Don’t get suckered into buying a pricy ride! 

  • Are Teslas cool? Yes.
  • Can you save money on gas? Yes
  • Will you save money by buying a $60,000 car? Hell, no.

Don’t pretend an expensive car can help you save money.

So what can you do if you already blew your budget?

I only recommend things that are fast.

So what can you do in 1 hr? Check how much money you could make by selling off your lux car on autotrader. Then find a dealer to negotiate with.

What’s that you have an F150? (I don’t hate F150s, they are just more expensive than people realize). You can suddenly have an extra $50,000 and a few hundred dollars a month by checking that car in.

Your stealth wealth will improve too!

Example calculation:

  • $50,000 on a 10 year 5% loan = $529 / month
  • Driving 20,000 miles a year on an F150 is about $200 / month. Let’s assume your replacement car is half that for a savings of $100 a month and the car is cheap as heck.
  • Then let’s just conservatively say insurance and maintenance is $100 a month extra.
  • That makes for a cool $729/month in savings.

Nice! If a free $729/month doesn’t motivate you, then you need some new goals. You could take an awesome course every month with that money.

If you work that out over 10 years and say it takes 10 hours to actually sell off your car you are making $8,748/hr!!! AHHHHH 

That is a nuclear bomb in the world of saving!

I hope this answered the question, “How much car can I afford?” Please go nuke your car now.

TL;DR – How much car can I afford?

  • Cost of ten-year ownership should be under half of your salary. (Also, keep your car for ten years, and no financing allowed.) 
  • Buy slightly used, so that someone else can live through the depreciation (heh heh) 
  • Look for low-maintenance cars with low fuel consumption. Better yet, get a hybrid
  • Don’t get suckered into thinking that a fancier car is only slightly more expensive and therefore worth it. It’s not. 

What about you guys? How do you keep your car spending down?

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4 thoughts on “You’ll spend over $1M on cars! Ask yourself “how much car can I afford”?”

  1. Certainly puts car ownership into perspective. Personally I roll around car free and loving life. I know that’s not possible for a lot of people, especially families with children or people living in remote areas.

    At least we can let them read this post and save them $1M.


    • Yeah even if it’s not possible to be car free (lucky you!). There are a lot of things that you CAN do. The silver lining 🙂

  2. “The whole reason for those loans is to trick you into buying a more expensive car than you can afford. ”

    So true! I noticed that car companies about a decade ago began offering 72 month loans. It was in the fine print below the big payment number on TV advertisements. The payment number would make the car look very affordable to the person that was used to seeing 60 month financing instead. Now, I believe you can even get 10 year loans! You will become a slave to your car even after it has lost all of its value and you owe more than it is worth. Cash is king!

    • Totally! I admit those 72 mo loans are attractive to the financial optimizer in me, but then if I’m buying an affordable car (let’s say 30K) who wants to carry a <30K loan for 10 years! The theoretical optimization isn't worth the fraction of my brain it would take up! (Plus I'd probably get caught up in the upgrades and make a mistake!)


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