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Hey, it’s Steve from Feasible Creative — your weekly shortcut to smarter money moves.
BUDGETING
Vroom Vroom
Considering the brand new Tesla Cybertruck versus a used Honda Civic?
The Tesla is faster, looks cooler, and is overall more enjoyable. To some people, this is worth it. For me? I’m more focused on finding the balance between preference and affordability.
Before buying my used Subaru Outback in cash, I did a deep dive into what actually makes sense for my budget. So, if you’re in the market for a car (or will be in the future), here’s what you should think about.
The Dealer Trap
Car dealerships tend to ask “What monthly payment works for you?” when trying to assess your budget.
The thing is, any car can be considered ‘within budget’ if you stretch out a loan long enough. For example, if you can afford $500 per month, dealers could offer a 96-month loan to make it work.
The issue is, you’ve now committed to 8 years of debt on a depreciating asset (not to mention thousands in interest payments).
For this reason, it’s best to do your homework before going out to buy a car.
The Old Rule That Doesn’t Work
Hard rules rarely work in personal finance. You may have heard of the 20/4/10 rule:
20% down payment
4 years max financing
10% of gross income for total car costs (payment, insurance, gas, maintenance)
On paper this seems reasonable, but when you consider today’s car prices the math doesn’t make sense. According to Kelley Blue Book, the average used car costs around $25,000.
Following the 20/4/10 rule means you’d likely need to make a six-figure salary just to afford an average used car.
To me, directionally it makes sense to follow a framework like this to see what’s in your budget, but it’s not a hard rule.
It’s more important to be sensible. If you make $60,000/year, you probably shouldn’t be driving a Mercedes. Alternatively, if you make $250k+ per year, you don’t have to drive a Mercedes if you’re comfortable in a Subaru.
Instead of following rigid rules, here’s how I approached buying my car:
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What I Actually Did
I paid cash. This means no debt, no interest, and I fully owned the car on day one. I recognize not everyone can do this, so if you need to finance you can still win by maximizing your down payment (for example 30-50%), and keeping a shorter loan term (under 72-months).
I bought used. I don’t care if someone else ate the first year of depreciation or made a few stains in the seats. To me, saving that money was well worth it, especially when new cars lose 20% of their value in the first year.
I chose reliability. Subarus are pretty boring, but they run for years and are cheap to maintain. It’s not just the sticker price, but also anticipated oil changes, repairs, and more.
I set a hard budget. Before stepping foot in a dealership, I researched listings online to understand average prices. Then I took a step back, looked at my overall financial picture and determined a price range that made sense.
The Bottom Line
Nobody actually cares about what you drive. Your neighbor in the BMW is probably stressed about their $800/month payment, while your other neighbor is pouring savings into investments from his paid off Toyota Camry.
Find what works for your budget, and don’t look back.
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Talk Soon,
Steve
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Here’s my updated review of Marcus by Goldman Sachs. I’ve had this HYSA (and CD) account for years. See if it’s the right choice for you too:
“A new car is not going to change your life.” - Monica Ali
Disclaimer: The content provided in this newsletter is for informational and educational purposes only. It is not intended to be a substitute for professional financial advice. Please consult with a financial advisor before making any financial decisions. This newsletter may contain affiliate links, which means I may earn a commission if you make a purchase through these links, at no extra cost to you.
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