On: The Seven-Year Auto Loan (2019)

[synlatexc]

First I've heard of the suggestion that the cost of a car should be 50% of annual pay. To me that's insane, but then again I view my car as an appliance[0].

[0] https://oppositelock.kinja.com/i-used-to-take-it-as-a-given-...

[brianwawok → synlatexc]

US median household income is 63k. So for a two income house, that would mean two cars costing a total of 31.5k max.

A 2020 yaris starts at 15,650. With fees, should be around that mark.

The problem is, the median US household does not buy a Yaris. They spend more like double that. So 30-40k PER car, two cars per household.

[perl4ever → brianwawok]

For a coherent analysis, you should use the median income of two earner households. Two people where one makes $75K and the other makes $50K equals a household of $125K.

And it seems obviously extravagant to me for a middle class family to have two new cars. One maybe, but two? But even so, by the formula, the family can afford two $30K cars.

[syshum → perl4ever]

in 2005, the last actual data I could find that lists 2 income households, the median income was $75,293, assuming that income kept pace with inflation that would be $98,562 today not 125K,

Such a family would not want to spend more than 49K total on their cars. so that is 1 car for 49K or 2 for 24K

and that IMO should be the extreme absolute limit

[SilasX → synlatexc]

I think it's intended as an extreme upper bound, not the optimal value.

[xboxnolifes → synlatexc]

> ...should not cost more than half of your annual income.