How much should you spend on your next car?

Speaking of cars, wife and I just got a new (well, new to us) vehicle to tote around a new kid and the dog.

We had lots of choices.

One of those was a BMW X5 but… knowing a small number of things about cars, I know BMWs are very high tech and high powered but also… very expensive.

Especially the BMW X5 (SUV).

Expensive to fix. Expensive to maintain. And… they’re junk. Seriously. They break down all the time. In fact, if I’m not mistaken, they are one of the highest maintenance cars in the world. They break down much more than the average vehicle.

And because repair costs are higher for luxury vehicles and for BMWs specifically, it’s just a big ole money pit.

So we opted for a gently used Honda… probably one of the best deals out there in the marketplace right now.

Either a used Honda or a used Toyota.

We went with a 2007, which is somehow still in good condition.

As for how much you should spend, that depends on how much savings you have to devote to a car. Don’t spend more than you can comfortably afford but don’t buy less vehicle than you need.

If your total debt-to-income ratio is over 40%, that’s considered pretty high. So high that, statistically, a bank or credit union will consider you on the verge of bankruptcy if you run into any financial setbacks. That’s why lenders typically don’t lend money to anyone with a DTI over 43%. So… probably a good idea to not spend so much that it would push your debt to income that high or that it would drain yoru savings such that putting that savings back over 5 years would put your total repayments for debt and savings replenishment over 40% DTI.

OK, back to cars.

Hondas have excellent resale values so used they tend to be a bit more expensive than average.

But Honda tend to overbuild their engines, making them very reliable.

Much lessons to be learned about the nature of value just by looking at resale value and repair costs of vehicles.

Cars with high resale value tend to be more valuable than low resale vehicles. High maintenance costs are a red flag. A high number of recalls can also be a red flag, but not always.

Something to take to the bank. Or to your mechanic.

Anywho, if you are wondering how you’re going to buy your next Honda or BMW or Toyota or Mercedes or whatever, consider self-financing it.

Here’s how:

David Lewis

This post brought to you by //The Rogue Agent//. David has been a life insurance agent, and worked with some of the oldest and most respected mutual life insurance companies in the U.S., since 2004. Learn more about him and his business, here.