Everyone loves pulling into the driveway or parking lot with a brand new set of wheels. Although the process of buying a new car is rarely fun, unfortunately, it’s a necessity for just over a billion people across the world.

When it comes to purchasing power for your next vehicle, the cash you deposit in the bank each month isn’t the sole factor that you should consider. 

If you make $60,000 a year and you’re looking to purchase a car, an affordable range for a new or used vehicle will be in the $20,000 to $30,000 range. In saying that, what’s affordable for you will depend on your down payment, credit score, and your other monthly expenses.

This article looks at how much brand new car (we’ll explore brand new pick-up trucks in another article) a person making $60,000 per year can buy from four categories:

  • Easily Affordable
  • Affordable
  • Stretching It
  • High End

If you make less or more than $60k, don’t sweat it, because this analysis will give you a great barometer for where you stand in your particular income bracket. 

While it would be much funner to drive a Rolls Royce, Bentley, or Lamborghini, these cars are clearly not practicable for the average American, so they won’t get attention here!

Ladies and Gentlemen: Start your engines and buckle your seatbelts – here we go!

Debt to Income Ratio and Credit Score

If we tried to do this analysis with varying credit scores and debt-to-income (DTI) ratios, this article would never end. So, we’ll take the average American credit score of 698 and a DTI of 25% and apply that scenario to each category.

But…what do these numbers actually mean? 

First, unless you’re paying all cash, your credit score is how the bank financing your new ride determines whether you qualify and your interest rate.

Three main credit bureaus, Equifax, Trans Union, and Experian each provide credit scores. While credit scores can be tricky to understand, promptly paying your bills and keeping your debt-to-income (DTI) ratio lower than 30% will keep it in a good range for you to purchase a new vehicle.  

You can calculate your DTI by determining how much you pay in debt payments per month and dividing that number by your gross income.

Debts to include in that number are debts that would appear on your credit report. A person making $60,000 per year would gross $5,000 per month, and for our scenario, that person would have $1,250 of debt payments per month (we’re assuming purchasing a new car is in addition to these existing debts). 

What is $60,000 per Year Per Month? 

After taxes, a $60,000 annual salary breaks out to approximately $4,102 per month. With a DTI of 25% (or $1,250), that leaves the purchaser in our scenario approximately $2,852 per month to spend on living expenses.

Because the average living expenses per month range from approximately $3,000 for a single person to $5,000 or more for a family, it’s easy to see how an additional car payment needs to be kept in check. 

How Much Car Can I Afford Making $60,000 a Year?

1. Easily Affordable

For a $60,000 per year salary, the list of cars under the easily affordable list is extensive, but some recognizable makes and models under $20,000 include:

  • Chevrolet Spark
  • Mitsubishi Mirage
  • Kia Rio

The 2022 Spark is priced at $15,695, the Mirage $16,990, and the Kia Rio $17,275. 

Buying the Spark at 8.25% sales tax with zero down and no trade in at a 60-month term would cost approximately $290 per month. At similar terms and interests rates, the Mirage and Rio are comparable, with the payment range being $250-350 per month. 

At about 10% of monthly living expenses, these autos at the $20,000-or-less price-point are quite affordable for our scenario’s purchaser.

Of course, in this analysis, it’s important to remember that with a new car come new expenses, such as higher insurance for full-coverage and taxes, title, and license ($300 in our scenarios) as part of the purchase price.

But even in this category, our $60,000-per-year purchaser can easily afford a brand new car up to $20,000.  

2. Affordable

At the next level, prices increase up to $25,000, and payments rise to the range of $350-$450, or 15-20% of the $60,000 per year purchaser’s monthly living expenses. The 2022 Buick Encore GX sells for $24,400, which, at the same terms as the above example, puts the monthly payment at $454.89.

Similarly priced cars in this range of $25,000 include the 2022 Kia K5, the 2022 Hyundai Sonata, and the 2022 Mazda Mazda3. 

Another set of factors to consider in each category are gas mileage and maintenance costs. Vehicles with 4-6 cylinders or a hybrid-electric format will obviously help the purchaser save on prices at the pump. In that vein, let’s take it up another notch. 

3. Stretching It

While it may not be as financially sound, some car owners want a larger, faster, or more luxurious or reliable car, with these ranging from $25,000 to $40,000 in price.

The Chevrolet Camaro comes in at $28,090. The payments per month on this car would be around $523.68, which is a hefty 18% of our scenario’s living expense budget. 

For auto lovers and those who just like to flaunt their ride, this higher price can also come in the form of a:

  • Volkswagen Golf GTI
  • Subaru Outback
  • Toyota RAV4 Hybrid

Even with variations in DTI and credit score, payments on these vehicles hover in the $500-700 range. A loaded Subaru Outback, popular among outdoor enthusiasts and persons living in snowy winters, fetches a price of $40,145, for a payment of $748.42, which is a whopping 26% of monthly living expenses. 

4. High End of Budget

This category includes vehicles that will stretch the $60,000 per year purchaser’s auto budget to the max, beginning at $40,000 and ranging up to $60,000.

While these vehicles are not classified as unaffordable at a $60,000 per year salary, they will certainly put a hurt on one’s monthly living expenses.  Let’s take a look at some of these higher end makes and models.

The 2022 Lexus ES starts at the lower end of this category, priced at $42,150, with a monthly payment of $785.80, or 27% of the monthly living expenses. Perhaps our purchaser prefers a 2022 BMW 4 Series which starts at $46,195, for a payment under this scenario of $861.21, a whopping 30% of the monthly living expense fund.

Looking into the $50k-60k range, a buyer may prefer to sport a 2022 Audi S4 to the next family picnic, and they’ll pay a hefty price of $52,995 to do it, with a payment of $987.99, or an enormous 35% of the budget. 

The Bottom Line: The Price of a Ride 

As the markets reflect, many consumers opt for less expensive cars in the easily affordable $15,000-$20,000 range.

At $60,000 per year, the sweet spot for a great brand new car payment falls somewhere in the area of $25,000 range, which are “affordable” for this type of purchaser, coming in at around 10-15% of living expenses, and delivering a better quality car.

Purchasers who feel that the bigger price tag is worth the comfort or style will uncomfortably stretch their budget in the $40,000-$50,000 range, or hit the high (nearly unaffordable) end at $50,000 plus. 

Fun Fact: I’ve been driving a 2006 Nissan Pathfinder for the last 3 years, I paid $2,500 for it and I love it. Hopefully that didn’t throw you for a loop, but if you’ve read my blog much before, you know I hate debt!

Thanks for driving folks! I mean reading! Come back any time.

Geek, out.

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