How much car can you afford?

I stumbled across an interesting article recently entitled “Find out how much car you can afford with 20/4/10 rule.” The idea, it seems, is not to spend too much on vehicles. Consider this passage:

“The 20/4/10 is a good example of one. It can help you get solid starting numbers to help your car buying decisions. Here’s how it works:

• 20% down payment on the car.
• 4-year car loan or less.
• 10% or less of your gross monthly income goes towards car expenses including gas, insurance, DMV fees, repairs, parking/speeding tickets, and interest payments.

Imagine you want to purchase a new car for $30,000 and you earn roughly $50,000 a year. That means you need to put at most a down payment of $6,000 (20% of the cost) and spend no more than $417 a month (10% of your income) on expenses for it.”

I found this to be appalling advice, especially coming from a website entitled “I will teach you to be rich.” How can you become rich if you “invest” (cough cough) in financially losing strategies by putting yourself in extreme debt for something that does not hold value? Hellooooo?

How’s this for a concept: If you earn $50,000/year, you have no business buying a $30,000 car. New cars literally — literally — lose half their value the very second the wheels leave the car lot.

If you’re trying to be rich, I imagine the first rule of thumb is not to spend money on things you can’t afford, especially things that don’t hold their value. Foolish people that we are, we buy used but reliable $2000 vehicles for cash and drive them until they fall apart.

Of course, we’re not rich, so what do I know? Maybe it’s better to listen to the experts.