How Does A New Car Payment Affect Your Purchase Price?

In Don't Buy That Car! Or Anything Else! We introduced this inevitable situation so many of us get in to. We expanded on the idea in Fight That Desire To Spend Money!. After discussing the fight we looked into What Are Debt-To-Income Ratios? and What Do They Have To Do With My New Car?

So, how does a new car payment affect your purchase price?

This is what we will look at today. Let's start with the assumption, that this is true. A new car payment will affect your purchase price. For instance, you are earning $5000 a month and have a car payment of $400 a month. (And, let me remind you that this is a low payment.) At current interest rates (approximately 8% on a thirty-year fixed rate loan), you would qualify for approximately $55,000 less than if you did not have the car payment. WOW! This is significant.

You might be thinking to yourself, "I know I can afford the car payment and mortgage payment." BUT, in reality, mortgage companies approve your mortgage based on their guidelines, not your opinion.

I have received some mixed opinions on this subject, but the entire point was to make you think. So, think ahead! If you are going to remember one thing while you are standing there at the car lot, electronics store, furniture stone, etc... remember this. Are you going to be purchasing a home? Purchasing your home is a much bigger purchase when considering your future financial well-being.