New-car payments often take back seat
By Susan Tompor
Detroit Free Press
How much is too much to pay each month for your car? Ask Scott Hatfield, a 33-year-old teacher from Indianapolis, and he'll tell you that a monthly car payment of $450 or less is a doable deal.
Right now, Hatfield pays about $350 a month for his 2002 Toyota Corolla. But he's guessing that he will pay $400 or $450 a month in two years or so if he buys a new SUV or truck.
He says he can afford it.
He's single, he doesn't have children and he has his eye on a macho Dodge Durango or a hip Nissan Murano. Neither will be cheap. The 2005 Nissan Murano SL AWD he was ogling at the 2005 North American International Auto Show in January had a sticker price of $35,240.
Take away the glitz, the glam, the handsome gents and stunning gals chatting up the steel on wheels and what we're looking at here is another monthly bill.
Sure, nobody enjoys addressing this point. It's more fun to get caught up in chrome-clad, supercharged, industrial-size bling.
Even so, you have to ask: How much will this sexy ride cost me?
And how much is too much?
The average monthly payment on a car loan is $416 now — up $100 a month from 10 years ago, says CNW Marketing Research in Bandon, Ore.
"Consumers, in fact, are buying more expensive cars," said Art Spinella, CNW president.
He said 80 percent of all incentives are now used to buy a pricier car or truck than planned. In 1995, about 43 percent of incentives went toward a plusher ride.
Here's another shocker: CNW — which tracks consumers as they car shop — has seen consumers end up paying one-third more for a car than they had budgeted when they started shopping.
And many regret it.
Charles Bates, 44, of Oak Park, Mich., said he easily could have had a monthly car payment of $700 a month if he bought the Chevy Tahoe he really wanted in 2000.
Bates, who has three children and works for the U.S. Postal Service, ended up with a Chevy Malibu and a $450 monthly payment.
Some general guidelines say that car payments should be no more than 5 percent to 10 percent of one's monthly pretax income. So a household making $50,000 a year might consider a monthly car payment of $208 to $416.
Americans spend more of their disposable incomes on cars than virtually anything else except housing, said Kerry Lynch, director of research for the American Institute for Economic Research in Great Barrington, Md.
The institute's research shows that owning a series of even small cars in the United States could end up costing an average of $240,704 over a driver's lifetime. Owning SUVs could push the costs to $320,506.
