What is a Reasonable Auto Loan Payment?

When it comes to auto financing, you have to look out for yourself, because the dealer/seller doesn’t care about your finances.

The only thing they honestly care about is their own profit.

It’s crazy the rip-off loans they’ll try to foist off on you, using mperfect credit as an excuse.

Sometimes they’ll try to trick people with excellent credit into taking an interest rate that is too high — higher than necessary.

That’s what happened to me one time when I was sitting in the finance person’s office. He tried to get me to take an interest rate that was 2% higher than the one I ended up getting simply by pointing out that I had excellent credit and therefore deserved a better rate.

But there’s more!

In addition to their greedy astromonic interest rates, they are happy to approve you for a payment that’s much too high for your budget.

Unlike mortgage underwriters, they don’t regard your debt-to-income ratio.

The bigger your debt, the more they like it (at least seemingly).

The sales person doesn’t care if your payment is so high that you can’t afford to buy gas to drive the darn thing!!!

So you need to do your own calculation and decide for yourself what is a reasonable car payment.

Your auto loan should not be more than 5% – 7% of your income.

If your income is $8,000/month, then a reasonable auto loan is $400 to $560/month.

If your income is $3,000/month, then a reasonable auto loan is $150 to $210/month.

If you know someone who is considering buying a new car, SUV, or truck, help them out by passing this on to them. I’m sick and tired of people getting set up for repossession by greedy auto sellers who gave them payments they couldn’t afford.

This information comes from “Set Your Own Guardrail” Chapter 5 in Credit Repair Mindset.

This is a short, fast read that helps people think like a person who has an 800+ credit score. You can check it out here.