How Much Car Can You Afford?

As I have mentioned in other posts, I’m still driving the car I had when I was 18. Less than a month ago I was driving home from a long trip when I blew a tire about 3 hours from home. After a slow ride home on my mini spare tire, I took the car in to get it replaced. As it turned out, my car needed an alignment… but they would have to repair several things before being able to properly align it. The cost would be more than my car was worth.

Time to Get a New Car

The cost of keeping my old car was now more than the cost of replacing it. If I were to sell my car, the new buyer would have to replace the  lightly cracked windshield, repair the alignment, fix what is causing the check engine light to come on, and repair host of other problems and leaks before it would pass the insurance inspection. The only think going for my poor car is that it has 4 relatively new tires. The bottom line, I’m not going to get much (if anything) for my car.

I began searching the online ads (such as CraigsList) for a vehicle. Those familiar with my posts will realize that I have a weird love for Jeeps TJ’s, and that is where I started my search. But what can I afford? I have my 6 month emergency fund, as well as money in other savings and checking accounts. Because I knew my car was not going to last forever, I had started a dedicated “Car Savings Account” as recommended in the “Create a Record of Savings” article. The problem was that I only had $2,500 in that account. I could call this an emergency and buy a nice 2006 Jeep Rubicon, but something didn’t feel right about that. On the other hand, buying a car for $2,500 might require me to pour an extra thousand dollars into it in repairs! Up until the last few months my ’94 Saturn had been relatively trouble free. The question became “How much can I afford to pay for a vehicle?”

You Can Afford Half a Car!

After a week of thinking about this, the answer suddenly hit me like a load of bricks. ONLY SPEND HALF! It really made sense. I would look for a vehicle around the $1,250 range. By only spending half of my vehicle savings, I would still have money left over if it required any repairs. If I got lucky, that extra $1,250 would still be there and increase with each monthly addition until I was ready to move up. The downside: I couldn’t get a Jeep… yet.

Although my original plan of filling my “Jeep Account” fell flat, this new method will still allow me to continue saving and repairing my car without tapping into the emergency fund. Affording “half a car” helps keep the financial stress level down, and keeps the emergency fund for what it’s really there for… an emergency!

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