How much car can I afford? Before buying a car, it is critical that you determine both the complete price of the vehicle and what you can afford to spend. This information is essential in deciding whether to pay cash or finance the vehicle with a loan. The difference between these two methods of payment, however, is the difference between paying the car's fult price versus making a much smaller down payment and fitting the monthly payments into your budget. There are two schools of thought about how much car you can afford. Financial experts recommend that the amount of your car payment should noe exceed 20% of your net manthly income. Others suggest that if you can accommodate the payment in your budget, then it's acceptable-although you shouldn't obligate yourself to eating rice cakes for the next four years. Manuel is 38 years old, and his current gross monthly income is $3,800. Given an average personal tax rate of 32% for his federal, state, and iocal taxes, Manuel's net monthly income is If he follows the advice of financiat experts, what is the maximum amount that he should spend to purchase a new vehicle? (Note: Round your answers to the nhmest whole doliar.) $1,550$2,067$517 An alternative to the 20% rule is to eivaluate your budget, determine a monthly payment that you con reasonably afford, and then incorporate that information with the moturity and interest rate of a possible loan to determine the valve of the potemist loan, When this value is added to a saved. amount of a down payment, you know the total amount that you can reasonably afford to spend on a new car. To reyiew this process, consider the following case: He's currently accumulated a down payment of $5,000 and he has determined that he can afford maximum payments of $475 per month. His initial research on the current cost of auto loans has found that his lowest cost loan would be made by a bank and would require an interest rate of 6% for four years. Given this information, the maximum amount that Manuel can atford to pay for his new car is afford to purchase, without stretching his budget, is: The Hyundai Accekt The volvo c70 The Mini Cooper The leep Wrangier However, he could upgrade to a more expensive model by undertaking several activites. Which of the following activities would asow this upgrade? Check all that apply. Postpone his purchase untal he can save more money for a larger down payment Purchase the more expensive car now and figure out later how to pay for it Take a better-paying job or another, or part-time, job that would give him the additional income to support a farger monthly payment Purchase the more expendive car now and then atk his boss for a roise next week