A shiny new car is a mood booster for sure...but now the number of US drivers with a car payment of at least $1,000 a month is soaring! Borrowers may be getting in over their heads!
For instance, some are losing out on a home purchase because mortgage lenders are influenced by a big debt. Financial Strategist Mitch Kramer says most of us need a car - but not one costing a grand a month! He gives you some solid car buying advice. "The car can be an emotional purchase. When you go to buy a car, bring someone with you who is a 'Voice of Wisdom and Reason' and will not let you be up sold into buying something you don't really need!"
Rising Interest Rates can Produce Underwater Car Loans
Kramer says lenders are looking for a payment to income ratio of 6% - not the 17% the $1000 note would represent. Putting a crunch into your regular financial obligations will also cause major problems during an emergency. Kramer says to avoid this mess - watch your car buying closely as car prices are still inflating. "Car manufacturers realize they will make more money if they put more bells and whistles on a car. Add to that the current shortage of automobiles and trucks and, well you know..."
Getting any other loan, from a credit card to a house, will be harder to achieve with this high payment-to-income ratio.
photo:Getty
Monthly Car Note - $1,000?!?Photo: Getty Images