Know These 3 Numbers Before Buying a Car, According to Humphrey Yang
Written by
Peter Burns
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Cory Dudak
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Whether it’s to show off, enjoy a smoother ride, take advantage of the newest technology or reward themselves, people love buying and driving expensive cars. You can save up for years or take out a loan to make your big purchase, but if you don’t consider the whole picture, you might still buy a car you can’t afford.
Content creator and entrepreneur Humphrey Yang recently released a new video on his YouTube channel to help hopeful car owners grasp the complexities of the costs. Here are three numbers that he said are essential to know before making your big purchase.
The 35% Rule
When it comes to buying a car, “affordability” is a word that gets thrown around a lot, but isn’t always understood. When you can break down the cost of an expensive car into monthly payments, even large installments might seem reasonable. According to Edmunds data, the average monthly payment for a new vehicle was at an all-time high in Q4 of 2024, with nearly 19% of buyers paying $1,000 or more a month.
To make sure you’re not spending more than you can afford, Yang explained you can determine your sweet spot by applying the 35% rule. This rule states you shouldn’t pay more than 35% of your gross income on a car. For example, if you want to buy a car that costs $28,000, you should make at least $80,000 per year. To be on the safe side, Yang recommended lowering the percentage to 25% or below.
The Cost To Own
Finding a car that runs you 35% of your gross income or less is a good start, but it doesn’t give you the full picture. Yang said the accurate cost to own a car comes in at a much higher number than just the monthly payments. Buyers will need to figure taxes, gas, insurance, repairs and the depreciation of their car’s value into the overall price.
According to Consumer Affairs, repairs and maintenance for the average car totaled $900 a year in 2024. Not taking these costs into account can be detrimental to your long-term financial health.
The Real Purchase Price
When you visit a car dealership, the salesperson may dangle a seemingly reasonable monthly payment in front of you to distract you from the total price of the vehicle. According to Yang, this is dangerous, and falling for it often means paying a lot more for your car than you need to.
He explained that buying a car costing $35,000 with a loan that has 5% interest will run you $600 a month over 60 months. Lowering the monthly payments even more may make the purchase feel more affordable, but they stretch out the duration of the loan and increase the amount of interest you’ll pay.
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