WHEN DOES A $1000 MONTHLY CAR PAYMENT MAKE SENSE?
FROM BALTIMORE WASHINGTON FINANCIAL ADVISORS
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Sandy Hornor | CEPS
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Tessa Hall
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About This Episode
Car payments are getting larger, and higher interest rates are forcing many buyers to rethink their decisions. In this episode, members of the BWFA team discuss when a car payment may make sense and how to evaluate financing decisions within a broader financial plan.
For more information, visit BWFA’s Financial Planning Services page.
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Car buying decisions have become more complicated as vehicle prices rise and interest rates remain elevated. In this episode of Healthy, Wealthy & Wise, BWFA advisors explore when a car payment makes financial sense and how borrowers should evaluate the true cost of financing a vehicle.
The conversation begins with a look at recent data showing that a growing share of buyers are paying $1,000 or more per month for a car. While that number can be alarming, the advisors explain that whether a payment is reasonable depends on several factors, including interest rates, loan terms, cash flow, and overall financial priorities.
They discuss the trade-off between borrowing at low interest rates versus paying cash, especially when investments may offer higher long-term returns. However, with auto loan rates now averaging in the mid-to-high six percent range, that math has changed for many buyers.
The advisors also highlight common mistakes, such as selling long-term investments to pay off a car or borrowing from retirement accounts to fund a purchase.
The discussion touches on newer tax rules that allow certain taxpayers to deduct a portion of auto loan interest.
Ultimately, this episode reinforces that car decisions should not be made in isolation. Evaluating financing options as part of a comprehensive financial plan can help buyers make choices that support both their lifestyle and long-term financial security.