LendingTree, the online lending exchange, just announced that among used cars, Buick, Chrysler and Nissan are the ones on which consumers tend to overspend. Consumers are just as likely to get in over their heads when buying used as they are when buying new. New or used, cars are a significant chunk of most owners’ budgets. But, used is clearly a different world from new in terms of why. There are plenty of good reasons for shopping used rather than new; a big one, typically, is that used cars are more affordable than new.
Affordable, however, is relative to the buyer. It’s just as easy to spend too much on a used car as on a new one. It’s no surprise that Autotrader believes overspending on either makes no sense. It’s easy to get caught up in the moment and justify a bigger monthly payment than our budget really allows and then suffer the consequences of that poor bit of decision-making for years to come.
Here’s the thing. According to recently released research from LendingTree on which brands used-car buyers are stretching their budgets to buy, the top nine are more mainstream than luxury. How can that be? Simple: No matter the brand or transaction price, it’s possible to commit a bigger chunk of your monthly budget than you can afford to a vehicle payment.
Lending Tree’s Methodology
Using 2017 data from its auto-loan marketplace, LendingTree analyzed average monthly payments (AMP), including the borrowed amount, loan term and interest rate, for each brand against the monthly income of the borrower. Purchasers using the LendingTree platform, who didn’t supply income amounts, were excluded, as were brands with too few sales.
Research bears out that rather than stretching their monthly budgets to buy luxury cars, most overspending consumers do so on mainstream brands. Of the top nine budget-stretching brands, only Buick is considered a premium carmaker. The first true luxury brand appears at number 10: Cadillac. Of the nonluxury brands, Subaru ($361 AMP and 7.2 percent) and Mini ($355 AMP and 5.7 percent) are the least likely to inspire overspending.
Here are the top 10 brands of used cars for pushing the budget envelop with their AMP and the percentage the monthly payment takes out of owners’ budgets before fuel, maintenance, insurance and so forth. LendingTree advises that 10 percent should be the max.
Buick $418 AMP 10.9 percent
Chrysler $440 AMP 10.9 percent
Nissan $405 AMP 10.6 percent
Dodge $454 AMP 10.6 percent
Chevrolet $437 AMP 10.2 percent
Kia $368 AMP 9.7 percent
Honda $356 AMP 9.4 percent
Hyundai $356 AMP 9.3 percent
Mitsubishi $370 AMP 9.0 percent
Cadillac $480 AMP 8.8 percent
Just as surprising, Porsche and Tesla are the two brands of used cars that their buyers can best afford. With an AMP of $635, average Porsche owners are committing just 5.6 percent of their monthly budget to a car payment; Tesla buyers, with an AMP of $818, are even more responsible at 4.6 percent.
What it means to you: Whether buying new or used, stay within your budget. LendingTree suggests following the 20/4/10 rule: 20 percent down payment, finance for four years and keep transportation costs below 10 percent of your monthly income.