How to Manage a Car Allowance
Dave gives Bob three things to look for in choosing a car with the $500 monthly car allowance from his employer.
ANSWER: What most people do is take on a car payment equal to their car allowance. You’re going to be putting a lot of miles on this car and the value is going to drop significantly. What you need to do is limit the overhead because whether you buy a $50,000 car or a $5,000 car, it’s not going to be worth anything by the time you’re done with it.
You need to buy the least amount of car to get the job done. That means:
- It has a reasonable level of credibility. You can’t drive up to sales appointments in a beater.
- It has a reasonable level of comfort. You can’t drive a $1,000 car and spend the rest of your time in the chiropractor’s office.
- It has a reasonable level of reliability.