I'm working on a project about buying a new car. It says: A common bit of financial wisdom is that a car payment should be no more than 20% of your monthly take-home pay. Set up and solve an equation to determine how much you would need to be making in take-home pay each year to afford this car and still follow that bit of financial advice.

Question

I'm working on a project about buying a new car.  It says:  A common bit of financial wisdom is that a car payment should be no more than 20% of your monthly take-home pay.  Set up and solve an equation to determine how much you would need to be making in take-home pay each year to afford this car and still follow that bit of financial advice.

If my car payment is $288.02 monthly, does this work?

288.02 = 20% of monthly take home pay
20% = x
m = monthly payments

m/x = monthly take home pay * 12

288.02/.20 = 1440.10 * 12 = $17.281.20

Your yearly take home pay would have to be at least $17,281.20

Thank you

Reiny · Answer

correct