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As a personal finance guy, I find two things to dislike about trends in car payments. One is the increasing preference for car loans with terms of eight years or more. The other is the average amount of the payments people are taking on.

A U.S. financial planner named Jeff Rose comes down hard on car payments in a recent article he wrote for Forbes. “These days, we blame everything but our car payments for our inability to get ahead,” he writes.

Mr. Rose quotes U.S. figures showing the average monthly car payment is US$523. The analytics firm J.D. Power says the average car loan payment in Canada is closer to $630. Can’t find money to save for retirement? How about buying a cheaper car and directing some of your car payment budget to savings?

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The frugalistas of personal finance would tell you to buy a used vehicle, or to find a cheap, reliable new vehicle and drive it until it disintegrates. I’m not so militant. Here’s a picture of the odometer on one of our family cars as it approached the 200,000-kilometre mark. Driving a car that long is a first for us.

The odometer on Rob Carrick's car as it approached the 200,000-kilometre mark.

Buying a new car often means getting better fuel economy, better safety features and spending less on maintenance. But based on your household budget, there should be limits on your car spending. Here are a few thoughts:

  1. One car debt at a time: Try to avoid being a two-car-payment family if possible.
  2. Maximum loan term: Five years used to be the longest you could stretch out a car loan – that’s a good rule for today as well.
  3. Maximum payment: Every family’s different on this, but a good rule is to take on a car payment that doesn’t crimp your ability to put money away for retirement and your children’s post-secondary education.

Subscribe to Carrick on Money

Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.

Looking Ahead: The Retirementality

That’s the name of my new podcast on retirement, which you can listen to here or download on iTunes or Spotify. There are three episodes, one aimed at millennials, one at Gen X and one at baby boomers.

Rob’s personal finance reading list…

CRA targets abuses of TFSAs, RRSPs

The Canada Revenue Agency has issued guidelines about aggressive financial planning and investing strategies that magnify the tax savings from tax-free savings accounts and registered retirement savings plans.

Yes to the marriage proposal, no to the engagement ring

A blogger’s take on why she didn’t want the expensive engagement ring her fiancé bought. “Call us the most millennial couple ever, but we really do value experiences over things.”

How to use leftover greens before they spoil

Wasted food is wasted money. Plus, slimy spinach or lettuce is gross.

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Why seniors should have more money in bonds

This is a U.S. commentary attuned to that country’s retirement system, but I’m including it here because of an interesting and contrarian stance questioning the idea of holding dividend stocks instead of bonds in a retirement portfolio.

Today’s financial tool

The Boomer Club is a new blog for sharing ideas about retirement, investing, health and more.

Ask Rob

Q: I am invested primarily in ETFs. In the current climate, would I do well to get out of Canadian dividend ETFs and into international dividend ETFs?

A: Moves like this amount to market timing, which means running your portfolio based on guesses about what’s coming in financial markets. A better approach – it’s also easier to live with – is to figure out how much of your portfolio should be allocated to the Canadian, U.S. and international markets and then stick with that mix. This is diversification – it gives you exposure to all regions, but limits your risk when one underperforms.

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.

In case you missed these Globe and Mail personal finance-related stories

  • The fuse has been lit on Canada’s debt bomb
  • A dozen tax tips for the fourth quarter
  • Don’t try picking superstar stocks – you’ll fail (for Globe Unlimited subscribers)

More Carrick and money coverage

For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group. Send us an e-mail to let us know what you think of my newsletter. Want to subscribe? Click here to sign up.

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