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Robin earns $46,000 per year and has current debt payments of $1,200 per month. she wants to buy a new car with desirable financing which will give her additional monthly debt payments of $435 provided that her debt payments are no more than 40 percent of her gross income. what will robin's debt payment to gross income ratio be if she buys the car?

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talkingturkey
Given:
Annual income: 46,000
Annual debt payment: 1,200/mo * 12 months = 14,400

debt payment to gross income ratio = debt payment / gross income

before the car:

debt payment to gross income ratio = 14,400 / 46,000 = 0.313 or 31.3%

40% debt payment to gross income ration → 46,000 x 40% = 18,400

w/ car loan: 1,200 + 435 = 1,635

Annual debt payment = 1,635 x 12 months = 19,620

debt payment to gross income ratio = 19,620 / 46,000 = 0.4265 or 42.65%

If Robin buys the car, she will have a debt payment to gross income ratio of 42.65%. 

Robin can only afford to pay an additional amount of 333.33 for car loan payment to still pass the 40% debt payment to gross income ratio requirement. 

18,400 - 14,400 = 4,000
4,000 / 12 mos = 333.33 per month

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