How Much to Spend to Buy a Car

The other day I was having dinner with one of my good friends and knowing that I'm into personal finance, he sought my advice about buying a car.

My friend, "Car Fanatic", has always been a big car enthusiast, in fact he's the only one I know who every month goes to a different car show. However, ever since I've know him he's always driven the crappiest car of the group. (Keep in mind I've known him since we were freshman in college -- so most college students, or at least the one's based in reality, drive crappy cars). Anyway he used to drive a 1981 Mitsubishi and then about two years ago when he graduated from college he upgraded to a 1992 Honda Civic. Well now "Car Fanatic" is looking to get a "real car" in his words and now that he's financially stable wanted my advice on what he could afford.

I know he was looking for something like "$20,000 max" or "no more than $250 a month" or any other solid dollar figure. I'm usually rather opinionated and am always willing to contribute my two cents and sometime even twenty-five cents, so "Car Fanatic" was taken back when I said that I really couldn't give him a firm answer and it really depends on him. He said no, Future Millionaire, seriously what can I pay a month for a car payment?

First off the idea that he has to finance it, doesn't sit well with me, especially since I know he paid cash for his other two cars. But none the less, I'm not one to judge (okay I take that back, I judge but tell myself I shouldn't). So the best advice I could give him was:
It really depends on how much you value a car and what you're willing to sacrifice for it, for example would you rather have a rockin' ride or be able to go to a nice dinner with friends every week? etc. In the mean time while you're figuring out how much you value a new car, you should start playing house by setting aside whatever amount of money you feel you can a) afford and b) would align with a car payment for your future car. And play house for several months (at least 4-6) to see if this is a realistic amount of money and on top of that when you go to buy your call you'll have a nice down payment already set aside.

On top of that I advised "Car Fanatic" to avoid at all costs going into a dealership when he was ready to buy a car with the attitude that he could only afford X amount of dollars per month as many times they will fluctuate the interest rate and length of load based on this information instead of dealing strictly in the lump sum price of a car. With an attitude of money per month the dealership can really end up having you pay more for a car than you were ever intending.

Well that's my 2 cents on buying a car, and my no means am I an expert car buyer so for your used I've listed several good car buying advice articles that may be of help:
Edmonds.com --- check out the real price of cars
Inside Car Buying Secrets
How Stuff Works : Buying a Car
Car Buying Tips