This is an interesting one, as it's really a personal point of view for anyone who has to consider it - there's no one-size-fits-all answer. For me, the key word is 'afford' - it sounds obvious but it really is down to what your individual perception is of what you can afford - for me it is what you are able
and prepared to spend. That is usually influenced by what you want and/or need the car to do for you.
For example, my wife's car was ruined in a collision earlier in the year so we had to replace it - it wasn't worth much so the insurance payout was negligible, meaning we might as well start from scratch - normally we'd work out the pros of changing the car versus the cons of keeping the existing car and spending the money elsewhere - it might be partly to maintain that car or to spend on other stuff completely unrelated to it.
Poor little bogey.
We needed a car that she was comfortable driving yet practical enough to do the donkey work (taking passengers, doing tip runs, weekly shop etc). We have (in my mind) a decent combined income and are on top of our overall outgoings, so we were able to buy brand new, but it just made no sense to us so we were not prepared to spend that much. We didn't need the perceived prestige of being owner-number-one on the log book, nor the dealership experience of choosing your own spec and driving off the forecourt, or the warranty/servicing packs - we also didn't want to absorb that level of depreciation, as it's money lost (and rarely recouped) as a result of all the nice stuff around buying new - I don't deny it'd be lovely, I've bought new before under different circumstances - this time we just needed a reliable, safe car that does all we needed it to, to be a weekend workhorse, nothing extravagant - and the less we spend on it, the more there is to spend on other nice stuff that takes priority over a 'nicer' car, like holidays and getting the house fixed up (as well as keeping that safety buffer for a rainy day).
In our case, we spent 3000 on a used but fairly good condition 55-plate Mk2 Focus. That was buying it with eyes open for 2500 and spending 500 for fixing any niggling issues/preventative maintenance (that was including cambelt, waterpump, service and 2 new Goodyears with tracking). A lot of people would see that as 'too much hassle', but it should now serve us for the next 5 years at least which should cover the first years of us raising a family - if it's worth zero at the end of that, I won't lose sleep over it - I'm prepared to lose that money, anything more than that 5 years trouble free service is a bonus. If I didn't have that much to spend, I'd have looked at my options - my Z4 is all luxury which is why if it had to go to buy the Focus, I'd have done it, if that wasn't enough I'd have bought something similar but older like a Mk1 Focus or a Mk4 Golf, if I after all that I couldn't buy a car I'd have been 'unable' to fund it, either I'd have to make a sacrifice (obtain the funds some other way) or go from being prepared to spend to not being prepared to spend (do without).
Donkey.
Oh and on the thing about used cars and trying to be hygienic, the Focus did smell like it was owned by a chain-smoker and the amount of crap that came out of the seats, carpets, headlining and hard surfaces was unreal. But after a mornings worth of cleaning it came up pretty fresh.
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