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View Poll Results: %?
<15% 288 55.81%
16 - 30% 145 28.10%
31 - 50% 36 6.98%
51 - 75% 22 4.26%
ARE YOU KIDDING ME ? ALL OF IT ! 25 4.84%
Voters: 516. You may not vote on this poll

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Old 16th February 2009, 17:37   #46
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I spend <15% of my annual income in EMI,Insurance, Fuel, Maintenance of my car. I think i am just at tolerable limit as far as responsible spending on a car is concerned.
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Old 16th February 2009, 18:09   #47
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I know the poll is anonymous but I might as well confess...

I'm still at the early stages of my career (3+ yrs of W.EXP) but had bought a car (along with some help from family) in my first year itself. The EMI I was paying was (easily) more than 50% of my monthly income! (said car is a 2003 Ikon 1.6 nxt)

Now, since I am currently living with family and am unmarried, I didn't feel the pinch then. However, I did learn the lesson that spending these amounts DOES NOT help save money in the long run - money that is better spent on good (appreciating) investments or just stashed away for extended recession periods.

Don't get me wrong - I don't regret buying the car at all! But like some people have already said, as you grow older and your responsibilities (i.e. wife/kids/commitments) increase, the proportion of your income that you spend towards a car/other vehicles should decrease.

That's okay though, because hopefully you'll be making proportionately more anyway! I'd read somewhere that big wealth accumulators (i.e. the Gates' and Buffets of the world) have historically not spent more than 5-10% of their wealth on their vehicles. and 10% is max!

but I'm sure the people buying Lambos and Cayennes in India are pushing this limit
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Old 16th February 2009, 18:24   #48
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Well i agree with GTO completely over this thread.
However as i am not married and dont intend to soon enough and dont have any major liabilities i can spend more in getting a car then people who are married and have to run a family. Depends from person to person and their circumstances (also the passion for cars as well)
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Old 16th February 2009, 18:56   #49
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Quote:
Originally Posted by A.R View Post
OT: This rings up another Qn in my mind. At what age should a person plan to buy/build a home? What Home depends on other factors so leaving it untouched. Shud I start a new thread for it or does one exist already?
I'd say as soon as your income reaches a level where you can service the loan after taking care of other expenses such as living, kid's education, transport etc.

I took a loan in 2002 - at the time it seemed like a lot and one had to tighten the waist to service it. But as the years progressed, income increased, and the loan seemed like less and less of a burden. Now I'm close to finishing it off - ahead of time.

One rider here though - I was lucky to buy a house at a time when property prices were sane and to take a fixed rate loan. If I had a floating rate I wouldn't be in the same position - in fact all I would have done this entire period is pay back increasing amounts of interest. Seeing how my friends have suffered because of this, I have become extremely high-interest rate averse. I now plan my big ticket purchases be it a car or house upgrade only when rates are low.

Such a sweet spot is approaching again. Property prices and rates are falling. If you have the income I would say bite the bullet in the latter half of this year.
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Old 16th February 2009, 21:54   #50
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I completely misunderstood the question. I thought "what %age of annual income would you spend to buy a car" means say your annual income is 8 lacs per annum and say honda city is 8lacs then you are spending 100% of your annual income on the car.

I just hate taking loans, not sure why, may its in my psyche that If I lose my job or something what do I do and in any case hate to pay the extra money by way of interest.
Hence I did something totally crazy or totally brilliant depends on how you look at it.

I bought the Indica Vista TDI on road cost 4.6 lacs in Bangalore.

I had about 2.5 lacs of liquid cash and needed to 2.1 more lacs. I had 2 obvious options that most people have
1)Break existing FD/mutual funds
2)Take a loan

I didnt want to break my existing FD at it was with SBI 1000 day 10.5%, wont be getting those rates for long long long time so didnt break it. Breaking mutuals at these levels of the market would be like taking an axe and cutting your leg.
As I hated taking loans didnt go for option 2 as well.

So what did I do? I swiped 2.1 lacs on my Credit card
And got the entire amount interest free.
Want to know how?
If you make a transaction just after the billing cycle you get an interest free period of about 1.5 months.
I put my 2 months entire salary on to pay off the 1.5 lacs and then did a balance transfer of the remaining amount to another credit card and then payed that also next month and hence got the loan interest free for 3 months
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Old 16th February 2009, 22:22   #51
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I used to spend upto 50% of my income before on my car. Now:

1. With me having aged - rather ungracefully, unlike wine
2. The proverbial "No time to scratch (anything)" not being a proverb
3. The silliness of having anything more than a beat-up old rick to drive in the even sillier city traffic/road conditions



, the current expenditure on my car is only running costs and maintenance. Thats <15% - option 1 in the poll.
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Old 17th February 2009, 09:33   #52
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Quote:
Originally Posted by revhappy View Post
did a balance transfer of the remaining amount to another credit card and then payed that also next month and hence got the loan interest free for 3 months
Did balance transfer require some kind of initial fees ?
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Old 17th February 2009, 11:04   #53
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Quote:
Originally Posted by GTO View Post
NOTE : The poll is NOT public, only to protect those who wish to maintain their privacy.

I FIRMLY believe that your car /s should NOT take anymore than 10 - 12% of your monthly $$$ (the lesser the better). I know for a fact that there's a lot of BHPians way over this comfortable zone, but most of them are younger / students (pocket money) or are in the initial stages of their career. I hope better sense prevails once they grow a little older and have a higher set of responsibilities on their shoulders. We need to understand that a cars costing is not made up of the EMI alone - a popular way of thinking today- they need to visit our cost of ownership article (ARTICLE: The real cost of car ownership) to clearly understand the financial outflow associated with ownership.

I'd rather drive around in a car thats less expensive, personalize it a li't bit, have money in the bank / savings / investments and sleep with that peace-of-the-mind than drive a more expensive car & worry about the next EMI / other large payments. An example : I know of a certain 36 year old who spends about 1/2 of her income on her flashy new German car. When I bump into her at a social gathering, I see her as more of an outright fool than someone of a certain "status" (which she'd hoped).

Related comment : SAVE atleast 40% of what you make. Life will show you more than a single rainy day. Plus, this way, by the time you are in your mid-forties, you'll have a lot of money working for you (interest, dividends etc.).

Related comment II : If you really want that better car, work harder / smarter!! Trust me, it works.
But doesn't that depend on the amount of disposable income you have? If 50% of your income every month is disposable and you want to use it to payoff your EMI isn't that good. After all the more the emi, the shorter the duration, the lower the amount you spend by way of interest.




Quote:
Originally Posted by NetfreakBombay View Post
Did balance transfer require some kind of initial fees ?
It was Rs 99 fixed as processing fee by Stan Chart and .99% interest rate for 6 months, but if you pay off in the 1st month then no interest

Last edited by revhappy : 17th February 2009 at 11:06.
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Old 17th February 2009, 11:08   #54
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Quote:
Originally Posted by revhappy View Post
But doesn't that depend on the amount of disposable income you have? If 50% of your income every month is disposable and you want to use it to payoff your EMI isn't that good. After all the more the emi, the shorter the duration, the lower the amount you spend by way of interest.
If you had bought a cheaper car, you could pay a lower EMI & have the same
shorter duration - so that would have been even better, isn't it?
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Old 17th February 2009, 13:00   #55
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In my opinion - use cash to buy a car...
Cars/Vehicles are depreciating assets, why would one want to accelerate the effective depreciation???

I bought my first car (A second hand astra for 1.6 L) with my savings from my first overseas trip.

Second one (Swift DDIS) was bought after using my first car for almost 5 years... and that too after saving leftovers from my salary after expenses & investments...

Buying a car is still an important milestone for an average Indian, and I am really hurt when people buy a bigger car than what is required and affordable and that too after getting it financed...

Quote:
Originally Posted by revhappy View Post
I

So what did I do? I swiped 2.1 lacs on my Credit card
I'm sure that you'd have got handsome reward points on your credit card...
Sic my dealer did not accept credit cards

Note from the Team-BHP Support Staff : Please use the "edit" button if posting within 15 minutes of the first post, instead of creating another back-to-back post

Also use "Multi Quote" option for quoting Multiple posts.

Last edited by Technocrat : 17th February 2009 at 13:08. Reason: see note in post
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Old 17th February 2009, 13:10   #56
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Revhappy - Paying your EMIs early is good even if it means spending more than 50% of your salary for a year or so to pay off your loans. It is total waste of money down the drain with the current interest rate of around 13-14% on car loans. Not worth it.

Sonirohit - I totally agree with you, car is a fast depreciating asset. Buy only what one can afford and if possible avoid taking loan. You did an excellent job at it.
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Old 17th February 2009, 14:30   #57
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Well in Youth (school and college) almost 80% to 90% of pocket money used to go in for petrol of bike.

Then when I bought a second hand 800 in early business days it was almost 60% of my annual income. (I didn't wanted to buy a new car with that much down paymnt and knot myself with an EMI, instead did full down payment for second hand 800 and I now know that was the best decision.)

Then in few years I bought New Ikon (EMI <15% of income) when I could buy Civic or Corolla with a higher EMI, but that wouldn't have matched my status and age, and as my income (and age) was growing there were other things in priority (like GTO has mentioned: investments, savings, insurance, new home etc).

Now at a reasonable stage of my life (Mid 30s), with all other things first taken care of I buy Altis (Emi <10%). Along with that I have equally supportive house, lifestyle, maturity level and Social circle.

At each stage of my life the % has changed, in fact lowered down. But it all boils to the point GTO has mentioned. My income has increased, not only direct but indirect too (from investments and savings). Next I dream to buy BMW 5 series, but that will happen when my rental income grows to double or 3 times its EMI.

I strongly believe you should have dreams and targets for your favorite car. But you need to upscale your whole lifestyle and your income standards so that it becomes very much in ease to buy.

Specially in young age. Early stages of career are best to take maximum risks, switch jobs or switch business, keep your mind free and keep free from any burden of EMI or any other fixed expenses. That way you climb high faster. But suppose you buy your dream car as soon as you get first job and tie yourself in huge EMIs you will be the the last one to take risk (Low risk low rewards) and might lose some big opportunity to climb.

So moral: dream for big cars, set targets for cars which are out of your budget but buy those cars which are well under your budget.

Last edited by Ym-enjn : 17th February 2009 at 14:43.
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Old 17th February 2009, 15:04   #58
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Quote:
Originally Posted by d3mon View Post
I think I didn't frame the question correctly. What I meant was how much of a percentage of your annual income should be the price of your car.
For both the cars it was about 75% of my gross annual income.
Voted as per this logic, as I guess that's what you were looking for.

Quote:
Originally Posted by d3mon View Post
But as it turns out, i guess, monthly expenses are what really matter and they should be kept at a minimum.
No EMI, so monthly average running cost is <10% monthly gross income
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Old 17th February 2009, 19:10   #59
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Default How do we define income?

A few questions:

1. Income = Net income (Excl taxes) or gross income?
2. Income = Monthly income or annual income (because for the salaried class the annual income can include bonuses that can be substantial)

My two-paise regarding loan vs downpayment:

If you can structure the loan as a tax deductible expense, it does not make sense to pay the entire amount upfront. Certain companies offer lease schemes and other freebies (insurance and / or registration will be borne by company). In certain situations the following equation might hold true:

(Sum of EMIs) Less (Tax shield due to company lease) Add (Bullet payment at end of lease period to buy the car) < Price of car

There is a thread on leasing of cars.. please go through that. It might just change the way you buy your car.

However, I would not look at this is as a license to splurge. A good idea would be to keep the entire value of the car as an investment that is put to "more" productive use and is also an insurance against job loss in these turbulent times.
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Old 17th February 2009, 20:58   #60
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Quote:
Originally Posted by revhappy View Post
But doesn't that depend on the amount of disposable income you have? If 50% of your income every month is disposable and you want to use it to payoff your EMI isn't that good.
Not good? Avoid it like a plague. One bad recession, job layoff or black spell over your business.....there goes your disposable income!

P.S. : I am absolutely thrilled to see 57% of this community (the current poll results) spend 15% or less of their income on cars. Well done!

Last edited by GTO : 17th February 2009 at 21:03.
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