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<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%
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Old 8th August 2011, 15:49   #91
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Default Re: How much should you spend on a car?

Folks,

We are in an inflationary ecomony. With cost of living going up day by day and the Salary raise not matching to the increasing cost of living we would be getting into a debt trap if we try buying a liability (Read Car) which is worth more than 1/3rd your annual gross salary.

Rationale -
Cost of car - 33% of your gross salary = 50% of your net annual salary (Assuming 30% tax bracket). assuming 5 year tennure and 20% of net salary will be the salvage value for the car after 5 years. Annual outflow of capital for the car = 6% of net annual salary
yearly interest on the capital - 6-7% of your annual net salary (Assumption is loan interest will be 12-14% on the capital).
Fuel - this again depends on the miles you travel. typically this is 5-10% of your annual net salary
maintenance including insurance/repairs/tyre changes etc - 2-3% of your annual net salary.
Total expenses per year on the car - 20% -25% of your net annual salary.

With home loan, education loan investments etc. I do not want to spend more than 1/4th or 1/5th of my annual net salary on my car.
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Old 8th August 2011, 16:00   #92
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Default Re: How much should you spend on a car?

Quote:
Originally Posted by saraf_suman View Post
I am in a big dilemma looking for a new car and would appreciate any advice.

There is a fundamental tension between my impulsive brain and my rational brain. The impulsive brain says go buy that 30L car. I can actually afford it with a reasonable down-payment and an EMI which will not cause me grief. But the rational brain says NO. It says 1L on Insurance, 30K on service and god knows how much in case the car is damaged in an accident is not worth it. Buy a cheaper (but still good quality) car which you can drive in peace. With a 30L+ car you have greatly increased chances of hypertension, especially when driving in Gurgaon.

So here is my question- Is there an objective measure of how much you should spend on a car? As a percentage of net worth or annual salary or savings etc? What would a financially prudent person do?

Thanks
Suman
What car do you own currently?
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Old 8th August 2011, 16:03   #93
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Default Re: How much should you spend on a car?

Suman, what is on your list?
what spec do you need?
which is your "my car maker"?
Saying that you can buy a 30 lac car is sort of like asking for 13ft of car.

There will be conflicting views as to how much you should spend on a car.
A lot of us are governed more by what we want, rather than what we can afford.
Vice-versa, youll find a lot of others.
Some of us, if possible would be more than willing to shell out 2 years of income for the car, some may go the other route.

A few people have bought with the heart, and later the head(pocket, rather) has given some lessons in life, and economics...

which one are you?

Last edited by mayankk : 8th August 2011 at 16:05. Reason: attempt at removing irrelevance
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Old 8th August 2011, 16:03   #94
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Default Re: How much should you spend on a car?

My thumb rule is that the OTR price of the vehicle should be equal to half your annual (pre-tax) income, with some variations. So I guess:

<5 lac pa: No car or Nano or used small hatch (upto 2.5 lac budget)
5-10 lac pa: New Alto/small hatch/used small sedan (upto 6 lac budget)
10-15 lac pa: New small sedan (Etios/Dzire) or used C-sedan (Fiesta, Verna, SX4 etc) or slightly used local SUV (Safari, Scorpio) (upto 8 lakh budget)
15-20 lac pa: New C-sedan or local SUV ( Upto 11 lac budget)
20-25 lac pa: New C+/ used D-sedan (Upto 14 lac budget)
25-30 lac pa: New premium SUV or D-sedan (Upto 17 lac budget)
30-50 lac pa: New D-sedan/ used luxe sedan (Upto 30 lac budget)

In my humble opinion, an income of 50lac+ only warrants a luxury car over 30 lac OTR. This is because luxury cars have their own set of issues to grapple (image you want to convey, will it stand out like a sore thumb where I live, do I have secure parking, do I want to spend on A.S.S etc. etc.)

No offence meant o anyone, this is just my opinion based on my personal experience. For the record I am highly risk averse as well!

Last edited by noopster : 8th August 2011 at 16:04.
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Old 8th August 2011, 16:13   #95
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Default Re: How much should you spend on a car?

^Noop: That was very well put. Shall give the buyer a precise idea as to what he should be looking at, with some exceptions of course. But all in all, a steady guide while buying a car.

@Suman: So what are the cars you are looking at? C segment or D?
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Old 8th August 2011, 16:25   #96
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Default Re: How much should you spend on a car?

Quote:
Originally Posted by noopster View Post
My thumb rule is that the OTR price of the vehicle should be equal to half your annual (pre-tax) income, with some variations. So I guess:

<5 lac pa: No car or Nano or used small hatch (upto 2.5 lac budget)
5-10 lac pa: New Alto/small hatch/used small sedan (upto 6 lac budget)
10-15 lac pa: New small sedan (Etios/Dzire) or used C-sedan (Fiesta, Verna, SX4 etc) or slightly used local SUV (Safari, Scorpio) (upto 8 lakh budget)
15-20 lac pa: New C-sedan or local SUV ( Upto 11 lac budget)
20-25 lac pa: New C+/ used D-sedan (Upto 14 lac budget)
25-30 lac pa: New premium SUV or D-sedan (Upto 17 lac budget)
30-50 lac pa: New D-sedan/ used luxe sedan (Upto 30 lac budget)

In my humble opinion, an income of 50lac+ only warrants a luxury car over 30 lac OTR. This is because luxury cars have their own set of issues to grapple (image you want to convey, will it stand out like a sore thumb where I live, do I have secure parking, do I want to spend on A.S.S etc. etc.)

No offence meant o anyone, this is just my opinion based on my personal experience. For the record I am highly risk averse as well!
Well, you seems closest to my calculations than anybody else I have seen on the forum. Give or take a few. I am probably slightly more adventurous but roughly in the same ball park. For e.g. I may completely skip the D segmenter (Accord/Superb) type cars and straightaway go for the 'holy trinity', when the time comes. Coz I think at that stage, prestige becomes very important. To me 'Accord is Honda'.

But, well put out. I mostly agree.
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Old 8th August 2011, 18:05   #97
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Default Re: How much should you spend on a car?

Quote:
Originally Posted by noopster View Post
<5 lac pa: No car or Nano or used small hatch (upto 2.5 lac budget)
5-10 lac pa: New Alto/small hatch/used small sedan (upto 6 lac budget)
10-15 lac pa: New small sedan (Etios/Dzire) or used C-sedan (Fiesta, Verna, SX4 etc) or slightly used local SUV (Safari, Scorpio) (upto 8 lakh budget)
15-20 lac pa: New C-sedan or local SUV ( Upto 11 lac budget)
20-25 lac pa: New C+/ used D-sedan (Upto 14 lac budget)
25-30 lac pa: New premium SUV or D-sedan (Upto 17 lac budget)
30-50 lac pa: New D-sedan/ used luxe sedan (Upto 30 lac budget)
Hi Noopster,

Thanks for categorizing like this. In my personal opinion, I think the slabs are a bit on the higher side. Going by the pattern in my area, including my family, a person can start owning a car when his income reaches ~2.5-3 lacs.
3-6 lacs: New Alto/small hatch/used small sedan (upto 6 lac budget)
6-9 lacs: New small sedan (Etios/Dzire) or used C-sedan (Fiesta, Verna, SX4 etc) or slightly used local SUV (Safari, Scorpio) (upto 8 lakh budget)
9-12 lacs: New C-sedan or local SUV ( Upto 11 lac budget)
12-~18 lac: New C+/ used D-sedan (Upto 14 lac budget)
~18-~28 lac: New premium SUV or D-sedan (Upto 17 lac budget)
~28 - ~50 lac: New D-sedan/ used luxe sedan (Upto 30 lac budget)

How about this? Of course, after 5 years, I'm sure other expenses(including fuel) will shoot up, and owning a car will require the slabs you mentioned.
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Old 8th August 2011, 18:43   #98
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Default Re: How much should you spend on a car?

Quote:
Originally Posted by noopster View Post
My thumb rule is that the OTR price of the vehicle should be equal to half your annual (pre-tax) income, with some variations. So I guess:

<5 lac pa: No car or Nano or used small hatch (upto 2.5 lac budget)
5-10 lac pa: New Alto/small hatch/used small sedan (upto 6 lac budget)
10-15 lac pa: New small sedan (Etios/Dzire) or used C-sedan (Fiesta, Verna, SX4 etc) or slightly used local SUV (Safari, Scorpio) (upto 8 lakh budget)
15-20 lac pa: New C-sedan or local SUV ( Upto 11 lac budget)
20-25 lac pa: New C+/ used D-sedan (Upto 14 lac budget)
25-30 lac pa: New premium SUV or D-sedan (Upto 17 lac budget)
30-50 lac pa: New D-sedan/ used luxe sedan (Upto 30 lac budget)


!
Quote:
Originally Posted by dhanushs View Post
Hi Noopster,

Thanks for categorizing like this. In my personal opinion, I think the slabs are a bit on the higher side. Going by the pattern in my area, including my family, a person can start owning a car when his income reaches ~2.5-3 lacs.
3-6 lacs: New Alto/small hatch/used small sedan (upto 6 lac budget)
6-9 lacs: New small sedan (Etios/Dzire) or used C-sedan (Fiesta, Verna, SX4 etc) or slightly used local SUV (Safari, Scorpio) (upto 8 lakh budget)
9-12 lacs: New C-sedan or local SUV ( Upto 11 lac budget)
12-~18 lac: New C+/ used D-sedan (Upto 14 lac budget)
~18-~28 lac: New premium SUV or D-sedan (Upto 17 lac budget)
~28 - ~50 lac: New D-sedan/ used luxe sedan (Upto 30 lac budget)

How about this? Of course, after 5 years, I'm sure other expenses(including fuel) will shoot up, and owning a car will require the slabs you mentioned.
Hi Noop,

I believe that yours is the best suited to a "costly" city (read b'lore)for a married person whereas dhanushs is more suited for a comparitively "cheaper" city(read kolkata) for a bachelor
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Old 8th August 2011, 19:58   #99
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Default Re: How much should you spend on a car?

Another factor to be considered is how long you will keep the car?
If one believes in having a "latest" car and would like to change the car every 3 years, IMO it makes sense to buy a car slightly cheaper than one can afford . As long as you remain happy with the car for the next 3 years. That way the depreciation at the time of selling the car will hurt less.

On the other hand if its a purchase with long term ownership in mind or a dream car, please stretch and buy because that car will be with you for a some time.

Just my 2 cents..
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Old 8th August 2011, 20:02   #100
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Default Re: How much should you spend on a car?

Quote:
Originally Posted by noopster View Post
My thumb rule is that the OTR price of the vehicle should be equal to half your annual (pre-tax) income, with some variations.
Well summarized but that does not take care of a few points. Like Tax, expenditure etc.

My idea is:
To play safe you can buy a car which is equivalent to your 6 months savings.
If you are too much enthusiastic about cars (Which you should be if you are on Team-BHP) and don't have too much responsibilities in future you can stretch it to 12 months savings.

So basically if you can save 20K per month (2.4L) - Used alto/wagonr/santro.
30K / month (3.6L) - Alto, Astar, Wagonr, Spark, Santro.
40K /month - (4.8) - I10, Swift, Ritz, Beat, Figo.
50K / month - (6L) - I20/Polo
70K / month - (8.4L) -Fiesta Classic, Etios, Manza, Verito, Jazz.
1L / month - (12L)- SX4, Verna, Vento, Linea, New Fiesta.
1.5L / month - (18L) - Civic, Laura, Yeti, Corolla, Fluence, Jetta.
2L / month - (24L) - Superb, Passart, Accord, Camry, Fortuner.
3L/ months - BMW/Marc/Audi

And yes you can increase your budget by 1L incase you are going for a diesel.
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Old 8th August 2011, 21:06   #101
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Default Re: Vitamin M - What percent of your annual income do you spend on your car?

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.
@ GTO : - I know this is very old post written by you, but i must admire you that you always write very good comments. They are really worth a lot and ones should follow. You are a gifted person as a good adviser. Your advises are really good & i really appreciate you for that Keep it up.

Anyways, i am also of your opinion that one should not spend more money on car. After all its your need but minimizing that is best thing one can do. No point in putting your 40-50 % hard earned money in that. After all car is a liability & one should not forget that this is what i think
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Old 8th August 2011, 21:06   #102
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Default Re: How much should you spend on a car?

Quote:
Originally Posted by oxyzen View Post
3L/ months - BMW/Marc/Audi
BMW on 3L/ Month? God, then many members of this forum should be driving Ferraris and Astons, considering an Italia or Rapide goes for around 250L whereas a base BMW goes at Rs 25L!

My idea on spending money on a car is that if I am able to make at least 50% more than last year's income, I spend around 10% of that incremental income on cars, watches, mobiles and holidays! And an equal amount of money I spend on such luxuries and non- essentials for charity.

Last edited by Yeldo : 8th August 2011 at 21:08.
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Old 8th August 2011, 21:08   #103
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Default Re: Vitamin M - What percent of your annual income do you spend on your car?

Many BHPians have mentioned that one should not buy a car on a loan, specially if you are salaried person. I think one needs to see the opportunity cost of his capital. If you can get a greater return on your investments than you car loan, there is no reason why one should not go for a loan, else have the maximum cash payment. Being highly leveraged can be quite useful too.
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Old 8th August 2011, 21:34   #104
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Default Re: How much should you spend on a car?

Quote:
Originally Posted by Yeldo View Post
BMW on 3L/ Month? God, then many members of this forum should be driving Ferraris and Astons, considering an Italia or Rapide goes for around 250L whereas a base BMW goes at Rs 25L!

My idea on spending money on a car is that if I am able to make at least 50% more than last year's income, I spend around 10% of that incremental income on cars, watches, mobiles and holidays! And an equal amount of money I spend on such luxuries and non- essentials for charity.
Considering you earn Rs100/year. And assuming your increment is 50%. Now 10% of this increment is Rs5. And you are earning Rs 150.
That means you are spending 3.3% for luxury. Now that to me is insane unless I had deciphered it all wrong.

NOTE: I am not considering EMI.
It is just a relationship btwn on road price and savings.
I am willing to buy a car with 1year of complete savings and then stick to it for at-least 7-8 years.

Last edited by oxyzen : 8th August 2011 at 21:50.
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Old 8th August 2011, 21:54   #105
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Default Re: How much should you spend on a car?

Quote:
Originally Posted by oxyzen View Post
Considering you earn Rs100/year. And assuming your increment is 50% more. Now 10% of this increment is Rs5. And you are earning Rs 150.
That means you are spending 3.3% for luxury. Now that to me is insane unless it had deciphered it all wrong.

NOTE: I am not considering EMI.
Maybe

Sir, suppose you earn Rs 100L a month/ 1200L PA on personal & company heads. Next year, you earn 150L, that is 1800L a year. So, 10% of the 600L = 60L - is that not enough for you to splurge on a car, which BTW, is another abyss where money disappears: a new car always brings with it celebrations, and pleasure trips in the first 2 - 3 months, and further depreciation down the lane.

Now consider this: with the surge in bullion prices and interest rates, and the rot in property values and the available opportunities in the stock market, aren't there many ways to invest your additional windfall of 600 - 60 = 540L elsewhere than in BMWs and Omegas and Vertus?

Am I making this a business discussion which is by default irrelevant on an auto forum, or am I being simply stupid?
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