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Old 29th March 2013, 19:18   #241
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Default Re: What Car @ What Salary ?

This rule is what I think makes the most sense if you want to have your car without messing with your financial standing.

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Buy a car that is worth 6months of your salary
If you make less than 4lakhs p.a, I'd suggest you hold your car dream until you start making more like 4.8-5L. Suppose you've saved 2.5L from your 5L salary, you can buy a car that's available for 2.5L in the market. That basically rules out all cars except the Nano and the very basic Alto if new. However, it really opens up choices if you start looking for used.

This advice is only for people who like playing on the safe side of finances, and do not mind driving a low-budget or a used car.
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Old 29th March 2013, 19:26   #242
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Originally Posted by CrAzY dRiVeR View Post
Weird thread!

My EMI comes to almost 33% of my salary. My EMI + fuel expense comes to almost 50% of my salary.

Do i repent? No way - Everyday after parking the car - i stand and admire her beauty, everytime i drive it - i realize I'm alive and young! I know i wont be able to save anything till the loan repayment is completed - but then - there is more to life than just sitting in front of a computer and working 10- 12 hours just to make money!
Well. I agree that there is more life than sitting in front of the computer. But by the time you finish paying for this car, it will be time to change & buy new one. With new loan. Please do not fall into that trap. Happy motoring!
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Old 29th March 2013, 23:06   #243
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I would like to quote a famous saying-You only live once. So in a forum like team bhp go for that car that your heart desires. Wait for few months or a year and then go for the kill.
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Old 30th March 2013, 02:24   #244
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Default Re: What Car @ What Salary ?

This is indeed becoming one interesting thread on T-BHP apart from supercars and imports, and the T-BHP meet threads.

If I look back, I paid only about 10% of my income as EMI for my first car, and that's why I bought a Chevy Spark, when I could have easily bought an entry level sedan like Accent at that point.

But, when it comes to higher segment cars, you can't apply that golden rule unfortunately, and I couldn't do that when I later bought Cedia, and then finally the s80.

But let me tell you something - you CAN'T go by percentages here. Consider that a person earns 1.5 Lakhs per month, and he pays an EMI of around 48-49k for say a Merc C Class or BMW 320d then he's essentially paying 33% of his income towards EMI; however, in reality he still has good 1Lakh+ to spend on other things. And, that I reckon, is more than enough to take care of most of the other expenses! (assuming he's NOT coughing out like 70k on a home-loan EMI of course)

And, thirdly if you're married you can count the total income in your calculation, and not just yours.

Lastly, if you were to follow these rules, you'd probably have to wait until you're like 40 years old to buy a 5-series or higher, and probably by then, your enthusiasm would be dead, your priorities in life would have changed, and you'd be worried about kid's education, marriage etc, and planning for retirement.

I'd have to wait for another 5-6 years to save enough money to pay for s80 in cash, but would I really want to shell out that kind of money on a car, and bring down my bank balance to 10-20% of its value before purchasing the car? Nah - at least, not me!!!

So, if you've got your retirement planned, decent savings in bank, and everything else figured in life, I don't see anything wrong in even paying 50% of your total earnings towards car EMI, if you're really an automotive freak!

But, of course, key is to have at least 12 months of savings in your bank to handle the emergencies in life!

Last edited by OmThoke : 30th March 2013 at 02:26.
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Old 30th March 2013, 10:05   #245
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Default Re: What Car @ What Salary ?

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Originally Posted by OmThoke View Post
But let me tell you something - you CAN'T go by percentages here. Consider that a person earns 1.5 Lakhs per month, and he pays an EMI of around 48-49k for say a Merc C Class or BMW 320d then he's essentially paying 33% of his income towards EMI; however, in reality he still has good 1Lakh+ to spend on other things. And, that I reckon, is more than enough to take care of most of the other expenses! (assuming he's NOT coughing out like 70k on a home-loan EMI of course)
Interesting way of looking at things but I guess when you are earning in that bracket, you are really neither here nor there. You are not middle class so your lifestyle expectations have increased, but you are not upper classs so you cannot actually afford those expectations!!
Upper middle class might be a way to describe the income range between 1L to 2.5L.
I say this because in this range, housing and retirement savings eat up most of your income, because:
a. Housing costs have increased tremendously in metros
b. No pension so retirement planning has to begin by age 30.

So this income range is not really enough for buying a BMW, especially since the maintenance costs after 4 years will kill you.

Actually what I would prefer the best is to identify a car which costs 6 months of income and then buy it preowned.

Last edited by abeerbagul : 30th March 2013 at 10:07.
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Old 30th March 2013, 10:44   #246
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Default Re: What Car @ What Salary ?

Even before I started earning, I made up my mind to buy a car, which would be approximately equal to my yearly CTC. And change of car would be only when the current car bores me out to the core. I did that with the first car, and the car still is keeping me very interested
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Old 30th March 2013, 12:55   #247
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Originally Posted by OmThoke View Post
And, thirdly if you're married you can count the total income in your calculation, and not just yours.
Marriages nowadays necessarily come with additional income. True, but with additional baggage's too.
In fact as per my observation, The expenditure doubles when you get married and triples when you have a child.
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Old 30th March 2013, 13:43   #248
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Default Re: What Car @ What Salary ?

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Originally Posted by abeerbagul View Post
Interesting way of looking at things but I guess when you are earning in that bracket, you are really neither here nor there. You are not middle class so your lifestyle expectations have increased, but you are not upper classs so you cannot actually afford those expectations!!
Upper middle class might be a way to describe the income range between 1L to 2.5L.
I say this because in this range, housing and retirement savings eat up most of your income, because:
a. Housing costs have increased tremendously in metros
b. No pension so retirement planning has to begin by age 30.

So this income range is not really enough for buying a BMW, especially since the maintenance costs after 4 years will kill you.

Actually what I would prefer the best is to identify a car which costs 6 months of income and then buy it preowned.
Very well put!! Actually being an auto enthusiast forum people have not put in consideration for retirement savings and home EMI's
Also people in this bracket might afford a BMW or Audi or Merc but are they able to pay for the maintenance or repairs is to be seen.
Its a good idea to see what car you can buy with 6 months take home and then buy new or buy a used one at the same price, either case financially you are secure.
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Old 30th March 2013, 14:01   #249
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Default Re: What Car @ What Salary ?

Why stretch your resources so much.
Buy a car which doesnt kill you on the emi.
If you buy a bmw you have to be able to afford the bmw lifestyle too. Do it if u can.
If you cant afford owning one, yet want to enjoy a bmw, then every once in a while rent a car for a few days. It will satisfy ur urge and fuel it too
Then post a bmw on your profile pic here and dream on
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Old 30th March 2013, 14:11   #250
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Originally Posted by faustus77 View Post

Incidentally as far as I remember Azim Premji goes in a Toyota Corolla.
A high earning president of an American company went about in an ordinary car.His saying was that that he just needs it for going from point A to B.Sorry cant recall the name.
Regards

When you're azim premji, such behaviour is considered modesty

But when you need a car to project an image when you're not azim premji,you need the 'appropriate' car!
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Old 30th March 2013, 17:33   #251
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Originally Posted by drsingh View Post

When you're azim premji, such behaviour is considered modesty

But when you need a car to project an image when you're not azim premji,you need the 'appropriate' car!
Apparently in the old days at Wipro, as part of the Austerity measures practiced habitually by Mr Premji, sometimes even 7 or 8 Sales chaps and Mr Premji used to pile into an elderly Amby and do their rounds of Market visits.
I guess there are many ways of becoming a squillionaire and austerity, frugality are some of them.
Until date, the Chairman of Ikea, who is known for his frugality, travels Economy and stays at three star hotels or so I am told. He is a gazillionaire as far as I know...

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Originally Posted by vineethvazhayil View Post
I have always gone and got used cars and evaded some depreciation in the process. It is far easier to get used cars in the states than in India.
My friends abroad have usually bought used cars. Great cars generally, but always used.
This way they let the original owner take the depreciation hit and pick up a three to five year old beauty that has been well looked after and then cherish it for several more years!
That is a nice way of getting to drive a dream car at a nice price!

Last edited by Rudra Sen : 31st March 2013 at 07:20. Reason: back to back posts
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Old 30th March 2013, 21:06   #252
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Default Re: What Car @ What Salary ?

Why a car is a better first investment?

1. Car EMI usually closes in 5 years max. After that, invest on your wedding / home etc. Ideally your financial condition also would have at-least doubled by then.
2. Wedding is a life long expenditure.
3. Home loans go for 20 years min.
4. Kids - expenditure actually starts after 5 years, from the time they need to go to school.
5. No blames since you buy the car yourself & NOT "gifted" by the bride's party.

If you buy a slightly expensive but reliable car, you can keep it for couple of more years (5+) without the headache of repair bills and while selling, these cars usually* fetch a good re-sale too. With the good re-sale, you can buy a new car (or even pre-owned) and NOT spend huge cash on your second car.

After wedding, you have some extra income to play around with (provided your better half is working), so your added income in these 5 years + extra income will help you plan other factors (home / kids etc) better.

PS: Some of the points on top is on a lighter note; so please don't flame me. Also these statements are made with the assumption that you don't have dependants for the time of EMI of your car.

*Conditions Apply

Last edited by swiftnfurious : 30th March 2013 at 21:08.
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Old 30th March 2013, 22:55   #253
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Interesting thread. First let me start by confessing that my first car (a second hand Zen) cost me 75% of my gross salary. But part of the cost was taken care off by getting a loan at 3% p.a. from my employer (vs. market rates of ~ 18% in those days), and the fact that my employer would not cash out the interest differential if I did not buy a car. Further, at 25, and living with my parents (who were both working), my salary was pocket money. And I kept that car for 8 more years, and drove it all the way to 80,000 kms - so it turned out to be quite affordable.

Since then, I moved onto costlier cars (a New Honda City in 2003-04, a Getz in 2005, a Superb in 2010, and a Vento a few months ago), but have never spent such a large part of my income on a car.

So what are my thoughts on the views expressed in this thread:
- There clearly is a big disconnect between folks like me and Shankar Balan who have ridden the post liberalization boom, and think one should not spend too much on cars (even if one loves them), and those like Crazy Driver who seem happy to spend half their take home pay on cars.
- If you are below 25, single, living with or off parents who are adequately provided for even post retirement, you can blow up to 75% of your income on a car (once in a lifetime)
- But recognise that very shortly thereafter, you will need to start saving - for a family, a home, kids, your retirement, medical expenses etc.
- Also recognise that the boom starting 2003 has bridged a large part of the gap between wages in India and wages abroad in several sectors - to the extent that Indians in several fields are overpaid on a productivity adjusted basis. This adjustment is no longer going to continue at the same pace. Combined with a slowing global economy, and under performing Indian one, the wage growth you can expect in most sectors is materially less than what people like me have experienced.
- How much do you need to save for retirement? Much, much, much more than you think. Cost of living will rise in line with nominal GDP (14% p.a.). With negative real interest rates on safe assets, and assuming 25-30 years of life after retirement, you will need to save 25x your estimated annual expenses by the time you retire. Getting there probably requires saving 30-40% of take home pay starting 25 through 60.
- Housing costs vary a lot based on where you live - but in Bombay for example, rent will eat up another third of your take home pay. ( based on my non scientific survey of people I know) - buying costs more initially.
- In short, you have about 25% of your take home pay left for cars, travel, education, clothes, food et al. Upto you to choose how you allocate that.
- Lot of people here think that people with take home pays of 4-5 lakhs can buy Mercs et al. That is not the case. To safely buy a luxury German, you need to be earning a take home pay of at least Rs. 1 cr p.a. In my view.
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Old 30th March 2013, 23:16   #254
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Originally Posted by Hayek View Post
Interesting thread. First let me start by confessing that my first car (a second hand Zen) cost me 75% of my gross salary. But part of the cost was taken care off by getting a loan in Bombay for example, rent will eat up another third of your take home pay. ( based on my non scientific survey of people I know) - buying costs more initially.
- In short, you have about people with take home pays of 4-5 lakhs can buy Mercs et al. That is not the case. To safely buy a luxury German, you need to be earning a take home pay of at least Rs. 1 cr p.a. In my view.

I ll agree in part about liberalization, wage parity etc.
But I think that even someone earning 50-70l p.a can easily afford that Merc or Beemer or Audi or LR or lower end Jag even....
Its just a question of priorities thats all.
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Old 30th March 2013, 23:19   #255
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Here's what I did if it helps anyone-

When I got my first job, I bought myself a RE TB. It was a long term aspiration.

Next I bought myself the most expensive apartment I couldn't afford (4BHK).
I used to end up with about 2500 Rs. disposable income every month, and I had girl friends to look after. It was a tough one and a half years until my first switch.

Then a year into my second job I bought a car (Logan DLE).

Four more years later I bought the Gurkha, my second vehicle and essentially the thing I want to be driving for another decade god willing.

At this point, i.e. ten years into my career, I fully own my apartment and the Logan i.e. no loans. Have a small loan outstanding on the Gurkha, which I will finish off before this year end hopefully. This year or the next, I'll sell the Logan and get myself a pre-worshipped something to avoid the depreciation hit.

I believe, if I had made my choices differently, especially prioritized a car over a house, I would have been screwed royally.
While I can still buy a similar car for maybe +-20% of what it cost then, the same apartment would be at least 400% of what it cost me then. I would perhaps now be reeling under a heavy mortgage. That was the opportunity cost!

So my two cents of advice to those at the start of a career. Listen to your head over your heart and please buy a house before you buy a car. As someone recommended rent something to satisfy your hormones than buy it outright.
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