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Old 27th April 2010, 13:38   #106
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Originally Posted by nowwhat? View Post
You actually gained 6 lakhs in 5 years just because you didn't pay cash down!
Is it so?
Consider you do buy by paying 5L upfront. Then for the next 5 years, you invest the EMI you would pay for a loan (11,012 in this case) in a SIP scheme. Even considering zero returns from the SIP scheme, you'll have 6.6L at the end of 5 years. Chances are you'll have quite a bit more.

Oh and I'm all for taking a loan for a car - since I belong to the 'instant gratification' group !

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P.S If that hot chic needs to look at your car to be impressed by you, I'd stay the heck away from her :P
ummm, depends on whether one has long term plans or short terms plans for her
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Old 27th April 2010, 13:49   #107
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Interesting that many here advise against buying car on loan.
That rule may be true for people who have maximized their earning potential, lets say in their 40s and 50s.
But for someone in his/her 20s and 30s, whose earning capacity is only going to increase (in majority cases if you have a decent job), i see no point in putting something like 5-7 lakhs on a car for full payment. Those 5-7 lakhs can be better utilized for wise investments, and also as a source of some liquidity in crunch situations.

How much one can pay for EMI depends on lot of other aspects, not just the salary.
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Old 27th April 2010, 13:56   #108
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Originally Posted by SilentEngine View Post
Interesting that many here advise against buying car on loan.
That rule may be true for people who have maximized their earning potential, lets say in their 40s and 50s.
But for someone in his/her 20s and 30s, whose earning capacity is only going to increase (in majority cases if you have a decent job), i see no point in putting something like 5-7 lakhs on a car for full payment. Those 5-7 lakhs can be better utilized for wise investments, and also as a source of some liquidity in crunch situations.

How much one can pay for EMI depends on lot of other aspects, not just the salary.
+1 to that.
i guess the general rule should be, if you can avoid loan, avoid it.
there can be a lot of other factors too, like investments.
for example, you can take loan, if you feel you can earn more by investing your money with respect to the interest you would be paying.
The question asked here have varied and vast answers akin to the study of financial matters.
It seems there is no one size fits all solution for this.
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Old 27th April 2010, 13:59   #109
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I think its a matter of time and the way you plan it. One of my very close friend makes ~2.5L a month and he drives a used Matiz which he bought for 1.2L a year back in full cash. He was totally out of liabilities since he had no loans on his head then.

He saved, and bought a plot worth nearly a crore on loan. Even after paying off his EMI he is saving good bucks due to his no-exhorbidant habits, note that he is not miser !..

Given his non-moving asset, he can easily get a loan against his property for any car he want to buy.

Had he bought a civic instead of a matiz, he would have to give a second thought to the land plan.

But today he is planning a Beetle even after a loan of ~75L.
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Old 27th April 2010, 13:59   #110
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Aseem,

I am thinking on the same line though you have to cut the hypothetical salary by a lot


In the hypothetical scenario you mentioned,

Salary = 1.75 lakhs..

Advised savings = 30% of salary ~50000.
Home Loan EMI = 50000
Expenses = 40000

Remaining = 35000/- that you can spare for the car EMI and monthly expenses.. Assuming 6000 for monthly fuel and maintenance costs (Assuming you use diesel and taking a usage of 1500+ kms).

You are left with 29000/- for the EMI.

On a 48 month lease, you can finance upto 11.5 lakhs. If your company pays the roadtax and insurance, you can close your eyes and go for Chevy Cruze.

If you have to pay the road tax and insurance, the two cars that will fit in the budget will be Fiat Linea and Hyundai Verna Diesel. You can consider Ford fiesta to the mix as well although that is no longer VFM, considering Figo comes at much lesser price band with the same engine.

Take your pick. All the best in advance on your new purchase.
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Old 27th April 2010, 14:05   #111
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Quote:
Originally Posted by aseem View Post
Take Home Salary (hypothetically speaking): 1.75 lakhs
Home EMI: 50k
Car EMI: Nil
Living Expenses: 40k
Downpayment Money: 3 Lakhs

Now with those figures, what car should this person be looking at??? Given that risk taking appetite goes down with age. What would be an ideal car, not overboard, not conservative. A sensible decision in my current situation?
Well, downpayment is 3L & balance would be 175000-50000-40000 = 85000. Well, IMHO, if a person's take home is 1.75L per month, then the company where he's working will not only be providing him a car but also taking care of the expenses. Then he need not buy any car & he can simply save the remaining 85K for future.

Well the numbers seems to be picked up from thin air. How come a person earning 1.75L per month can afford only a 3L downpayment when he has a balance of about 85K a month? I would rather wait & keep saving more to buy a car to purchase outright cash purchase, just within a year I'll have 10L.

OT - I sincerely wish to earn 1.75L a month so that I could afford the new WagonR now & keep saving to buy Innova after few years.

Quote:
Originally Posted by imp! View Post
P.S If that hot chic needs to look at your car to be impressed by you, I'd stay the heck away from her :P
Exactly my point too. Express to express & do not express to impress

Last edited by aargee : 27th April 2010 at 14:09.
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Old 27th April 2010, 14:10   #112
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Originally Posted by SPARKled View Post
I think for a lot of us here on Team-BHP, car buying is more of an emotional thing and being enthusiasts the equations of going overboard in our car buying decisions could be a regular occurrence. So IMHO people here on this forum may have over leveraged themselves to get their dream set of wheels.
Absolutely. The car enthusiasm will try to kill the needed expenses (eg kids sports training or coaching classes). I have stretched now to book a new car. Even then I am not satisfied and try to extend to a higher model because of enthusiasm. As said by many, car is not an asset. The more you use, the more is the benefit.

The age of buying also counts a lot. Better to buy early (with no major college or educational expenses, medical expenses) and enjoy to the core.

The ideal winner is one who gets an excellent second hand car where the loss becomes minimal if you are not interested in becoming the first owner of the vehicle
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Old 27th April 2010, 14:17   #113
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One needs to make huge huge bucks to have an outright purchase of new car. otherwise it is very dificult for a decently salaried person itself not to go for loan.

General order of priority will be to have an own house and then car. When you can afford a car loan, you will already have a home loan running and it will not be possible to do outright purchase.

Even if you have spare cash, you have various options to invest them and make some earnings out of it.
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Old 27th April 2010, 14:26   #114
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Originally Posted by RGK View Post
The ideal winner is one who gets an excellent second hand car where the loss becomes minimal if you are not interested in becoming the first owner of the vehicle
You hit the nail RGK.
Get a reliable second hand car and try to stay away from debt. If at all you need a new car then try to make at least 80% down payment. At least I would prefer to do so.

I think having a Honda civic and thinking thrice to top up the tank is totally insensible. Its equivalent to wearing a Pupa(duplicate of Rupa) undies inside a Tommy hilfiger jeans.

I would better wear a levis undies inside a Wrangler jeans.

Better stick to Alto and party in 5stars without giving a second thought.

Last edited by Speed Pujari : 27th April 2010 at 14:29.
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Old 27th April 2010, 14:32   #115
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Originally Posted by imp! View Post
P.S If that hot chic needs to look at your car to be impressed by you, I'd stay the heck away from her
You indeed are an imp! Nice one

Last edited by gpa : 27th April 2010 at 14:42.
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Old 27th April 2010, 14:50   #116
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Guys, we are going O.T.
Instead of answering the question that aseem had put, we have gone to a different direction of how much loan to take, how much we should save and all that.

Aseem, here is my take on the cars against salaries:

1) Alto, Santro etc: Annual CTC - 4 lacs

2) Swift/i20 etc: Annual CTC: 6.5 lacs (however I bought it at 3.6 , but then it was my first car and at 23 years i had no liability )

3) Verna, SX4, ANHC etc: Annual CTC - 10 lacs

4) Altis, cruze, civic: 13-15 lacs

5) Accord, passat etc: 23-25 lacs

over and above its the game of all the Richie Riches and at any salary dont buy a Skoda because of their A.S.S (Awesome Sales support )

Last edited by bblost : 27th April 2010 at 14:53. Reason: Extra smiley deleted. There is a limit of 2 smileys per post. Thanks.
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Old 27th April 2010, 15:19   #117
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Also, was told that making full down payment you can attract the attention of the IT guys even if you are a regular salaried professional.

Vijay
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Old 27th April 2010, 15:19   #118
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Originally Posted by ikoneer View Post
Even if you have spare cash, you have various options to invest them and make some earnings out of it.
Quite right. "Different people different Risk Profiles".

The majority of Bhpians on this thread have suggested/advised that buying a car with outright cash/minimum down payment is the best option.

In my case, I had sufficient funds to pay for atleast 40-50% of the value of the car (Safari GX). However, I paid less than 15% as downpayment and got the balance financed by bank @ 9%.

Why did I do this, one very simple mathematical reasons. My investments have been growing @ XYZ% annually (much more than 9%, rather in multiples of 9%). Why should I pull out my money from an investment which is giving me such a good return to avoid taking a loan at 9%. Simply doesn't make sense.

Let me explain by an example where the cost of the car is Rs. 100,000 (just for calculation purposes) and there are two alternate ways of buying the car.

Assuming the buyer has Rs. 1 lakh to buy the car.

Scenario 1: Outright purchase Cash
Resale Value of car at the end of 1 year (65,000)
Total cost of owning a car for 1 year Rs. = Purchase Cost (100K)- Resale Value (65K)=35,000

In scenario 1, the buyer at the end of 1st year would have spent 35K to own a car for 1 year.

Scenario 2: 100% financed (again to keep it simple) @ 10% SI. And Invests Rs. 100,000 in MF with average return of 30%.

In scenario 2, the buyer who has invested in MF will have earned Rs. 30,000 as profit and would have paid Rs. 10,000 as interest on the loan. So you would have to add the interest cost of 10,000 to 35,000 to get the cost of ownership of car for 1 year, but at the same time he also earned a profit of 30K on his investment. Thus in this case the cost of ownership of the car would be:

Purchase Cost (100K)-Resale Value (65K)+Interest (10K)-Profit from MF (30K)= 15,000.

Now like any good finance guy here is my caveat: Please bear in mind this plan is not for everyone. If you do not know anything about capital markets or are not familiar with the risks involved with high return investments, please follow the various thumb rules which have been listed out throughout this thread. But yes if you know what you are getting into are ready to take a hit, you can have your car practically for free.
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Old 27th April 2010, 16:41   #119
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I am getting a simple equation here
if no other liablities/loans
buy car of value = salary per anum
else
buy second hand car of value = salary per anum
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Old 27th April 2010, 18:53   #120
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Originally Posted by vjoy3 View Post
Also, was told that making full down payment you can attract the attention of the IT guys even if you are a regular salaried professional.

Vijay

Thats an urban legend buddy!
If you have your papers in order you should fear no one.
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