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Old 2nd April 2016, 19:46   #106
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Default 17.5 lakhs liquid cash: Save or spend on new car?

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Originally Posted by DMD View Post
After weighing all the options and discussing with my wife I plan to "Invest the cash I have in something sensible which provides a decent return.

Save as much as I can here to make enough money to buy a decent new hatch or a used Toyota/Honda cash down

Smart decision, in my view. 25 l seems like a lot, but it's just 3 years take home salary - and that's about where I would expect someone of 32 to be in terms of savings.

I think the advice Noopster and GTO gave was directionally appropriate for your stage in life.

If I think about my own example, my first car (as a 25 year old bachelor, living with and off my parents) cost me about 12 months salary, my second car (as a 30 year old DINK) cost about 6 months base salary (and I had just received a one off payment that amounted to more than that - similar to your onsite savings), and my third car (at 37, with a 2 year old) was under 30% of my base annual take home salary. Please remember that your wife may need a car too, sooner or later - in my case, my wife inherited my first car, but two years later, we bought a car that cost half of my car's price for her (and then replaced it with another one with similar economics 2 years after I bought my third car).

Replacing cars once every 6+ years also makes sense - that enables slightly more aggressive spending than if you plan to change every 4 years.

I think you should not spend more than 5-6 l on a car given the income you indicated. It's easy for folks to say you live only once - but that life is going to be long, and for private sector employees with no pension or social security, saving large sums is a must do.
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Old 2nd April 2016, 21:59   #107
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Default Re: 17.5 lakhs liquid cash: Save or spend on new car?

Hey DMD,

The post itself shows that there is some confusion, i personally feel that take a plunge when there is zero confusion.

IMHO look for Polo TSI or Figo AT, fun to drive cars with automatic transmission to deal with ever increasing traffic and would still put a wide grin on your face everytime you take it out for a spin.

Take a bank loan of 50% or above and invest your money into a decent investment.

Cheers!!!
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Old 2nd April 2016, 23:22   #108
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Default Re: 17.5 lakhs liquid cash: Save or spend on new car?

I may sound a little conservative when I say this, but never make any purchase unless you have it fully backed by liquid asset. Assuming that all your investments - the flat, the property are for a purpose, you should probably look at something that's around 9 lac (new / used is your call) or save another 17.5 lac and buy your dream car.
Remember, a conservative was once a liberal who got mugged! ;-)

Last edited by freak1201 : 2nd April 2016 at 23:44.
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Old 3rd April 2016, 10:49   #109
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Default Re: 17.5 lakhs liquid cash: Save or spend on new car?

Even after knowing that this thread got the best of advices I am so tempted that I couldn't stop myself posting something too.

Recently I was planning to upgrade my Nano Lx. I explored all the options and finally looked at my bank statement and found that its just because of Nano that I am able to afford a car! Otherwise I am sure I cant afford a car, looking at my current status.

Buying car is not a difficult thing but to pay insurances on time, Maintenance and Fuel costs and adding accessories to it really can extract a lot of money and not to mention that depreciation hits you every year. In fact I have started using Bicycle a lot to balance my fuel costs which my Car is demanding. For example if I make a solo trip to nearest shopping mall, Using a Bicycle saves me a lot (Parking charges at mall are saved a minimum one litre of petrol is saved)

But the question put up here on this thread is very difficult to answer especially when you watch the movie "Zindagi Milegi naa Dobaara"
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Old 3rd April 2016, 11:42   #110
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Default Re: 17.5 lakhs liquid cash: Save or spend on new car?

This is possibly the story of many of us in India especially at this particular age (I am also 32). We work hard and i generally do not agree with most people of the older generation when they say we have it easy.

coming to your particular dilemma here is my 2 bits.

At the end of your onsite say you have managed to save up a total of 20 lakh rupees and the car you are planning to buy costs 14 lakhs. What I would suggest is put in 50% from your pockets and take a loan for the rest. Now it becomes very important what you do with the balance of 7 lakhs. You need to invest it in such a place where your ROI is more than the interest you are paying for the car loan.

At the end of the loan tenure or when you plan on selling the car effectively you would have paid 7 lakhs principle+ interest and on the other side you would have the 7 lakhs+ interest accumulated. Besides all this there is also the resale value of your car which lets assume is about 7 lakhs. Effectively you would have paid about 7 lakhs for a 14 lakh rupee car

All these calculations come from experience. My car was purchased on total cash as the resale of premium segment cars is quite low. In hindsight i also would have done what i suggested if I knew this at that time.

Having said all this please do make sure your sons education fund is not risked in any way as that is the one thing that we can actually give to our next generation.
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Old 3rd April 2016, 12:00   #111
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Default Re: 17.5 lakhs liquid cash: Save or spend on new car?

Man there is no doubt that you have come ahead in your life and have made all the right decisions so far. You have definitely earned and truly deserve a reward, however, play it smart- simply treat yourself to something like a used Accord, Teana, Camry, Fluence or Outlander
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Old 3rd April 2016, 13:29   #112
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Default Re: 17.5 lakhs liquid cash: Save or spend on new car?

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But he has liquid. Put that in a fixed deposit and take a loan at +1%.
This is exactly I do not prescribe. This is not financial prudence. Let me explain how.

First of all you have the money with you for complete payment then there is no reason to put that in a fixed deposit and pay an additional 1% to bank. You loose Tax on FD interest and pay 1% more to the bank. It doesn't make sense at all. If you need to put the money in a relatively safe instrument (As compared to equity) buy into a debt mutual fund SIP every month on the cash you have because you are not paying EMI each month. This will cut the middle man (Bank) and give you higher returns than a FD if you hold the debt MF for >3 years it is LTCG and will attract lesser tax and it can also be subjected to indexation benefits. So one ends up paying max 5% tax on the gains. While w.r.t FD one has to pay 30% (If you fall in that bracket) of the interest amount as tax. Also debt mutual funds give better gain than an FD would.
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Old 3rd April 2016, 15:02   #113
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Originally Posted by DMD View Post
Hey Guys,

I am not sure if this question of mine even qualifies to be posted in this forum. If it doesn't kindly discard. I am actually faced with a BIG question on whether or not to buy a car which costs a premium. While this is a sheer financial question, I would like to have some perspective thrown in by other members.

Actual Question:

I have exactly 17.5L in my account at this point. I think I could save between 5L -8L in addition or so before I go back to India early next year.

I love driving and and has been longing the family advises against it.


Dreams Vs reality.

First things first- with your salary you have managed good amount of savings. But what are you doing sitting with so much cash. Any financial advisor would have given your knuckles a stick.

1. Get life insurance
2. Get health insurance.
The reason I am saying this is because age is on your side. Premiums will be low. I made a mistake of taking products later and thus paying higher premiums.

3. Get a investment plan in place for your son. (Education, other needs).
4. Ear mark 7-8 lacs. And gradually invest in equity mutual funds over the next few months.

5. Keep monthly expenses * 6 months as contingency fund. You can do FD or also park some of this amount in a liquid mutual fund.

6. Now with whatever is left, think about buying a decent hatchback. Frankly your income doesn't merit going in for something extravagant.

Remember that financial security is most important. Life and circumstances can change overnight. In case they do, you should have your backside covered.

If you need context- between the wife and me we make about a Cr in a year. Have a daughter. Clearly not enough money for any of the German or expensive cars. Priority is to pay off home loan and go debt free, at the same time invest about 1.5 lac every month. I bought a punto last year- cash down payment.

Last edited by ampere : 4th April 2016 at 07:11. Reason: Reduced space in quoted post
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Old 3rd April 2016, 22:42   #114
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Default Re: 17.5 lakhs liquid cash: Save or spend on new car?

Could any of you please create a sheet/chart where one can know as to which segment of car is safe enough to invest as per one's income.

10L annual income is good for a K10 and likes...

Thanks
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Old 4th April 2016, 00:40   #115
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Default Re: 17.5 lakhs liquid cash: Save or spend on new car?

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Originally Posted by Sheel View Post
Could any of you please create a sheet/chart where one can know as to which segment of car is safe enough to invest as per one's income.

10L annual income is good for a K10 and likes...

Thanks
10L annual income only gets one a K10?
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Old 4th April 2016, 05:53   #116
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Default Re: 17.5 lakhs liquid cash: Save or spend on new car?

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Could any of you please create a sheet/chart where one can know as to which segment of car is safe enough to invest as per one's income.

10L annual income is good for a K10 and likes...

Thanks
I would say thats way too conservative. We have a dedicated thread for that discussion here (What Car @ What Salary ?).

On the topic : Am really impressed with the rental car option now-a-days in India and hence decided not to sell my hatch when I flew abroad last year. Yes its a depreciating asset & many would say selling it off is the best thing to do. But when I go back I can use it easily for my city commute. Its just 15k kms old in 5 years, so as good as new. And for longer drives I can always hire a self-drive car of choice. The extra cash saved, I would be plonking in my dream bike as that's something not/wont-be available on rent now/in-near-future.

Moreover in IT , there's no guarantee when we need to travel & for how long. Such huge investments hurt a lot when go unused. So decide wisely.

Just my 2 cents. Wish you all the best

Last edited by SoumenD : 4th April 2016 at 06:02. Reason: Proof-reading
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Old 4th April 2016, 09:59   #117
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Default Re: 17.5 lakhs liquid cash: Save or spend on new car?

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Originally Posted by anycatd View Post
10L annual income only gets one a K10?
Sorry, should have been clear...it was to be meant as suppose

Rest, the maths could be done, am from old school, not verse with charts & pies
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Old 4th April 2016, 12:53   #118
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Default Re: 17.5 lakhs liquid cash: Save or spend on new car?

I am not an expert but one bit of advice i can try giving is, why dont you put the liquid cash in a Fixed deposit and take a loan for the car. The interest accrued on the FD should be close enough for the EMI with some down payment. Think about it. Your liquid cash will remain with you in terms of FD. Good luck. Sometimes its hard to explain matters of the heart to the mind.
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Old 4th April 2016, 13:05   #119
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It is a game between the heart and the mind and a lot of it depends on perspective. I believe in "living" my life.

My beat friend follows a simple formula while buying cars. His budget for a car is always what his CTC is. He bought a Vista when it was 5.5 lakhs. He bought a duster when it was 12 lakhs
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Old 4th April 2016, 13:34   #120
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Default Re: 17.5 lakhs liquid cash: Save or spend on new car?

Well I just emptied my bank account on buying a used car, a pre-worshipped Fortuner (interesting story, would put on ownership thread soon). So you would know what I would suggest!

But seriously, pre-owned car route seems like best bet for you, a decent hatchback like Polo TDi should do fine to replace Ritz. If you want to venture into crossover territory, Duster and likes (even S-Cross) are available at fairly decent prices. Invest rest of the money in some financial plan as others have suggested.
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