[Sam Kapasi]

Originally Posted by ac 427

I will spend around 50% of my annual salary for a car.

Yes you will. If you earn 50K a month and buy a Honda Civic and pay for it in installments, you will.

[architect]

I am in the 20% plus category, and while I do buy the argument that it should be less than 10%, I don't really think everyone can do that.

Take these instances:

I needed a car because of my considerable professional travel (intra-city or within 80 kms from my office). I could have bought an Alto and managed within the the 10-15% mark but I preferred to be safer and yet enjoy the flexibility of going on roadtrips in a more comfortable manner.

In case of many of my lady friends, they are spending more than 20-30% on their cars. They have bought new cars as they don't want to be stranded on the roadside at night because the previous owner did not follow a maintenance schedule. In Delhi, a working lady who has to travel a lot for her work has to have a car. Try going to 5 places in a day on an auto and see how much you end up spending, forget the literal extortion they do! At eight o' clock in the evening try getting into a Blueline Bus with a bunch of drunks groping you.

These people prefer to be safer and lead a more dignified commuting life than look at the precentage.

[GTO]

Originally Posted by d3mon

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.

If you spend 10% of your monthly income on the car, and those automotive payments are pretty much the same (averaged) through the year, that's an average of 10% of your annual income too. . 10 bucks of a 100 monthly is the same as 120 of 1200 p.a.

Originally Posted by Atlblkz06

It takes money to make money and squandering it away is the best way to remain poor.

Originally Posted by aseem

Agree with most of it, apart from the save 40% part.

That statement is worth a million bucks, Atlblkz06. I'll tell you why:

1. Consider two personalities : Mr. A makes $2,50,000 a year but blows away $2,25,000 of it with his lifestyle. Mr. B makes $2,25,000 p.a. but saves 40% of it. By the time A & B are in their forties, B has over $2.5 million in savings and a ready return income of $250,000 on his savings / investments alone (more if invested wisely). Thus, his annual income is 250K (ROI) + 225K (annual income). However, A has blown up all his money and has only 25,000 per year left over. My question : WHO IS RICHER? The dude with more money in the hand is wealthier; It is the man who has MORE MONEY in the bank (and on hand / investments / savings) that is richer. In this case, even though Mr. B had a lower income level, he is the wealthier person than Mr. A who made more money, but has little to show of it today.

In other words, accumulated wealth makes a person wealthy. Not someone who made a lot, but blew it away a lot as well.

The smart + rich have their money working for them by the time they are in the high-40's. Read again : Their money works for them, they don't work for money. Not as much anyways.

2. You definitely need money to make money, whether you are an entrepreneur or salaried. Entrepreneurs need to invest. Plus, supplementary income from shares / MFs / FDs etc. simply rocks.

Originally Posted by Proxima;1173604I

know for a fact that most Americans spend less than 10% on their cars. There is something to learn from them as well.

Well, their per capita income as a proportion of an average life style is much superior to ours.

Originally Posted by kiren

Being self employed & having to travel a lot, the total expenses (i.e fuel + emi + maintainance)i incurr is more than 15%.

Hey, if you are using the car for business purposes, go higher than 15% by all means.

Originally Posted by carboy

The EMI you were supposed to pay otherwise - collect it in a bank deposit (or any other safe
investment) & when you have enough money, buy the car cash down.

Entrepreneurs / businessmen get tax benefits on the interest amount. In addition, we'd rather use the liquid cash for growing our business than lock it up in a car. Cheap auto loans only help this cause.

Originally Posted by aaggoswami

The pocket money I get is reasonable ( just about ), but out of that, approximately 50% goes for my automotive needs.

Aaggoswami, I'd say WELL DONE. I spent like 90 - 100% of my pocket money on cars. However, this topic is more relevant to those who are earning and have some level of responsibility (contribution toward the house, family, insurance, taxes etc. etc.). You are young now, go have a blast. Just make sure you toe the correct line when you are nearing your thirties. Actually, don't worry. Team-BHP will be there to guide you.

I disagree. It doesn't. No proper definitions available.

IMO, for me cars = life. I have been dreaming of cars since I was very young.

Same goes for all of us, Aaggoswami. In my teens, I also thought that I'll spend all my money on cars. You are only 23 now, I'll wait for you to say that on your 36th birthday. Not that our passion for cars has become any lesser, but just that we have gotten more reasonable / balanced / realistic in matching our automotive wants with reality.

Last BUT not the least, do NOT equate a higher price tag with more happiness. Case in point : I am just as happy in my Rs. 60,000 (book value) '97 Jeep as some other dude in his 60 lakh rupee Hummer. If only there was a happy-o-meter, I'd prove it to you.

[ac 427]

Originally Posted by Fountainheader

Guess you are getting the math horribly wrong. For a salaried person, buying a car with 100% downpayment is highly improbable. So thats where the EMI funda comes in.

For someone who earns say 50k per month, I guess not more than 10k will be alloted for car EMIs. So spending 50% of annual salary on a car would sound stupid to me. But then thats me.

Maybe, but as per what i understood, the thread is about how much would one want to pay in percentile of his annual salary.

Originally Posted by Sam Kapasi

Yes you will. If you earn 50K a month and buy a Honda Civic and pay for it in installments, you will.

Sam Bhai, i will buy a civic they time i start earning 26 lacs P.A
I guess there is some confusion about the thread, i see it as a very simple, percentile to the annual pay package.
Team members are seeing this as Expense vis-a-vis pay package.

cheers,
AC

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.

[SkyWalker]

I voted for 20% (16-30%, since there was no 20%). I believe there should not be any reason why anyone should buy a car with a cost more than 20% of his/her annual salary.

[NetfreakBombay]

Originally Posted by ac 427

I am finding it very hard to believe few of the posts in this thread, most of the selections are for less than 15% of the annual Salary. Considering the cars that people own, i bet the salaries would be CEO like. E.g acc to the 15% rule, for me to buy a Maruti Alto (3 lacs) i should be earning 20 Lacs.

Somebody earning 20 lakh can easily afford a sedan without going beyond 15% threshold.

But you need to make at least 50k per month (net) to afford a 3 lakh hatchback.

3 lakh cars will cost approx 7k per month to run (including Insurance/ Service/ Petrol etc)

Quick comparison :

Hatchbak (3 lakh cost, 7 lakh gross income)



Sedan (9.5 lakh cost, 20 lakh income)

[entropy]

Well my funda is that the TOTAL cost of the car should be at most 15% of your total yearly income (EMI etc are just a trap). Anything higher, better plan to increase your earning capacity and start investing what you can save today rather than indulgence ...

Indulgence is best enjoyed when one is mostly free from the worries of securing the future. Sorry for sounding like an old dad.

[ac 427]

I guess the thread is the 'cost(MRP)' of the car VIS-A-VIS the annual Income. and not the running cost VIS-A-VIS annual INcome

Cheers,
AC

[NetfreakBombay]

Purchase cost (On Road) is just one part of the picture.

As you go to higher class of cars, everything (Insurance, Fuel, Service and even spares) costs much more.

[d3mon]

Originally Posted by GTO

If you spend 10% of your monthly income on the car, and those automotive payments are pretty much the same (averaged) through the year, that's an average of 10% of your annual income too. . 10 bucks of a 100 monthly is the same as 120 of 1200 p.a.

Hey, I meant the total cost of a car, as in the on road price. Now no one takes a loan for just a year right, it's for atleast 3-5 years.
Say the loan is for 5 years, then the annual percentage will be 5x the monthly percentage (simple logic)

Originally Posted by GTO

Last BUT not the least, do NOT equate a higher price tag with more happiness. Case in point : I am just as happy in my Rs. 60,000 (book value) '97 Jeep as some other dude in his 60 lakh rupee Hummer. If only there was a happy-o-meter, I'd prove it to you.

Happy-o-meter ! I wish you could rig that up to me when the boost comes on in a swift DDIS. It would blow the meter right off the scale !!


I think there is some confusion over the thread whether it refers to the {monthly running cost + EMI} OR {the total cost for the car as a percentage of the annual income}.

I guess salaried people and businessmen have different ways of looking at the equation when it comes to purchasing a car.

[GTO]

Just to clarify : We are talking about total outflow (as a % of your income) per month toward your car. Yup, it is the EMI we are discussing, not the onroad price of the car.

The thread starters opening post read thus:

How much percent of your annual income do you spend on a car ?

NOT your cars worth vis a vis your income. If you wish to discuss the latter, please save it for another thread.

[Aditya]

HM Contessa
Average annual cost of maintenance ~ Rs. 15000/-
That's under 15% of my annual income.
Waiting for the day I buy a Jaguar. Then 100% of my earnings plus savings will go on annual maintenance.

[ASHISHPALLOD]

I prefer outright purchase of leisure items like car without any loan.

No botheration for EMI.

Regarding net outflow, it should be max 10%. This includes emi if any, petrol and maintenance.

[A.R]

I own two cars (actually 3, but the third one is not used for years now)
Cost of maintainance - both run on petrol:

Car 1 is driven for approx 15 - 18k kms a year.
Service + Fuel + Etc : 80k

Car 2 is driven for approx 5k kms a year. (spare car)
Service + Fuel + Etc : 20k

I have considered average expense on tyres too.

Hmmm, not tats not more than 10% my of annual income.

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?

[rm_arjuna]

I would say 10% would be ideal and maybe 15% on the outer limit, it's always safe & better to be within one's comfort zone rather than overstretching earning just to be part of the Yuppie Club and to be seen around in snazzy set of wheels . since it is anyways deprecating asset and the stronger urge to upgrade over 2-3 yr period also need to be factored .