[Gansan]

The question should be how much one "would" spend on a car. There is no answer for the "should" part. Everyone is mature enough to calculate whether he can afford to keep a particular car or not, after factoring in various parameters. It is more or less like a choice of watches; one person buy an expensive Swiss mechanical watch, while another with a similar financial status may make do with a Titan.

[BBR_SHR]

Taking a loan for a luxury would not be rational. Taking it for a necessity would be rational.

[rohan_iitr]

My personal opinion is that loan should be taken only for needs, not for luxury. If you can't afford a luxury item (car, gadget etc) without taking a loan, then you don't deserve that luxury. It is as simple as that.

I'm not saying that loans are a complete no no. All I am saying is that a loan should be taken only for real needs, not to fulfil your dreams of buying a fancy car or gadget.

Another thought process says that if you have to think twice before buying a luxury item, then probably you are not wealthy enough to afford that luxury.

Coming back to your original question - how much should one spend on a car. The general rule is that the price of the car should not exceed your annual take home salary.

Rohan

[Live To Jive]

If you never take a loan you may not be able to afford a good car. Majority of the car buyers take a loan. Yes a car is a depreciating asset. But if you don't take a loan you'll never afford the car you really want. In my case I can afford to buy a 10-15L car paying cash. However if want to go into the 30L bracket or for that matter a 20L car, I have to take a loan.

[taranonline]

Life is short my friends. fulfill your dreams. You dont want to regret later in life. Do what the heart says.

[HammerHead]

IMO if you can afford it, go for it, may be with loan or without loan doesn't matter.
Afford what? EMI's, down payment, Insurance, servicing and fuel charges without having to cut down on your other daily needs or rather without compromising on your life style.

[sgiitk]

In the US the norm used to be that one should be able to buy the car with three months salary. In India we should probably change it to 6 months or maybe one year, since cars a relatively costlier, and we tend to hang on to them longer. This should be a rough guide to which you add factors like requirements, other commitments, how much you drive, expected period of ownership, etc.

[Swanand Inamdar]

Suman, there is no such definitive answer to the question. Its a personal choice.
Buying cars mean different things to different people. Some do not buy on loan, some do. Some buy a uber luxurious car, because they can afford to, and some buy a decent car, even when they can afford to buy a segment higher car. To each his own.

I would tend to agree with your rational brain, and buy a car that is good in quality, and at the same time (relativey) easy to maintain, if I were in your shoes.

Good luck with your buying, and do let us know the cars you are looking at!

[Abhi_Automobile]

Originally Posted by rohan_iitr

My personal opinion is that loan should be taken only for needs, not for luxury. If you can't afford a luxury item (car, gadget etc) without taking a loan, then you don't deserve that luxury. It is as simple as that.

I'm not saying that loans are a complete no no. All I am saying is that a loan should be taken only for real needs, not to fulfil your dreams of buying a fancy car or gadget.

Another thought process says that if you have to think twice before buying a luxury item, then probably you are not wealthy enough to afford that luxury.

Coming back to your original question - how much should one spend on a car. The general rule is that the price of the car should not exceed your annual take home salary.

Rohan

Man! I am surprised by the over-conservative approach to a car purchase by so many users. Ok, so if I need a car for 12 lakhs I should collect 40-50 lakhs in my account to buy it? (Guys I am talking about people who will have to earn themselves and don't have a super rich dad). I say this coz the only way I'll put money 12-15 lakh cash down is if I have double that amount still in my reserve. COllecting 40-50 lakhs could take an individual 5-10 years (depending on you salary and baring onsite 3 yr stay. Plus, as you grow older, you tend to have other requirements too.

I think buying car on loan is perfectly ok. Yes, it a luxury all right, but you only get one life! However, you should be wise enough to project what you can truly afford. For e.g. just because somebody earns 1.5 lakhs a month does not mean that he can afford a Beemer/Audi. There are other deductions that have a bearing too.

Generally, I'd say if you earn 20 lakhs a year, you should be able to (conservatively) afford a 10 lakh car. If you have no liabilities at all, you may afford a 15 lakh car with that money. I'd say that your car purchase price may range between 1/2-3/4 range of your annual salary/income. However, you should be realistic in your projections. For e.g. you should refrain from buying an Audi A4/BMW 3 series when you have salary of say 30 lakhs, even though you can afford the EMI. I guess each individual knows what he can 'truly afford'.

Buy a car that you wish to buy, but only when you can 'truly' afford the car. Loan or no loan does not matter. Oh and yes, you pay 10% interest to earn 20% return on the amount that you did not put in the car purchase (if you are even half decent inventor)

[ghodlur]

IMO you should opt for not going for a car loan unless you have some financial benefits out of it. For eg through Company lease car where you can get some tax benefits.

Or else stick to the one time cash buy. Buying car out of one's reach just to satisfy one's dreams is not a rational idea. As they say "Stretch you legs as far as the blanket goes".

[supremeBaleno]

@suman, you would get more info on clarifying your dilemna in the "Can a regular IT Joe own a BMW?" thread - link given below.
http://www.team-bhp.com/forum/shifti...r-buy-bmw.html

[dhanushs]

Originally Posted by saraf_suman

As a percentage of net worth or annual salary or savings etc?

More important than net worth, I guess the deciding factor is the average income the person generates.

Like sgiitk suggested, one can own a car safely, worth his Annual Income. For small businessmen, I guess it should be the average of a minimum of two three years annual income, unless the car he owns boosts his income/business image.

Well, even though I say this, I used up all my savings while I bought my car. Its pretty difficult to control the urge, you know.

[saraf_suman]

@supremeBaleno: Thanks. Yes, I have seen that thread.

On loans: Some people cannot buy the car of their choice without resorting to the loan (read leverage). Some others can actually pay the entire money upfront. In this case it still makes sense to take a loan, provided you can invest the remaining amount at a rate > rate of interest of the loan.

I think my question more than `buying' the car is of `owning it' peacefully. Buying is a one time thing; there is a high chance you could go overboard. But once you do buy it, the car should not consume you completely. In my case, I can buy a 30L car; but if it was to be completely toasted in an accident, it would leave me completely wrecked emotionally (and to some extent financially) :-) With a 10L car, I can come out of the depression in a week ;-)

[Abhi_Automobile]

Conflicting views coming out of the thread here. So, what are you guys suggesting? A person earning say 15 lpa can afford a 15 lacs? Or should a person be generally be slightly conservative and say buy a 15 lac car when his sal is 25 lacs?

I am assuming that this person does not have any other liabilities.

[amitk26]

Originally Posted by Abhi_Automobile

Conflicting views coming out of the thread here. So, what are you guys suggesting? A person earning say 15 lpa can afford a 15 lacs? Or should a person be generally be slightly conservative and say buy a 15 lac car when his sal is 25 lacs?

I am assuming that this person does not have any other liabilities.

A person with 25 Lakhs salary purchasing 15lakh car is not conservative it is splurging.

My take is that 25 lakh sal means you will get somewhere around 20-21 after tax , so if you buy 15 lakh car that leaves some 5-6 lakhs for everything else.
So as a rule of thumb not more then 10 lakh should be the outgo towards a car.
Ofcourse if suppose person stays with parents and his food , housing and basic needs are covered then this rule of thumb many not apply.