[jayded]

Originally Posted by Warwithwheels

What do I advise my friend, who is in his early twenties and who has got no existing financial commitments at all. He owns an independent house for himself and still single.

He would belong to the 12L per annum category. Can he look for a car in the 15 - 20L segment which he is mad about?

Early twenties, 12L p.a., no commitments, own house. What more does one need? I would suggest him to take the plunge if that is what his heart really wishes for, but with some groundwork done beforehand.

To add to that, the best way to go about is to do some hard saving for 7-8 months to accumulate a huge downpayment amount, take interest free loans from the employer (of course, if they provide one as per policy), and take the minimum loan for a period of 3 years. The lesser the loan amount, the better.

This is just my opinion, and not from my experience. There are also other factors to be considered like maintenance, insurance, ego issues of colleagues/boss at work, etc. One should take into account all factors before doing such things.

[DriveAddict]

So far I have spent only on fuel, regular services and insurance renewals for my Vista VX QJD. With the extended warranty for the next 3 years and adding the single Tyre change & battery change , I expect to be in the less than 15% crowd for the next few years

God bless the FIAT & GM engineers who developed the Multijet 1.3 and TATA for plonking it in the Vista

[rahulsharma2008]

Originally Posted by Warwithwheels

What do I advise my friend, who is in his early twenties and who has got no existing financial commitments at all. He owns an independent house for himself and still single.

He would belong to the 12L per annum category. Can he look for a car in the 15 - 20L segment which he is mad about?

Since your friend is single, earns about 12L per annum and he is in his early twenties which means most probably he will be looking for a newer/better car 4 years down the line (marriage etc). So ideally he should be taking a loan for 3 years. Assuming his take home salary would be 9 lakh rupees (deducting tax) so he can plonk about 4.5-5.0 lakhs per annum for his car EMI's. This takes his allocation for car to Rs. 13.5-15 lakhs (Assume downpayment would be from his existing savings).

I have not taken increment of his salary in consideration since inflation levels are quite high in our country.

PS: VW was offering 3 year interest free loan on the Vento. I think it fits the Bill! Spare cash can be utilized to add accessories.

[Hatari]

Interesting thread. This EMI concept has blown the topic wide open, 10 years ago it was practically unheard of. People now can buy cars not with what they have saved or earning but how much they will earn over a 5-7 year period.

I have no auto related EMIs currently. Car expenses are negligible as my company pays for my fuel.

A wise acquaintance in his 50s, who earns upwards of Rs 2.5 crores a year, use to drive a 4 year old Honda Civic. It is only recently that he decided to upgrade to a German luxury sedan after im sure much ribbing from friends/relatives/colleagues!

He would always say, why should I spend so much money on a depreciating asset!

[CrAzY dRiVeR]

Originally Posted by Hatari

asset!

Ah! No offence to you or your friend, but that's quite a depressing thought! I've never thought of my car from this angle, and hopefully never will.

I was spending more than 50% in terms of fuel and EMI once upon a time. It's down to some 20% now that the EMIs are over. Don't wish to go the EMI route again, so I'd probably hold on to this car for longer, as it still delivers in terms of the smile quotient.

The only 'asset' I'm seeing here is myself and a whole lot of good memories I've invested in myself.

[Hatari]

Originally Posted by CrAzY dRiVeR

Ah! No offence to you or your friend, but that's quite a depressing thought! I've never thought of my car from this angle, and hopefully never will.

I was spending more than 50% in terms of fuel and EMI once upon a time. It's down to some 20% now that the EMIs are over. Don't wish to go the EMI route again, so I'd probably hold on to this car for longer, as it still delivers in terms of the smile quotient.

The only 'asset' I'm seeing here is myself and a whole lot of good memories I've invested in myself.

None taken, but we must admit a car is a depreciating asset at the end of the day. I see you have already in not wanting to go down the EMI route.

I love driving my Fiesta, and do not endorse my colleagues view, but he has a point.
An expensive car will not necessarily deliver more in terms of smile quotient!

[igp_79]

Hey, Nice thread.
You get to actually start thinking how much you spend on your car(s). That gets you thinking about the rationale of spending 'x%' on your automobiles and is that really justified.
Secondly, you get a rough idea of how much everybody else does and it gives you a ball park figure of what percentage is considered acceptable.

I voted 20 - 25% of my monthly profits.
I included
1.Annual savings for new car.(you can also call this depreciation of current car.)
2.Loan for current car(s)
3.Annual maintanence.
4.Monthly fuel costs.

At 30 % for living expenses and commitments (excluding car loans).
40 % for savings
5-10 % for leisure

[rahul_jo]

Originally Posted by Hatari

A wise acquaintance in his 50s, who earns upwards of Rs 2.5 crores a year, use to drive a 4 year old Honda Civic. It is only recently that he decided to upgrade to a German luxury sedan after im sure much ribbing from friends/relatives/colleagues!

He would always say, why should I spend so much money on a depreciating asset!

He is every bit right with his decision. If we get extremely logical and think about a car. It's only a medium to take us from point A to point B.

Sure, some cars might be faster, better equipped or might have a good deal of brand value attached to it. But at the end of the day, it's still metal on wheels that take us from one point to another.

Just out of curiosity, did he get the new German car on a loan or cash down?

[GKR9900]

Just stumbled across this thread and boy this was such an eye opener! Thank you d3mon for creating the thread.

I voted for the 31-50% category. Now I wouldn't call myself financially independent as my income is combined with my family's income. However, a rough calculation indicates that I spend about 32% of my income alone on my auto needs. This doesn't include the occasional need for pimping my ride. After going through the discussions though, I feel the need to tone it down a bit.

If we strictly think in logical terms, the depreciating asset tagline does seem errr logical. But for most of us here, buying a car is much more of an emotional decision, so we do tend to deliberately forget about the Vitamin M factor. Well at least I do. If I had my way, I would've spent another 15-20% on a motorcycle EMI as well. But I didn't! Luckily, my parents knew exactly where I was heading and decided to put a stop to my automotive spending thoughts. So we bought an apartment and I'm paying about 60% of my current income on housing EMI alone. That leaves me just 8% of my own income to spoil. Lesson learnt! Although I feel proud to own an apartment of my own, occasionally I do salivate all over Youtube watching that Benelli TNT 300 rev!

[Hells Bells]

Unfortunately, spending 60% on home loan EMI is also not financially savvy. In a prudent financial plan, such emi should not be above ~30% of home take away.

[shankar.balan]

If one spends more than about 15-18% of one's income on one's car, it just doesn't make sense to own that class of car.
If one spends more than 30% of one's income on one's home loan EMI, then it just doesn't make sense to own that home.

Far better to use UBER daily and to live in a nice rented home instead. Leaves you with more cash to invest in higher return investments and leaves quite a bit over for the good things of life too.

Most people tend to over-reach themselves when buying a car - possibly fuelled by ego or the desire to create an "impression" amongst others.

Similarly, most people mistakenly think that any property investment is a great one which can't go wrong. Remember that in todays world, one will be lucky if one gets a Rental ROI of 3% per annum from one's property investment, vis a vis the loan one has taken. Also remember that property investments are such, that they invariably benefit the "next gen" rather than the chap who sweated blood to buy it!

Human nature won't change much. We also tend to behave like sheep, being afraid to go against the grain.

But if we use our god given intelligence and do some elementary math, I guess most of us will come to similar conclusions as outlined above!

[GKR9900]

Originally Posted by Hells Bells

Unfortunately, spending 60% on home loan EMI is also not financially savvy. In a prudent financial plan, such emi should not be above ~30% of home take away.

Originally Posted by shankar.balan

If one spends more than about 15-18% of one's income on one's car, it just doesn't make sense to own that class of car.
If one spends more than 30% of one's income on one's home loan EMI, then it just doesn't make sense to own that home.

Oh yes! I realise that very much now. I would have loved a bit more flexibility. Fortunately, the percentages I mentioned are only from my own income/salary. My family has other sources of income that are pretty well regulated. So the salary I earn is more or less seen as a supplement which gets mixed with the pool. Although I did toy with the idea of mutual funds and stocks for a while, the writing on the wall was clear. Any extra flexibility that I could afford would go to satisfying my love for automobiles. So this needed to be done. It was more of like a lesson to manage my finances.

OT: And just when I finished typing this, a TNT300 whizzed past me! God, I hate myself!

[Acharya]

Slightly on tangential note, isnt buying car is also linked to one's net worth?
I know some people who pay more than 50% of take home salary for the car they drive, I also know that they dont need their salary to run their lives.
If you have net worth of 5-7 crores, you can easily buy car of 50-70 lakhs irrespective of percentage of current salary.
Such cases are not rare in Blore, which is full of abroad returned folks who do not have very high salary but have high net worth.

[Suraj25]

Originally Posted by Acharya

Such cases are not rare in Blore, which is full of abroad returned folks who do not have very high salary but have high net worth.

And the folks with a lot of ancestral property. Sell a 60x40 plot in a decent area and buy yourself a Lamborghini 😛

[The Rationalist]

The debate will go on for ever. When I checked with my bank about my car loan eligibility, I was told I can 'buy' a car of 50 lakhs. Does that mean I can 'afford' a 50 lakh car, hell no. I ended up buying a car of 9 lakhs, less than 6 months my salary. My first car, cost 3.2 lakhs when I bought in 2002, I spent about 5 lakh on fuel and 1.8 lakh on maintenance over a period of 14 years. So it cost me 10 lakhs.One should not only think about the on road cost but all other associated expenses. I would never advise anyone to buy a car which is more than a years salary. You can argue you only live once, but if you live long by any chance, you are gonna repent a mistake of your youth like anything. One doesn't need bucket loads of money to have a fun to drive car. If you are still doubtful, there is an excellent thread by GTO http://www.team-bhp.com/forum/owning...rade-swap.html
If are young and have not yet joined NPS, do join it soon rather than thinking about buying the next car.