[Speed Pujari]

Interesting thread. Let me put my experience.
I never did any calculation of salary percentage while buying my car. Simply bcoz I saw people with my kind of income bracket were driving a car worth 11-15 lakhs.
When I bought my T-Jet in 2010, the 5 years EMI was 15% of my monthly income after some down payment. Including my wife's salary this was 9% of our gross take home. We had a home loan as well. So home loan+car loan was 65% of my take home and 30% of my and wife's salary taken together.
(I am doing this math for the first time today).

When I was buying the car I already had a Palio which had no loan on it. I bought the T-Jet simply bcoz I had anticipated that I will NEVER get a car like this again. We were not in a need of second car.

The irony behind T-Jet was, we were eligible for very good loans but we did not have good liquid for down payment lol.
Sometime I felt the EMI is a burden but never bcoz I fell short of money in a month, but simply a time pass thinking.

Now I am trying to understand this logic of 30% of gross income. I really am unable to buy this logic. If you buy a car you certainly want to drive it.
I use to keep a good amount of cash in reserve simply bcoz I want to drive.

We very often go for long drives, sometimes for no reason at all. So apart from petrol I also need to reserve money for Hotel tariff, food etc. In a month it adds to my car EMI. Since our EMI is low, we are able to enjoy star hotel and very long drives without feeling a pinch.

Given our salary we could have afforded a sub 25 Lakhs car for that matter, but life could not have been so much enjoyable the way it is with a lower EMI burden.
So with a salary of 5 lakhs, better get a nice bike like thunderbird/CBR250 etc.
With a salary of 10L, best is get a used car. That is what I did when I was in that salary bracket- I bought a used Palio for 1.5 lakhs and maintained and enjoyed it to the core.

[oxyzen]

Originally Posted by Speed Pujari

We very often go for long drives, sometimes for no reason at all. So apart from petrol I also need to reserve money for Hotel tariff, food etc. In a month it adds to my car EMI. Since our EMI is low, we are able to enjoy star hotel and very long drives without feeling a pinch.

Agreed. Better to opt for a car with one segment lower and spend the money saved on trips.

Originally Posted by Speed Pujari

So with a salary of 5 lakhs, better get a nice bike like thunderbird/CBR250 etc.
With a salary of 10L, best is get a used car. That is what I did when I was in that salary bracket- I bought a used Palio for 1.5 lakhs and maintained and enjoyed it to the core.

For a 10L salary, I think one can also go for cars like Alto K10/Eon/Spark.
On the other hand one need not necessarily buy a new car if he earns more than 10L. For example you could have got a used Jetta/Laura/Cruze instead of T-Jet. Used cars let you choose from a segment above. That's it.

[motorworks]

This topic has been on my mind for quite a while now, but I think at the end of the day it boils down to the individual and his financial stability. We are all auto enthusiasts and buying a good car is always on top of our list. But it should never result in a financial mess.
My wife and I started saving for our 1st car's downpayment 1 year ahead of our marriage and even though the right car for our earning seemed to be a good hatch, we ended up buying the dzire in 2008 when it was launched. At that point of time we had no other loans etc, so a 15% EMI out of our salary was not something that bothered us too much. H.ever, what i noticed was people in my salary bracket generally were driving around in altos / santros and even my manager had a santro then. So it was a bit uneasy at times, embarrassing too, but we loved our car and the dzire was hugely practical especially when we traveled back to our native places etc. In the meanwhile my wife needed a car as well so we ended up buying a used alto with our savings. In 2012, I got bitten by the new car bug and sold the dzire for an excellent re-sale value and moved on to a Rapid tdi. Even now, my manager drives a honda city and like her, a lot of people who I know are earning 4-5 times the money I make are driving around in similar cars. So it is tricky as to what is the balance and depends on your priorities.
Also, it depends on your other expenditures as well. If you have other high spending patterns like holidays, expensive clothes etc, then your monthly EMI outflow needs to be less than 30%.

[entropy]

Ok so here goes my story and thoughts too ...

1. While I was on salary (for a total of 8 years of my life) I never owned a car. Primarily because I lived in a country (Japan) where public transport was more convenient. By the time I decided to move back to my mother country the car-bug had somehow bitten me.

2. While on salary I did bought couple of premium villas in Bangalore (one cash down and other on EMI) through hard earned savings and few other small real-estate investments around 1998 to early 2000 period.

3. The first car of my life (after I quit salaried job and returned back to India in semi-retirement mode) was Honda City ZX CVT. By this time I was more or less secured for regular income through good rentals and appreciated asset base. My principle afterwards has been never to indulge more than 15% of your net income on cars (+ related expenses). Since real-estate investments (asset base) has turned out to be quite good and now also guarantee a respectable constant income - There is a constant lure to increase this percentage higher but still I prefer to funnel excess savings into appreciating assets. I'd like my asset base to pay for my Bentley :-) if and when it happens (and I'm quite sure it will happen ).

4. For a non-car guy I'd say 5-7% of net income is what one can put aside for A to B transportation.

5. Of course these percentage talks are perhaps valid only upto certain point and probably don't matter much once you've crossed certain threshold (few hundred cr mark ?)

[jetsetgo08]

Hello Bhpians,

Pardon me for the revival of a dormant thread. Upon extensive search, I found this thread the most relevant to post my query. I have been working since 2011 and have saved just enough to buy a diesel hatchback by cash. Just wanted to confirm if it is a wise decision to spend all my savings on a car.

Currently, my daily drive is an 83k Km's and 7.5 years old Alto. It clocks about 1600Km's a month. Though it can easily stretch its legs for another 3 years, the comfort that the car offers is no longer the same as it used to be when it was new. The ride quality has not improved despite multiple suspension overhauls, lead to higher maintenance expenses. A new car is primarily being considered for better comfort,ride quality and lesser cost/km.

I have searched for several beater cars(read it as Swift's,considered for pocket friendly maintenance) to end my predicament. But could not conclude as the well maintained one's were exorbitantly priced.

Following are my queries-

1. Should I defer the purchase of a car?
2. Should I buy a new Swift Vdi with Airbags?
3. Should I buy a used diesel Polo/Linea/Figo etc.? (Or any car with poor resale are easy buy. What could be maintenance cost per year for such cars?)
4. What is the right balance of down payment vs EMI?( Should I strictly adhere to the EMI = 20% of monthly savings? )

Thanks & drive safe.

P.S.: Moderators, if the post is inappropriate please feel free to move it to the concerned thread.

[shankar.balan]

Originally Posted by jetsetgo08

I have searched for several beater cars(read it as Swift's,considered for pocket friendly maintenance) to end my predicament. But could not conclude as the well maintained one's were exorbitantly priced.

Following are my queries-

1. Should I defer the purchase of a car?
2. Should I buy a new Swift Vdi with Airbags?
3. Should I buy a used diesel Polo/Linea/Figo etc.? (Or any car with poor resale are easy buy. What could be maintenance cost per year for such cars?)
4. What is the right balance of down payment vs EMI?( Should I strictly adhere to the EMI = 20% of monthly savings? )

Thanks & drive safe.

Im just putting a few things down here.

1. Buy a Brand new car since you look like the sort of chap who plans to hang on to the car for a longer period. Used cars ought to ideally be only bought from someone you know. And used Diesels are aplenty but no one knows how the previous owner has driven it.
2. Do you really need a Diesel given that parity between petrol and diesel is fast being achieved?
3. Don't put all your savings and buy a car - use some money to put a decent downpayment and pay off the rest via EMI and try and keep the overall EMI tenure low. I would suggest pay a down payment of maybe 40% and take the rest on loan.
4. If you really like the Swift then I suggest please buy either the ZXi or ZDi - don't settle for Vdi or Vxi.
5. Remember though that the Swift is almost at the end of its natural life cycle and a new one is likely sometime in the next year or so.
6. Please buy a top spec car which has all the Safety kit. Dont get lured away by gimmickry and silly features and choose those over Safety.
7.Spend ideally a max of maybe 15% of your total monthly income on your Car EMI. Better always to cut your coat according to the cloth you have rather than over-stretch and then find it difficult to sustain.
8. Lastly, follow your heart also - everything in life is not about Excel Sheets, calculations and "mind" only. Your heart will tend to guide you to a place where you are happy and that's precisely what we all live for, isn't it?

[jetsetgo08]

Firstly, thanks for the prompt reply sir.

Originally Posted by shankar.balan

2. Do you really need a Diesel given that parity between petrol and diesel is fast being achieved?

For the petrol cars with mediocre low end torque(Alto 800cc), the clutch is wearing out sooner to my driving style. Have to do a lot of half-clutching at traffic signals on inclines or fly overs.
The diesel cars are a saviour on long trips, specially in cases where one is driving alone.

Originally Posted by shankar.balan

3. Don't put all your savings and buy a car - use some money to put a decent downpayment and pay off the rest via EMI and try and keep the overall EMI tenure low. I would suggest pay a down payment of maybe 40% and take the rest on loan.
7.Spend ideally a max of maybe 15% of your total monthly income on your Car EMI. Better always to cut your coat according to the cloth you have rather than over-stretch and then find it difficult to sustain.
8. Lastly, follow your heart also - everything in life is not about Excel Sheets, calculations and "mind" only. Your heart will tend to guide you to a place where you are happy and that's precisely what we all live for, isn't it?

Thanks. Just needed an affirmation if I am thinking in the right direction. Will surely work out the calculations.
What should be the ideal tenure for a loan in case 15-20% of savings are devoted to EMI's?

Originally Posted by shankar.balan

4. If you really like the Swift then I suggest please buy either the ZXi or ZDi - don't settle for Vdi or Vxi.
5. Remember though that the Swift is almost at the end of its natural life cycle and a new one is likely sometime in the next year or so.
6. Please buy a top spec car which has all the Safety kit. Dont get lured away by gimmickry and silly features and choose those over Safety.

I love the Polo Tdi,but for its poor resale. I don't want to get caught napping if an investment awaits in the future. And I would not mind selling a car if it is really worth it.
The Swift Vdi(O) is equivalent to Zdi in terms of safety, minus few features like rear defogger, seat height adjustment, alloys, push button start/stop etc.

[swiftnfurious]

Originally Posted by jetsetgo08

...I have searched for several beater cars(read it as Swift's,considered for pocket friendly maintenance) to end my predicament. But could not conclude as the well maintained one's were exorbitantly priced....

One thing I always believe is, buy a brand new car if the re-sale is solid! Because, you anyway don't get it cheap while buying a pre-owned one. Put the extra cash, enjoy the new car and sell it off with a good re-sale.

Buy a flop car from the re-sale market, because you enjoy a good price and wouldn't feel much of a pinch when selling it again.

Originally Posted by jetsetgo08

...The diesel cars are a saviour on long trips, specially in cases where one is driving alone...

Please do work out the maths here as well. A fuel efficient petrol wouldn't make much difference in today's scenario. Plus, you actually pay a 1L + interest on EMIs for a diesel car over petrol, so consider that too please. If the maths / mind is still in favour of a diesel, go with it.

Again, I presume you were looking for a pre-owned Swift D? Did you check petrol Swifts and you may end up finding a good one at a good price. Advantage - you'll save a lot more on the capital if you buy a pre-owned (as you know) Vs a brand new Swift diesel.

[abeerbagul]

Originally Posted by jetsetgo08

For the petrol cars with mediocre low end torque(Alto 800cc), the clutch is wearing out sooner to my driving style. Have to do a lot of half-clutching at traffic signals on inclines or fly overs.

Clutch does not wear out if you do half clutching properly on inclines.
Example of wrong half clutching:
You are stopped on an incline, so you pull up the hand brake.
Then you press the accelerator to raise rpm upto 2k to 3k
Only release clutch half way, release the hand brake and crawl up the incline with high rpm and half clutch.
This will burn out clutch in a short time and overheat the engine.

Example of right half clutching.
You are stopped on an incline, so you pull up the hand brake.
Keep your foot off the accelerator, so car is on idling rpm.
Release the clutch half way till you feel it "bite"
Now release the hand brake, and the car will not roll back since the half clutch bite is holding it in place.
Now slowly press accelerator to raise rpm upto 1.5k to 2k and release clutch fully and car will crawl forward.

I practise this many times on the Mumbai Pune expressway climbing up the Lonavala ghat.

[jetsetgo08]

Originally Posted by swiftnfurious

Buy a flop car from the re-sale market, because you enjoy a good price and wouldn't feel much of a pinch when selling it again.

+1. I wanted to cash in on the benefits of buying a used car with poor resale. But it seems the expenses in case of repairs would be inversely proportional to the vehicle sales. Worst case, one might end up spending an amount equivalent to vehicle's purchase price for repairs.

Originally Posted by swiftnfurious

If the maths / mind is still in favour of a diesel, go with it.

Neither the maths/mind is in favour of a diesel. It is mostly the heart that is yearning to own a vehicle with different character.

At times I wonder how life would be without the bug of automobiles. At least we save a fortune.

I would have to check on the petrol swifts. But, it seems their resale value has gone up in the last 6 months,due to diminishing petrol-diesel difference.

Originally Posted by abeerbagul

Now release the hand brake, and the car will not roll back since the half clutch bite is holding it in place.

Thanks for the advise. I did try the right method for a few times but ended up stalling the car/rolling back(may be because of under powered 800cc engine). This sent shivers down my spine. Since then I had to rely on my lazy feet and the result is a premature clutch wear out. As they say bad/old habits die hard.

[shankar.balan]

Originally Posted by jetsetgo08

What should be the ideal tenure for a loan in case 15-20% of savings are devoted to EMI's?

I love the Polo Tdi,but for its poor resale.

In general 3 year loans are perfect.
Polo TDi is a superb car.

Good choice.

[m3_07]

Many If's & But's

If cash down isn't an option someone is comfortable with & with options to assess a loaner plan - if the organisation offers car lease as a benefit, this isn't a no brainer.

https://salaryplan.co.in/costSaving.htm

Also to state, Car lease is interpreted in many flavors in a certain organization. In my case, if a certain employee does not opt for car lease, he stands to loose the benefits of claiming the driver salary/ fuel expenses. This hurts too much & imminently forces a an employee to opt for car lease. The benefits are too hard to ignore.

[Hatari]

As a ballpark 12-15% of your monthly take home in (EMI + fuel + maintenance) is a good reference. Im sure unmarried twenty somethings, living with their parents, with no household expenses will have a different yardstick!

But if you're a family man, and a smart one at that, 15% should be the yardstick.
But you must buy smart, look for fresh used cars. I got a 15th month old Verna SX with 10k kms on the odo for 6.3L, in mint condition. Im 35. My monthly outlay on my Verna is less than 1%.

And never forget, a car is a depreciating asset.

[AutoSphere]

Originally Posted by Hatari

As a ballpark 12-15% of your monthly take home in (EMI + fuel + maintenance) is a good reference. Im sure unmarried twenty somethings, living with their parents, with no household expenses will have a different yardstick!

Spot-on !

I have another rule-of-thumb:
Not more than 1/3 of your annual take-home on the car-loan for a max tenure of 5 years, and,
Not more than 5 times your annual take-home on the housing loan - simply because real-estate appreciates, tenure is much longer and hopefully salary also goes up.

So if one wants a better car for the same budget, then a used car should be considered.

[Acharya]

I have slightly different view on this equation of 'what car @ what salary. IMO, what car you can afford is actually linked to your net worth, not just your salary. In my opinion, one could always buy a car worth 7-10% of his net worth (if net worth is positive).
Moreover, 7-10 percent of net worth is the maximum limit. In a conservative place like Bangalore where many people live way under their means, this ratio would be minuscule.

Also, one should take loan for car only when it helps save some tax. Otherwise better to put down cash for such expenses, like cars.

Just for clarity :- net worth = all asset - all liability, for an individual.