[amtak]

Originally Posted by amtak

I have loans, if I close them, Linea/Accent/I20/Jazz etc category. Right now, I cannot even afford a Nano!

How things change as years fly by- I am now on minimal home loan, drive a Figo Automatic (no loan); I need another car just to block parking and considering between Nano/Alto and even an Omni. I was very close to buying an Evalia but the seller didn't negotiate on the price value and I did not want to over pay.

To summarize, with time, our options increase. I can very well afford a new car now but priorities have changed over the years. From a petrol head, I am now a family man and while cars play an important role in my life, I am saving moolah for my kid's education, his housing requirements and other essentials of life. Heck, whenever I need an additional car, Ola is available.

Lastly, I had read somewhere on the forum, the cost of the car should not exceed your 6 months salary. So if you are earning about a lakh a month, the cost of the car should be 6 lakhs max. Having said that, mind is a monkey and we know what happens next

[V.Narayan]

A lot of sound advice on this thread of the biggest most expensive car you can buy at a given salary point. The key word here is 'salary'. Most salary earners, of which I was one many years ago, assume consistency of inflow and increments. This is usually assumed for life. Allow me to share a different perspective.

Through the last 25 odd years at least, since a meaningful range of cars has become available in India the asset that I have tried to maximize is the house we live in by always going for the best located, highest quality house/apartment that was just a little beyond the full stretch of the then available income. The house you live in speaks more about your standard & status than the car. And as you get more senior and have to entertain folks the house's 'primeness' is very important.

Where cars go like most we wanted machines that were posh relative to our position in life. But one rule I followed was to buy what could be paid for from my own liquidity - no EMIs. That has always acted as a natural restraint on the segment we went for but we never worried about EMIs. Most businessmen spend well within their capacity and not at the top end with loans like employees in large firms are tempted to do. This is driven by the inherent risk in the consistency of our incomes.

Having given all this unasked for advice I'll say if you are going for your first car ever then follow your heart. The pride you shall enjoy with your first car will rarely repeat itself with later bigger acquisitions.

[arit.mondal]

Originally Posted by V.Narayan

Through the last 25 odd years at least, since a meaningful range of cars has become available in India the asset that I have tried to maximize is the house we live in by always going for the best located, highest quality house/apartment that was just a little beyond the full stretch of the then available income. The house you live in speaks more about your standard & status than the car.

Since you brought it up, even though it might be judged off topic, now I am curious about your opinion on what multiple of current gross annual salary should one commit to house purchase. Let's assume a conservative 5-7% annual salary increment rate and no family money help. Loan tenure must not exceed 10-12 years.

[arighna.dutta]

Originally Posted by arit.mondal

Since you brought it up, even though it might be judged off topic, now I am curious about your opinion on what multiple of current gross annual salary should one commit to house purchase. Let's assume a conservative 5-7% annual salary increment rate and no family money help. Loan tenure must not exceed 10-12 years.

This needs another thread "How much house @ how much salary" :-).

[V.Narayan]

Originally Posted by arit.mondal

Since you brought it up, even though it might be judged off topic, now I am curious about your opinion on what multiple of current gross annual salary should one commit to house purchase.

Sorry to disappoint you. I don't know the answer and I have no experience to provide a context. The home I live in and the real estate I own were bought from business earnings and sale of shares. Bankers I suspect would find me a cheerfully messed up potential borrower with my gyrating income. Never a borrower nor a lender be. I am grossly out of date.

[serious_maniac]

Originally Posted by arit.mondal

Since you brought it up, even though it might be judged off topic, now I am curious about your opinion on what multiple of current gross annual salary should one commit to house purchase. Let's assume a conservative 5-7% annual salary increment rate and no family money help. Loan tenure must not exceed 10-12 years.

This is indeed off topic, but global benchmark and true for India as well, 60 months of take home salary is what your house purchase can be. The higher % increase in salary in India offsets the higher interest rate. Also assumes 10-20% of equity is by the owner.

~m

[am1m]

Originally Posted by V.Narayan

Never a borrower nor a lender be. I am grossly out of date.

Not at all sirjee! A lot of us are beginning to realize the truth of this maxim. Never take a loan for a depreciating asset. That is as relevant today as it has always been and will always be.

A car/bike is always a depreciating asset.

[am1m]

Originally Posted by serious_maniac

...global benchmark and true for India as well, 60 months of take home salary is what your house purchase can be.

I'm sorry, but that sounds suspiciously like the "the engagement ring a man should buy for his fiancee' must be worth x times his monthly salary" 'wisdom' that advertising agencies spread to encourage people to buy diamonds!

And for the same dubious reasons!

Like with any other significant purchase car or home (or diamonds!), please do the hard numbers that apply to your personal financial situation instead on relying on benchmarks that may have marketing reasons behind them. Affordability and long-term value are serious considerations. Most homes in Bangalore that are going for a crore or two are simply not worth it in any rational sense.

[ani_meher]

Please keep discussion on topic. As rightly said above, car is not an asset, while house is definitely an asset, even if you may never rent it out. Curious persons can start a new thread for the same.


I echo the thoughts above, that if one can't afford the car in full payment, he shouldn't buy it. Decision of whether to take loan or not should be determined by opportunity cost, and not because one couldn't afford making full payment.

[rajushank84]

Originally Posted by ani_meher

Please keep discussion on topic. As rightly said above, car is not an asset, while house is definitely an asset, even if you may never rent it out. Curious persons can start a new thread for the same.


I echo the thoughts above, that if one can't afford the car in full payment, he shouldn't buy it. Decision of whether to take loan or not should be determined by opportunity cost, and not because one couldn't afford making full payment.

I think this approach may not be ideal either. Because someone could afford a large lumpsum but their net worth is low and they don't have enough income.

For example: Retirees with 1 crore. No other income. Theoretically they can put down a large amount, but does that mean they can afford to?

My suggestion (or I should say, just my idea) being: it should be based on neither salary nor net worth, but rather the cost should be a percentage of current income that is expected to continue in the foreseeable future. Whether that is income from salary, or mutual funds, or pension or something else, it doesn't matter. And this cost should factor in everything including depreciation, fuel, insurance, maintenance.

And that percentage should tell you what car you should afford.

[ani_meher]

Even in your point, affordability takes the front place. Our methods of arriving at this number may be different, but concept remains the same - buyers should not overstretch.

[selfdrive]

If something goes kaput in the car tomorrow, can you afford to bear that cost without impacting your lifestyle? Can you afford to pay for zero depreciation insurance, other 'wear and tear' parts (tyres/ battery/ wipers etc), regular maintenance? Rough amount would be 1% of onroad cost of car for maintenance, and affordability of 10% of onroad cost on wear and tear. If this is not affordable, it is better to stay away from purchases; especially as there are many tempting deals in the used car market.

I have seen people buying expensive cars but then using it rarely. I dont think cars were made for sitting in a garage. This, though, is subjective and opinions could vary.

[Chetan_Rao]

Originally Posted by selfdrive

.....

I have seen people buying expensive cars but then using it rarely. I dont think cars were made for sitting in a garage....

Me neither, but plenty of cars are bought intended to be porch/garage embellishments, not as machines that satisfy driving needs or pleasures of the person paying for it. Vanity trumps necessity for a good bunch of car buyers. To each his own.

[aadya]

Not an expert. Have been seeing my Dad/Uncle/myself buy multiple(30) commercial/personal vehicles over a period of 30 years. I was/am personally involved in buying,using and maintaining of at least 12 among them. What I have observed over the period of years and number crunching, I don't have exact statistics, cost of owning a vehicle per month is roughly 2% on road price of the vehicle. This 2% includes oppurtunity cost(of amount paid upfront), EMI cost, Repair/maintenance cost, Fuel cost and resale value. This applies for most of the cars in non luxury segment. We can keep arguing with this number it could be 1.8 or 2.24 %, 2% is easy to remember and fits most cases, if not all.

For example, if a car costs 10Lakhs OTR, monthly cost of owning that particular car is Rs.20000. So we should check whether this particular car is worth spending Rs.20000 for.

[Latheesh]

Originally Posted by aadya

For example, if a car costs 10Lakhs OTR, monthly cost of owning that particular car is Rs.20000. So we should check whether this particular car is worth spending Rs.20000 for.

It is like renting the car @ 20000 per month, right? If you are comfortable with the number or car is worth paying the amount you can go ahead and buy it.

3-4 year old same model @ 10-12K per month makes more sense(If you go for used one).