What Car @ What Salary ?

aargee · 24th April 2010, 17:11

Car or house be it anything, try to pay in full & avoid interest. When I bought my WagonR that did 16K in 2.5 years, I'd paid 2.14 out of my pocket & was offered 1L loan for Rs 2300 EMI for 60 months. End of 1 year I realized my foolishness 'cause the EMI was around 1/20th of my drawing at that time & if I could've waited 2-3 months more when I bought the car, I could've taken it without a loan. Hence after an year I closed the loan. I paid around 86K for foreclosure including the 1 or 2% charges apart from the interest paid for an year.
Lesson learnt - Patience pays, impatience pays with interest

The day I closed the loan, I felt like, I got relieved from everything. Again, I went by what I wanted rather than anything else. Is there a downside

? Yes, I feel very difficult to replace & I don't feel like exchanging it for a newer models.

Seek · 24th April 2010, 17:19

A thumb rule i picked up somewhere and find fairly agreeable is that the cost of the car you own should be 50% of your annual salary

So at an annual salary of Rs 15 L p.a, you should be owning a car of 7.5 L, of course other liabilities permitting this expense!

navin · 24th April 2010, 18:17

Quote:

Originally Posted by bblost

IMHO what you are is not defined by what you drive.
Its defined by how you drive it.

Beautiful words!

Quote:

Originally Posted by Seek

A thumb rule i picked up somewhere and find fairly agreeable is that the cost of the car you own should be 50% of your annual salary

I did a quick check for myself and most of my friends. What I realised is that while non of us really looked at % of salary as a yardstick the car we were most comfortable with cost us about 1/3 to 1/4 of our annual salary. Then again we are all family men so there are other presures on our income.

shuvc · 24th April 2010, 20:00

Quote:

Originally Posted by navin

Then again we are all family men so there are other presures on our income.

Other pressures are sometimes due to additional hobbies/interests too. Consider a person passionate about cars, audio/video, photography, watches ... the percentage allocation would depend upon the balance he strikes between these.

I normally end up stretching to buy beyond my means. While I advise most people not to do so, when it comes to me I tend to spend weeks and months on calculations and then take the risk knowingly. Not a wise thing to do, but that's how I am

punitkakri · 24th April 2010, 20:46

Well guys the ongoing discussion is great. Once again the kind of car one picks up will vary from city to city. In a city like Mumbai a Rs. 50,000/- monthly take home might only translate to an i10/ Swift while in a tier 2 city this could be a Honda city.!! We very much need to factor the place we live in.

aseem · 24th April 2010, 21:50

This thread is ending up to be rather depressing. If anyone from car companies is reading this threa, they might ending up changing professions

Ricky_63 · 24th April 2010, 22:07

I have NOT read the whole thread, BUT am putting down my perceptions any which way ! The car/s you own are based on what you can afford & most importantly, what you aspire to own.

There are times in life when one has reached a "certain stage" where fulfilling one's passions- be it house, car/s, music systems or anything for that matter is important. Afterall why do we earn ? So that we can look after our families AND fulfill any desires we aspire to - right ?

So what you earn & more importantly what you save will decide what you buy.

Wisdom

I for one started out with a modded Lancer, coz at that point in time I thought that was the right thing to do. I got ripped by unscruplous people is another matter.

Go with your heart AND your head.

Buy what you can afford & "ENJOY" it. That to me is the most important thing.

Cheers

drrajasaravanan · 24th April 2010, 23:07

Hi
My idea goes like this
1. The total cost should not exceed your annual salary
2. Per month EMI including fuel should not exceed 10percent of your monthly income. So if your monthly income is 50000 than your emi should be around 5000 to 6000 rupees. If you are looking at a bigger vehicle than save the money on the down payment so that your emi works out to the desired range. But compromising to buy a vehicle to fit your budget without saving up for the down payment in a hurry might not work as you cant enjoy what you have not desired.
3. Plus depends on your present commitments.
Buddy we can plan for the future but we can never expect things to go our way all the time. So all the best.
Cheers.

Caramelo · 25th April 2010, 00:26

everyone listen and keep in mind the following thumb rule.

"if you can pay off the car loan in 3 years you can afford that car."

its that simple!! no ifs and buts. so if you can pay for it during this period than you can certainly afford it or else its expensive for you. it may be a nano to a mercedes benz S class!

shuvc · 25th April 2010, 01:37

Quote:

Originally Posted by Ricky_63

Buy what you can afford & "ENJOY" it. That to me is the most important thing.

+1 to that. I'd rather stretch a bit for something I'll enjoy than spend a tad less and end up with daily 'what-ifs'.

ac 427 · 25th April 2010, 14:15

these are coming from my financial planner.

Never buy a liability on borrowed money. We might want to call a car an asset, but its an asset whose value keeps on depreciating, and hence id call it a liability.
The total cost of the car should not be more than half of your annual salary. e.g: if your sal is 12 lacs p.a you should buy a car which fits within 6 lacs.

cheers,
ac

artofzen · 25th April 2010, 15:49

Many of the 20+ cars which we see on the roads are bought as company assets and hence even though it deppreaciates, they can get tax exempt!.

But as an individual buyer , I agree with the above posts. I would not want to take out a loan on a car which is more than half my salary, because there is no guarantee that we will have an annual salary tomorrow. And if that happens it becomes a BIG liability.

oss · 25th April 2010, 16:23

I too go with 'half the annual salary' thumb rule. Whether it is half the annual gross or net salary depends on how aggressive/conservative you are and how much of other financial committment you have.

oxyzen · 25th April 2010, 20:28

There has been a lot of theories lot of arguments. Myself being a bachelor and practically no financial pressure from my family I would personally buy cars in this order.
take home
3L- Spark Ps
4L- Astar Vxi
5L- Swift Lxi
8L - Fiesta 1.6
15L- Skoda Laura
25+ ----BMW

Well looks like 1yr take home salary is my budget. Surely for a family man it should be 6 months salary.
Personally I will never opt for loan to buy a car. And I advice all my friends as well to stay away from loans.

aargee · 26th April 2010, 08:24

Well, I see one common advice pouring in stating, that the cost of the car should not be more than half of the annual salary.

Well, about 2 years ago, I'd plans to buy an Innova or Scorp by 2011 end & have been saving money regulary to buy without any loan & hence the patience meditation for almost 5 years. If I buy one, that would be buying a car that is more than my annual CTC.

So, I would slightly put it this way, the car loan should not be more than half of the annual salary. Is that incorrect?

24th April 2010, 17:11	#61
aargee Senior - BHPian Join Date: Jan 2010 Location: TSTN Posts: 6,236 Thanked: 9,637 Times	Car or house be it anything, try to pay in full & avoid interest. When I bought my WagonR that did 16K in 2.5 years, I'd paid 2.14 out of my pocket & was offered 1L loan for Rs 2300 EMI for 60 months. End of 1 year I realized my foolishness 'cause the EMI was around 1/20th of my drawing at that time & if I could've waited 2-3 months more when I bought the car, I could've taken it without a loan. Hence after an year I closed the loan. I paid around 86K for foreclosure including the 1 or 2% charges apart from the interest paid for an year. Lesson learnt - Patience pays, impatience pays with interest The day I closed the loan, I felt like, I got relieved from everything. Again, I went by what I wanted rather than anything else. Is there a downside ? Yes, I feel very difficult to replace & I don't feel like exchanging it for a newer models. Last edited by aargee : 24th April 2010 at 17:17.
	() Thanks

24th April 2010, 17:19	#62
Seek BHPian Join Date: Dec 2009 Location: Chennai Posts: 182 Thanked: 230 Times	A thumb rule i picked up somewhere and find fairly agreeable is that the cost of the car you own should be 50% of your annual salary So at an annual salary of Rs 15 L p.a, you should be owning a car of 7.5 L, of course other liabilities permitting this expense!
	() Thanks

24th April 2010, 20:46	#65
punitkakri BHPian Join Date: Feb 2010 Location: Mumbai Posts: 138 Thanked: 27 Times	Well guys the ongoing discussion is great. Once again the kind of car one picks up will vary from city to city. In a city like Mumbai a Rs. 50,000/- monthly take home might only translate to an i10/ Swift while in a tier 2 city this could be a Honda city.!! We very much need to factor the place we live in.
	() Thanks

24th April 2010, 21:50	#66
aseem Senior - BHPian Join Date: Jul 2005 Location: Delhi Posts: 1,730 Thanked: 441 Times	This thread is ending up to be rather depressing. If anyone from car companies is reading this threa, they might ending up changing professions
	(1) Thanks

24th April 2010, 22:07	#67
Ricky_63 Senior - BHPian Join Date: Dec 2006 Location: Gurgaon Posts: 3,885 Thanked: 518 Times View My Garage	I have NOT read the whole thread, BUT am putting down my perceptions any which way ! The car/s you own are based on what you can afford & most importantly, what you aspire to own. There are times in life when one has reached a "certain stage" where fulfilling one's passions- be it house, car/s, music systems or anything for that matter is important. Afterall why do we earn ? So that we can look after our families AND fulfill any desires we aspire to - right ? So what you earn & more importantly what you save will decide what you buy. Wisdom I for one started out with a modded Lancer, coz at that point in time I thought that was the right thing to do. I got ripped by unscruplous people is another matter. Go with your heart AND your head. Buy what you can afford & "ENJOY" it. That to me is the most important thing. Cheers
	(1) Thanks

24th April 2010, 23:07	#68
drrajasaravanan BHPian Join Date: Oct 2009 Location: Chennai Posts: 258 Thanked: 1,248 Times	Hi My idea goes like this 1. The total cost should not exceed your annual salary 2. Per month EMI including fuel should not exceed 10percent of your monthly income. So if your monthly income is 50000 than your emi should be around 5000 to 6000 rupees. If you are looking at a bigger vehicle than save the money on the down payment so that your emi works out to the desired range. But compromising to buy a vehicle to fit your budget without saving up for the down payment in a hurry might not work as you cant enjoy what you have not desired. 3. Plus depends on your present commitments. Buddy we can plan for the future but we can never expect things to go our way all the time. So all the best. Cheers.
	() Thanks

25th April 2010, 00:26	#69
Caramelo BHPian Join Date: Nov 2008 Location: ahmedabad Posts: 769 Thanked: 16 Times	everyone listen and keep in mind the following thumb rule. "if you can pay off the car loan in 3 years you can afford that car." its that simple!! no ifs and buts. so if you can pay for it during this period than you can certainly afford it or else its expensive for you. it may be a nano to a mercedes benz S class! Last edited by Caramelo : 25th April 2010 at 00:29.
	() Thanks

25th April 2010, 14:15	#71
ac 427 Senior - BHPian Join Date: Oct 2005 Location: Mumbai Posts: 1,393 Thanked: 244 Times View My Garage	these are coming from my financial planner. Never buy a liability on borrowed money. We might want to call a car an asset, but its an asset whose value keeps on depreciating, and hence id call it a liability. The total cost of the car should not be more than half of your annual salary. e.g: if your sal is 12 lacs p.a you should buy a car which fits within 6 lacs. cheers, ac
	() Thanks

25th April 2010, 15:49	#72
artofzen BHPian Join Date: May 2004 Location: VOCI-LHR Posts: 735 Thanked: 68 Times View My Garage	Many of the 20+ cars which we see on the roads are bought as company assets and hence even though it deppreaciates, they can get tax exempt!. But as an individual buyer , I agree with the above posts. I would not want to take out a loan on a car which is more than half my salary, because there is no guarantee that we will have an annual salary tomorrow. And if that happens it becomes a BIG liability.
	() Thanks

25th April 2010, 16:23	#73
oss BHPian Join Date: Feb 2005 Location: Chennai Posts: 683 Thanked: 6 Times	I too go with 'half the annual salary' thumb rule. Whether it is half the annual gross or net salary depends on how aggressive/conservative you are and how much of other financial committment you have.
	() Thanks

25th April 2010, 20:28	#74
oxyzen Senior - BHPian Join Date: Feb 2010 Location: Pune Posts: 1,051 Thanked: 394 Times	There has been a lot of theories lot of arguments. Myself being a bachelor and practically no financial pressure from my family I would personally buy cars in this order. take home 3L- Spark Ps 4L- Astar Vxi 5L- Swift Lxi 8L - Fiesta 1.6 15L- Skoda Laura 25+ ----BMW Well looks like 1yr take home salary is my budget. Surely for a family man it should be 6 months salary. Personally I will never opt for loan to buy a car. And I advice all my friends as well to stay away from loans. Last edited by oxyzen : 25th April 2010 at 20:29.
	() Thanks

26th April 2010, 08:24	#75
aargee Senior - BHPian Join Date: Jan 2010 Location: TSTN Posts: 6,236 Thanked: 9,637 Times	Well, I see one common advice pouring in stating, that the cost of the car should not be more than half of the annual salary. Well, about 2 years ago, I'd plans to buy an Innova or Scorp by 2011 end & have been saving money regulary to buy without any loan & hence the patience meditation for almost 5 years. If I buy one, that would be buying a car that is more than my annual CTC. So, I would slightly put it this way, the car loan should not be more than half of the annual salary. Is that incorrect?
	() Thanks