[shuvc]

Originally Posted by Devil on Wheels

Scenario 2: 100% financed (again to keep it simple) @ 10% SI. And Invests Rs. 100,000 in MF with average return of 30%.

To make it even sweeter, currently car loans work out to around 5% SI

[Buffetfan]

1. What car you purchase not only on your current income but also the savings and assets that you have built up / inherited.

2. Assuming that you dont have a huge inheritance (At least a couple of crores in free assets - not in the form of 5 rooms in the ancestoral haveli), Here are my recommendations assuming you take a 5 year loan.

a) In case you earn more than 60k per month. A comfortable EMI should not be more than 10% of your net salary after tax,

Sample EMI for 5 years @ 10k per month - Swift DZire, Fiesta, Logan, Indigo, i20 etc
Sample EMI for 5 years @ 20K Rs / month - Innova V, Corrolla, Civic, Laura etc etc

b) 30-60k per month, we can bring this figure upto 15% of your salary -

Sample EMI for 5 years @ Rs 9k per month emi - Swift, i10, Indigo etc etc

c) Less than 30k per month : Upto 20 percent of your salary for a new car or buy a nice condition used model.

Sample EMI for 5 years Rs @ 6k per month for a Wagon R, Santro, Beat etc etc

Some of the logic of one with a smaller salary parting with a higher portion it may sound sound counterintuitive. Some will argue that it is the higher salaried person who should part with a bigger percentage as he already has enough left to cover other expenses.

My logic is that just the safety of being inside a car has a premium in my mind and if you are less fortunate in terms of salary-prepare to part with a higher portion of your salary for that safety net. Saving money and getting involved in an accident with family on a 2 wheeler is simply not worth it.

Once you cross above thresholds, everything above that is more heart and less mind. We should remember that we are putting money into a fast depreciating asset-money which could be better used in kids education, buying an additional house (note that I did not say buying a bigger home as that is again wasteful beyound a point), investing in the stock market, saving in the bank etc etc.

3. If we really like to own an exotic cars with a lower salary, pre-owned is definitely an option, especially as many of these models have very high reliability and can last 10+ years with ease.


Finally, I recommend 5 year loans as most of the loans are available at 9-10 % per annum and any half decent mutual fund today can outperform these numbers. We are better off loaning and parking the surplus funds to earn a better return-but al depends on your risk profile, capacity to take a loss and how peacefully you can sleep knowing that you are doing the right capital allocation move-even if that means being indebted.

[aditya101]

Not directly answering the original post, but one good advice that I have read on Team BHP is to never buy a second hand car which you could never afford in the first place.

Folks go out any buy second hand octavias or BMWs and then go around driving without AC because it is too expensive to repair ....

[Devil on Wheels]

Originally Posted by aditya101

Not directly answering the original post, but one good advice that I have read on Team BHP is to never buy a second hand car which you could never afford in the first place.

Folks go out any buy second hand octavias or BMWs and then go around driving without AC because it is too expensive to repair ....

There was this guy in my office who bought an Esteem, pretty old, for 140 K. But every month after 15th he used to come to office on his CD100.

Whats the point in showing off, friends/family/colleagues are not as foolish as some of us like to believe.

[govigov]

@all,

which EMi is better? 5yrs or 7yrs? if i do 7yrs at 20% of salary i can get a car that is a notch better, but at 5yrs, i would have to look at a segment lesser.

This is considering a fixed downpayment on whatever the scenario.

regards,
govigov

[Gansan]

Originally Posted by Devil on Wheels

There was this guy in my office who bought an Esteem, pretty old, for 140 K. But every month after 15th he used to come to office on his CD100.

Whats the point in showing off, friends/family/colleagues are not as foolish as some of us like to believe.

That is, assuming one buys a car merely to show off! But it may simply be your assumption. A person may have a genuine need for a four wheeler, even though he may commute to office by bike. I commute to office mostly by bike as it is not only economical but faster as well. I take the car out only when more than two persons have to travel / during night times / foul weather / week-end family outings.

Perhaps you expect the person to become status conscious and discard the bike now that he has a car?!

[aargee]

Originally Posted by Gansan

That is, assuming one buys a car merely to show off! But it may simply be your assumption. Perhaps you expect the person to become status conscious and discard the bike now that he has a car?!

Would agree to this. Take my case, when I like to ride alone, there's nothing compared to the sound of wind & sound of RX; but when it comes to me & my wifey, both of us choose Activa & when it comes to Wifey+Son, we poll between Activa or Car.

@Govi - probably by speaking to him you can understand why he chooses to come by two wheeler during last 2 weeks of the month.

[Devil on Wheels]

Originally Posted by aargee

Would agree to this. Take my case, when I like to ride alone, there's nothing compared to the sound of wind & sound of RX; but when it comes to me & my wifey, both of us choose Activa & when it comes to Wifey+Son, we poll between Activa or Car.

@Govi - probably by speaking to him you can understand why he chooses to come by two wheeler during last 2 weeks of the month.

Originally Posted by Gansan

That is, assuming one buys a car merely to show off! But it may simply be your assumption. A person may have a genuine need for a four wheeler, even though he may commute to office by bike. I commute to office mostly by bike as it is not only economical but faster as well. I take the car out only when more than two persons have to travel / during night times / foul weather / week-end family outings.

Perhaps you expect the person to become status conscious and discard the bike now that he has a car?!

@ Gansan & Aargee: Its not a comment on every person who buys a car. It was in response to a statement made by aditya101 who said don't buy a second hand car from a higher segment if you can not maintain it.

This was about one specific person in my office and I knew him well enough to know that he was a show off. Consider this new cell phone every alternate month, 5-6 credit cards all of them over limit, borrowing money from each and every person in the office and not being able to return it; all this in a salary of 20K.

Originally Posted by govigov

@all,

which EMi is better? 5yrs or 7yrs? if i do 7yrs at 20% of salary i can get a car that is a notch better, but at 5yrs, i would have to look at a segment lesser.

This is considering a fixed downpayment on whatever the scenario.

regards,
govigov

Can you share further details like rate of interest, other costs etc. Also I think you should post this querry in the correct thread: http://www.team-bhp.com/forum/buying...etter-you.html

[jacs]

Guys,

I agree with most of you on considering 50% or less of your annual take home for cars and all other thumb rules. Here's my thought and experience, offcourse for those who are in or below the first bracket (I know they would be the younger blood wanting the best of rides).

Two things which i feel to be considered is (like Ricky quoted) affordability and offcourse passion. Affordability is not only the EMI but the cost of maintenence like Yearly insurance, regular services, fuel etc

When i decided to buy my first car, these thumb rules were letting me to go near to an Alto LXi only. Being a avid fan of cars and having driven bigger cars in family, i didnt wanted to go for an Alto LXi and started searching for a used car. I landed up on the deal of my adorable drive "2004 Formula Red Palio NV Sport". She was just 2.5 years old with just 16K KMs in odo and moreover maintained by a very passionate owner but his overseas travel forced for this heartbreaking game called sale. I got her @ almost 60% of the purchase cost which was just above a new Alto LXi (though i paid atleast 30K extra compared to market price for the immaculate condition).

Now driven for more than 3 years and 38K KMs on odo, she is still a performer and never costed anything strange above the regular service and consumables like tyres or sparks etc. Now she is due for couple of works (may be costing 15K or less), i'm very satisfied for what i invested. And you know she is still valued for around 70% of what I paid on her.

If you could pool in some money to make an immediate payment, a slightly used car is also a very good option. You will get advantages of VFM, less depreciation etc. But you have risk in terms of selecting a perfectly maintained vehicle.

[aseem]

Summary of some views from this thread:

1) Never buy a car on loan unless you get depreciation benefits from tax

2) Never buy a new car, go for a good second hand car (VFM) as it takes a depreciation hit

3) Driving a relatively "big" car is "show off"

They are all very sound economically, but where is the element of "heart"?

What about smell of a new car?

What about the chances of ending up owning a second hand lemon?

How many folks advising a second hand car, have visited the second hand dealers or own one. No matter what people advise, a new car is a new car. I would rather own a new i10 than an old NHC simply for the fact that its new.

[abhinav.s]

Originally Posted by aseem

... a new car is a new car. I would rather own a new i10 than an old NHC simply for the fact that its new.

a new car is a new car.

Having driven quite a few pre-owned cars in the family, we were not going anywhere near a pre-owned one for the replacement of our old 800. After all considerations, we went ahead with a brand new Spark.

As long as you can afford the car in terms of EMI+Fuel+yearly maintenance+yearly insurance etc, I guess be it pre-owned or new, you gotta get the car you would be happy with for a considerable period and not want to upgrade it within 1-3 months of purchase.

If this car falls within the salary bracket then good for you, else start looking out for a better paying job

[<Badguy>]

Originally Posted by aseem

Summary of some views from this thread:

1) Never buy a car on loan unless you get depreciation benefits from tax

2) Never buy a new car, go for a good second hand car (VFM) as it takes a depreciation hit

3) Driving a relatively "big" car is "show off"

They are all very sound economically, but where is the element of "heart"?

What about smell of a new car?

What about the chances of ending up owning a second hand lemon?

How many folks advising a second hand car, have visited the second hand dealers or own one. No matter what people advise, a new car is a new car. I would rather own a new i10 than an old NHC simply for the fact that its new.

I too agree with you aseem. It is a smell of the new car which make you go for that extra mile and ofcourse there is this feeling in Heart which play a bigger role in the matter of cars.

As per my case I always wanted to buy the car as soon I started working and started hunting for it when I got two years completed with my job but that time I had savings only to suffice for a used car. I searched for them for quite a time but then I always get this feeling that it has been used by someone and was never able to make my mind.
Then I decided to save money and buy a new car as soon as I am able to save enough.

I am still saving (investing)and hopefully within three months I will be able to save enough for purchasing a brand new hatchback.

[jacs]

Forgot to tell you something more in favorable on the used car .

I did a small analysis (samplings from friends and relatives) and found most of the enthusiastic drivers would love to change their wheels every 3 years (though not practically possible due to the cash shorts) or atleast every 5 years. Here a preowned car makes more sense. If one can do a good search in preowned market and with bit of patience, can swap cars upgrading easily every 3-5 years without shelling out huge money and offcourse satisfying oneself.

[RGK]

Originally Posted by aseem

Summary of some views from this thread:

1) Never buy a car on loan unless you get depreciation benefits from tax

2) Never buy a new car, go for a good second hand car (VFM) as it takes a depreciation hit

3) Driving a relatively "big" car is "show off"

They are all very sound economically, but where is the element of "heart"?

What about smell of a new car?

What about the chances of ending up owning a second hand lemon?

How many folks advising a second hand car, have visited the second hand dealers or own one. No matter what people advise, a new car is a new car. I would rather own a new i10 than an old NHC simply for the fact that its new.

No doubt owning a new car is something like a dream come true for salaried persons. (I am not telling about biz guys who buy BMW's, Merc's the moment they decide)
Before finalising to book my new car, I almost visited various second hand dealers, private guys, known persons etc etc.. In the process I came across two excellent cars one Santro just done 9k in the odo (damn new) and one Logan just done 14k in the odo. These two cars are shortlisted after seeing around 100 cars( from Dec 09 till Mar 10) including petrol and diesel just ignored M800 & Spark. The bottom-line for me was to get a truly high class second hand car around 4.5L.
Luckily my colleague picked the Santro and the logan guy was very adamant on pricing and I was bit doubtful about Logan's future and did not opt.
I thought of picking new Vista but ended up in Figo - as said a dream coming true in my life. I need to stretch my budget and did that because a new car is a new car as you said. Depreciation cannot be avoided, but I wish to enjoy the fullest benefits of a new car
But I repeat again, a true top class second hand one is definitely not a bad idea but you should be extremely double careful in spotting the right one.

[Dr.AD]

Originally Posted by aseem

Summary of some views from this thread:

1) Never buy a car on loan unless you get depreciation benefits from tax

2) Never buy a new car, go for a good second hand car (VFM) as it takes a depreciation hit

3) Driving a relatively "big" car is "show off"

Very good summary of various opinions expressed here. I am personally confused about this topic (salary vs. car budget) but overall I feel this thread is dominated by opinions on a bit conservative side.

For example, if everyone followed the rule 1 above, the car industry in India will come down to 30% (or something similar) of its current size (at least the small car industry). I don't have any concrete data but this is just a guess.

And if everyone followed the rule 2 above, the whole car industry will crash and cease to exist. If nobody buys a new car, where will the used cars come from?