How many months/years of gross income?
01-13-2008, 09:17 PM
#51
Interesting discussion, but I don't think there are any hard and fast rules...it's not just about your income, but how much disposable capital you have.
My wife and I have about $165K replacement cost tied up in all our vehicles, which is pretty high relative to the proposed standards thrown around here. However, all we owe is around $15K on the wife's Jetta TDI (which will likely be paid off shortly after we finish our taxes), and $11.7K int./pmt. free on my KTM Super Duke, which will be paid in full when the promotional financing period ends. Otherwise we're debt free ex. the mortgage, and I have near 50% equity in my home.
Even though they're depreciating assets, I almost consider them to buffers against the possibility of future financial distress, since I could raise a fair amount of cash selling some of the toys.
BTW, one of my New Year's resolutions is to not buy any more vehicles this year.
My wife and I have about $165K replacement cost tied up in all our vehicles, which is pretty high relative to the proposed standards thrown around here. However, all we owe is around $15K on the wife's Jetta TDI (which will likely be paid off shortly after we finish our taxes), and $11.7K int./pmt. free on my KTM Super Duke, which will be paid in full when the promotional financing period ends. Otherwise we're debt free ex. the mortgage, and I have near 50% equity in my home.
Even though they're depreciating assets, I almost consider them to buffers against the possibility of future financial distress, since I could raise a fair amount of cash selling some of the toys.
BTW, one of my New Year's resolutions is to not buy any more vehicles this year.
01-14-2008, 08:05 AM
#52
Very late to this thread but I personally would not go over 50% of annual salary for the price of a new car. Regardless of amount down and amount financed.
My wife and I do very well, she bought an $18,000 Mazda. I could go higher, but can not concieve of spending more than $40k on a car. And for $40 I would have to totally lust for it.
My priorities have changed drastically since I was 20 just like the OP. (and I don't even have kids yet) There are so many good quality cars out there for $30 or less, and the resale of lease vehicle has made it possible to get low milage great cars for about that price that I don't know why I would ever shell out $50k or higher on a car.
I am lucky in that luxury cars do nothing for me (don't care for benzes or anything about the 3 series) and don't need bling.
My ideal car is a Lotus, but I could see spending forty on a Supra convert if the pictures shown on the web were true and it could be had for that price. Higher than $40k and I say, "Nah".
I like the prospect of early retirement and the idea of jumping on a plane to a nice hotel somewhere on the spur of the moment better than a high monthly car payment. A decent used S2000 with still under 30K miles scratches the car itch.
But to each their own.
My wife and I do very well, she bought an $18,000 Mazda. I could go higher, but can not concieve of spending more than $40k on a car. And for $40 I would have to totally lust for it.
My priorities have changed drastically since I was 20 just like the OP. (and I don't even have kids yet) There are so many good quality cars out there for $30 or less, and the resale of lease vehicle has made it possible to get low milage great cars for about that price that I don't know why I would ever shell out $50k or higher on a car.
I am lucky in that luxury cars do nothing for me (don't care for benzes or anything about the 3 series) and don't need bling.
My ideal car is a Lotus, but I could see spending forty on a Supra convert if the pictures shown on the web were true and it could be had for that price. Higher than $40k and I say, "Nah".
I like the prospect of early retirement and the idea of jumping on a plane to a nice hotel somewhere on the spur of the moment better than a high monthly car payment. A decent used S2000 with still under 30K miles scratches the car itch.
But to each their own.
01-14-2008, 09:12 AM
#53
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Originally Posted by Chris S,Jan 13 2008, 10:17 PM
Interesting discussion, but I don't think there are any hard and fast rules...it's not just about your income, but how much disposable capital you have.
Gross income doesn't mean a thing. How many kids do you have? What's housing cost in your area? Do you pay alimony? (Or do you plan to?) These have a big effect on how much of your income is available for a car.
That said, the most I ever spent on a car as a percentage of gross income was about 48%. Looking back on it that was too much. If I had bought a car for half or three quarters of that then I would have been able to buy my first house years earlier than I did.
01-14-2008, 12:14 PM
#54
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Let's see:
16 years old. I had no job and used my cash savings to buy a 9 year old Sentra for $120 + ~$750 to get it running. So that is infinity times my annual income.
18 years old. I was just starting college and I only worked summers (made about $2500/summer) and bought a 8 year old Accord for $4K. So, that's about 160% of my annual income.
22 years old. I just graduated college and got a job making about $50K. I took my $3K "sign-on bonus/relocation allowance" and put a down payment on a $22K Prelude. So, that is about 44% of my annual income.
26 years old. 4 years at the same company, single, living in a cheap apartment. I think I was making somewhere in the mid 60s and bought a $32K S2000. So, probably 50% of my annual income.
My personal thought is that it's probably not a good idea for me to spend more than 6 months' salary on a car. That's the percentage I've spent in the past and it was comfortable for me. It's a different story now that I have a mortgage, though. Currently, I'm thinking 30% would be a more reasonable range. That makes me sad, though, because there aren't a lot of interesting cars at 30% of my annual salary. I guess that's why I haven't bought a new car in over 5 years.
So, I guess my answer to your original question would probably be that anything less than 50% of gross annual salary seems pretty reasonable, depending on an individual's circumstances.
16 years old. I had no job and used my cash savings to buy a 9 year old Sentra for $120 + ~$750 to get it running. So that is infinity times my annual income.
18 years old. I was just starting college and I only worked summers (made about $2500/summer) and bought a 8 year old Accord for $4K. So, that's about 160% of my annual income.
22 years old. I just graduated college and got a job making about $50K. I took my $3K "sign-on bonus/relocation allowance" and put a down payment on a $22K Prelude. So, that is about 44% of my annual income.
26 years old. 4 years at the same company, single, living in a cheap apartment. I think I was making somewhere in the mid 60s and bought a $32K S2000. So, probably 50% of my annual income.
My personal thought is that it's probably not a good idea for me to spend more than 6 months' salary on a car. That's the percentage I've spent in the past and it was comfortable for me. It's a different story now that I have a mortgage, though. Currently, I'm thinking 30% would be a more reasonable range. That makes me sad, though, because there aren't a lot of interesting cars at 30% of my annual salary. I guess that's why I haven't bought a new car in over 5 years.
So, I guess my answer to your original question would probably be that anything less than 50% of gross annual salary seems pretty reasonable, depending on an individual's circumstances.
01-14-2008, 12:39 PM
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As more money as I make, I get more scared spending money.
Car became secondary in my wish list when I crossed that point in my income graph. I'll be more generous on myself spending money on a car when I hit that "VTEC" in my income graph.
Car became secondary in my wish list when I crossed that point in my income graph. I'll be more generous on myself spending money on a car when I hit that "VTEC" in my income graph.
01-14-2008, 12:50 PM
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Originally Posted by jlstyle82,Jan 14 2008, 01:39 PM
I'll be more generous on myself spending money on a car when I hit that "VTEC" in my income graph.
If only we could reflash our careers for lower VTEC engagement...
01-14-2008, 01:57 PM
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Originally Posted by QUIKAG,Jan 13 2008, 02:24 PM
When I got out of college about 7 years ago, I was making about $50k. I didn't blink for a second spending $45k on my new Vette.
but i think the whole question is off... its not about how much of your gross salary to spend on a car... its about what percentage of your net income are you putting into savings...
i personally feel that after i invest or save 30% of my net income, the rest is free game... or put it another way... after all your expenses, you should still have 30% left over to invest...
i dont agree with always paying cash... i will never pay cash when that money invested will earn more than the interest on the loan... BUT ... that generally applies only to people who are good with their money and can fully control their expenses... so thats my disclaimer
01-14-2008, 02:32 PM
#59
my S2000 was 80% of my income during my last year of residency. that was delayed gratification long time in coming.
but now I have the 3-month rule. Total value for my cars must not exceed 3 month's income.
living on your own with a large student loan and saving for a house put a crimp on the balla lifestyle
but now I have the 3-month rule. Total value for my cars must not exceed 3 month's income.
living on your own with a large student loan and saving for a house put a crimp on the balla lifestyle
01-14-2008, 04:56 PM
#60
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Originally Posted by Iceman1,Jan 14 2008, 02:57 PM
but i think the whole question is off... its not about how much of your gross salary to spend on a car... its about what percentage of your net income are you putting into savings...
i personally feel that after i invest or save 30% of my net income, the rest is free game... or put it another way... after all your expenses, you should still have 30% left over to invest...
i personally feel that after i invest or save 30% of my net income, the rest is free game... or put it another way... after all your expenses, you should still have 30% left over to invest...
put 30% in savings the rest is fair game.
NOTE>>>>>>>>>>>>>>>>>> I do not call a house payment "savings" that's a place to live.
Why I say that is some people will say well I put 20% into my house payment so that's taking care of saving.
Saving for retirement do not include your house as part of the 'saving' you still need a place to live when you retire. It's crazy, you don't plan retirement counting on selling your house as part of your saving so don't count that as part of your saving.
As I said in my first response probably the older you get (ie. less bills from home payments and kids the more you can drop on cars).