[ScizzMoney]

Hey guys,

This question came up at work. I found it a little intriguing with the various answers that came out of it.

What is a good amount to spend on a new vehicle in relation to your income?

There are lots of variables to this, I know. But, if you had to just ballpark it, what would you say?


I figured 25-35% of your gross income seems appropriate to responsibly buy a vehicle with. A few of my co-workers said as high as 100%.

[rawr]

There's no right answer. Depends on how much you value your money. For myself, it's about 20%.

[mb_]

Different people have different proprieties. At the moment, since I still live with my parents (no rent :concentrate:) I would go as high as 40%. Once I'm on my own I would say it'll be around 20%-30%

[supafamous]

I've owned two cars, a new Protege5 and a 2007 TSX that I picked up last year. For me I've been between 7-13% of my gross income.

I find it hard to fathom spending more than 15% of my gross income on a car because I don't drive much (weekends plus 1 short trip during the week) - if I were to spend around 20-30% of my gross on a car it'd be a pretty awesome ride and way beyond my needs. I'd advise spending as little as you feel comfortable driving.

FWIW, retirement saving should eat up a lot of your income. Considering current market returns spending 2-3 times more on a car than what you are saving is just insanity. Doing retirement planning is one of the most depressing things you can do.

[TRDood]

I've owned two cars, a new Protege5 and a 2007 TSX that I picked up last year. For me I've been between 7-13% of my gross income.

I find it hard to fathom spending more than 15% of my gross income on a car because I don't drive much (weekends plus 1 short trip during the week) - if I were to spend around 20-30% of my gross on a car it'd be a pretty awesome ride and way beyond my needs. I'd advise spending as little as you feel comfortable driving.

FWIW, retirement saving should eat up a lot of your income. Considering current market returns spending 2-3 times more on a car than what you are saving is just insanity. Doing retirement planning is one of the most depressing things you can do.

If you are spending about 10% of your gross on a 07 tsx, that means you are making more than 100k. Depends on age too. I see a lot of my seniors (100k earners) drive average cars but younger ppl drive $60k cars. Thats probably parents powered though.
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[too_slow]

When they say 15% of your income, does that mean the net purchase price, or the annual lease/finance obligations?

(i.e. If your annual income is $100k, you'd only spend $15,000 to buy a car??)

[supafamous]

When they say 15% of your income, does that mean the net purchase price, or the annual lease/finance obligations?

(i.e. If your annual income is $100k, you'd only spend $15,000 to buy a car??)

I treat it as finance lease obligations - my math is using 4-5 years to pay it off. I think if someone can't pay it off in 5 years that they aren't being prudent with their money. When you're scraping for every penny it pays to be really careful.

Besides, there are so many great used car deals to be found that I find it hard to justify a lot of money on a car, I got my TSX with 22,000km on it from a desperate seller last Jan and there are still TSXs of the same age but higher mileage listing for more than mine a year later. I robbed the guy!

P.S. If I spent 30% of my gross on a car...I'd be Matt Zhang except for the douchebag part! LOL.

[hi-revs]

Depending on your income.

Although i dont believe in having to owe payments on a car.
To me, "buy what you can afford", means buying the car outright whether its used or new and not having to owe any car payments.

[lowside67]

Although i dont believe in having to owe payments on a car.
To me, "buy what you can afford", means buying the car outright whether its used or new and not having to owe any car payments.
Lots of people feel this way... to each their own.

There is a mathematical answer to this though... For the sake of argument, lets say you have $30,000 sitting in a bank account that you could use to buy a car, or you could qualify for a $30,000 loan for 5 years at 5%.

If all you were ever going to do was let that $30,000 sit in the bank for 5 years earning 1.25% interest, you'd be better to pay cash for your car. However, if you have the facility to invest that money and can earn a rate of return better than 5%, you are mathematically smarter to have borrowed money to buy your car.

Mark

[Death2Theft]

10%. Purchase outright.

[supafamous]

I generally agree about paying out as much as you can though I didn't do that for either purchases I made but...

I financed at 0% which is their way of giving you money. Right now, Acura is offering a .25% lease rate right now - again, it's practically giving you money, I'll let my savings accrue at 1.25% instead. For the right rate, a finance is just fine but choose carefully.

[Mr.C]

I like used, so half of what I could afford.

[Culture_Vulture]

A few of my co-workers said as high as 100%.

A few of your co-workers are retarded.

[ScizzMoney]

A few of your co-workers are retarded.

I agree. But, I do see a lot of kids that can't be making much more than 20k in a year driving cars worth 20-25k. I think my co-workers want to justify to themselves on buying 100k sedans.

[heleu]

Depends what your disposable income is. Obviously it is easier for someone making a $100K a year to spend 40% on their vehicle than someone making $30K.

Also, it's not like spending more correlates directly with how "happy" you are with your car. There's a certain threshold that you usually need to spend to be fairly satisfied, and then any more than that only makes you a tiny bit more happy.

[BrRsn]

95% .. use the other 5% to buy ed hardy and honk at bishes on robson while revving the shit out of your leased engine.


When the bank takes your car away, claim you lost it trying to chase down a thief who stole some poor old lady's purse .... maximum poosy magnet level achieved.

[unit]

i'd say its around 30-40%
if you make 50k you can probably afford a 15-20k car.
depends on your living situation.
if you live at home with mom, then you can afford more like 60%.

[roastpuff]

Over 9000.

[dachinesedude]

15% of my gross, paid it off in 1.5 years

being in debt for the next 5+ years? have fun, while im earning interest you be paying interest

[taylor192]

You can probably pick this up for a little over $10M. Anything less and you're only cheating yourself of good times. Save Ferris.

1959 Ferrari 250 GT LWB California Spyder for sale: Anamera (http://www.finecars.cc/en/detail/car/16681/index.html)

http://www.finecars.cc/typo3temp/GB/c604ba1d0d.jpg

[taylor192]

I'd take this guy's advice:

Sell everything you own, buy a lambo, drive town to town hitting strip clubs, and banging easy women in motel rooms.

He definitely has better stories than your coworkers that suggest just a measly 100%.

I Sold Everything To Buy A Lamborghini And Drive Across The Country (http://jalopnik.com/5559767/i-sold-everything-to-buy-a-lamborghini-and-drive-across-the-country)

http://cache.gawkerassets.com/assets/images/12/2011/11/64daa338fc6c133d17f08fdfa3fc709f.jpg

[ForbiddenX]

I'm paying 15% of my gross right now. I don't pay any rent or have other many expenses so I think it's pretty reasonable. Also financing it at 0% through the dealer so I don't have to worry about any added interest

[Nightwalker]

Good rule of thumb is not to spend more than 15% of your net income on transportation.

[PJ]

+1 for 15%... if you must.

For me, I personally hate loans and payments. Especially on top of your expenses and existing student loans (if you have them). I know I'm old school, but I still go with the "if you can't afford it in cash, you can't afford it." (For everything other than real estate, of course). Though a couple years ago when I was 20 after I gradded, I did take a $5k loan to help reward myself with a G35 after scoring a good job. :o But I just hated having that hanging over me. Paid it off as soon as I can, and went straight to tackling my student loans.

But like everyone said above, to each their own. Everyone has different priorities.

It's not uncommon for people to drive an expensive car but won't go to Quizno's without a coupon. Which I'm not bashing.. but whatever makes you happy. :whistle: I have a couple friends who make ~$50k a year and bought themselves $40k cars. They still live with their parents, and now have payments on top of their student loans and expenses.. and therefore lock themselves at home and make excuses as to why they can never come out for a bite.

I don't drive a luxury German, but I like having money to invest, eat at nice places, go on vacations, concerts, hockey games, whatever.

[fliptuner]

^^^ Same mentality, more or less.

Car's are not a status symbol for me. I drive what I want/need, not what I want others to see.

[achiam]

Mark Zuckerberg daily drives a white 2006 TSX
Steve Jobs drove a SL55
One of the Walmart heirs daily drives a 1995? Acura Integra.

[Spoon]

Average Canadian family in BC makes about 67k.
Median total income, by family type, by province and territory (http://www40.statcan.ca/l01/cst01/famil108a-eng.htm)

If 15% was the standard, a used civic sedan's barely in reach.

[hk20000]

^ But if you use that Civic for 5 years that's spreading 67k x 5 x 15% = 50250

that's a lot of car.

plus after ownership you are looking at more like how much it costs to keep that car running, versus how much to pay to get that car in the first place.

[ScizzMoney]

When we were talking about this, we were talking about a one time shot price. Not, 'how much do you spend per year on a car'. None of my co-workers spend all their money on their vehicle. But, a few of them bought cars worth 100k because they make 100-140k per year. We said nothing about 15% of income over 5 years etc etc.

[fliptuner]

That's the only way it makes sense though, unless they plan on buying a new car every year.

Vehicle cost / years they plan on keeping it = avg. $$ per year

[ScizzMoney]

^ yeah, I realize that. But that wasn't what we were discussing =P.

[freakshow]

You guys all make 100k+ and you figured the best way to talk about how much to spend on a car is by single purchases as a percentage of your gross income?? :fulloffuck:

must be a government job :troll:

[taylor192]

When we were talking about this, we were talking about a one time shot price. Not, 'how much do you spend per year on a car'. None of my co-workers spend all their money on their vehicle. But, a few of them bought cars worth 100k because they make 100-140k per year. We said nothing about 15% of income over 5 years etc etc.

$100K, please that's nothing. Haven't you heard, 9/10 RSers make 6 figures and drive GT-Rs.

You gotta spend at least double your income to hard park at Starbucks.

[ScizzMoney]

^Haha =P since maintenance is similar give or take with new vehicles, the outright purchase price of a new vehicle is what we were going by.

[Vette Dood]

My max is 5% of gross monthly towards a car if borrowing is needed. If I can pay my mortgage and a keep food on the table, and want to prioritize a nice car over luxury purchases then its savings and a cash purchase.

Frees up space if you want a mortgage that is likely going to push 30% of your gross monthly and you want to keep under a TDS of 40%.

Thats my rule of thumb - works ok.

[Tapioca]

You guys all make 100k+ and you figured the best way to talk about how much to spend on a car is by single purchases as a percentage of your gross income?? :fulloffuck:

must be a government job :troll:

I have friends who make 100K and none are public sector.

But my wealthiest friend drives a run of the mill A4.
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[Hakkaboy]

^ But if you use that Civic for 5 years that's spreading 67k x 5 x 15% = 50250

that's a lot of car.

plus after ownership you are looking at more like how much it costs to keep that car running, versus how much to pay to get that car in the first place.

wow, if you caculate it that way, 15% seems kinda high to me

personally, i was thinking full price of car = 50% of gross annual income max is what i would spend.

ie. if you make 60K, then you should only buy a 30K car

damn, if i applied the 15-30% gross to finance/lease payments, then i'd be driving a much much better car than i do now...