[rki2007]

AFAIK buying a car is not related to one's income.I have seen different catogory of people like:

1) High earning but basic car.
2)Low earnings but good car because of good family background.
3) Good car because of personal liking, enthu, auto freaks/lovers (Just like us , we the bhpians) etc but not tied to the earnings.

These are the reasons that i get now and may be much more than this.

[shankar.balan]

Originally Posted by crazydave

Interesting thread, though old. I think the thumbrule mentioned earlier is the best, you should not go for a car which costs more than your total annual net income (post-tax and preferably, post investments for retirement). If you're DINK, and you both share a car, add in your wife's net income as well to the equation

Bad idea. Never build castles on 'great expectations'. If you are fortunate in enjoying a double income because your wife works, and you both share one car, then try to use some of that to live better, invest decently, travel well and enjoy life. There is far more to life than that 'big and expensive' car!

Before you jump down my throat, I may be a car buff, but good sense should prevail in financial matters...

[rajivr1612]

Hi nice topic. I waited a good three years from the time I decided to buy a car to the time I actually took the plunge. Since I was already paying 1/3rd of my salary as EMI I had decided that I will try to avoid taking a car loan. And the moment came in Nov'12 when I finally realized my dream. I had saved some money, partioally used my PF withdrawal money and voila I could avoid the loan. Proud owner a Liva GD. I know that my bank account is lighter by a few lakhs, but at least I don't have to worry about an additional EMI. For info I fall in the 5-10 lac package range.
I know there is another thread in this forum regarding buying car outright or on loan.

[shankar.balan]

Originally Posted by rajivr1612

Hi nice topic. I waited a good three years from the time I decided to buy a car to the time I actually took the plunge. Since I was already paying 1/3rd of my salary as EMI I had decided that I will try to avoid taking a car loan. And the moment came in Nov'12 when I finally realized my dream. I had saved some money, partioally used my PF withdrawal money and voila I could avoid the loan. Proud owner a Liva GD. I know that my bank account is lighter by a few lakhs, but at least I don't have to worry about an additional EMI. For info I fall in the 5-10 lac package range.
I know there is another thread in this forum regarding buying car outright or on loan.

Takes me back to the early- mid nineties. Three years into my working life I bought my first car, an ancient, 14 year old used old shape Maruti Suzuki 800 DX.
Paid a princely 75K for it by taking a loan where the EMI was exactly 27% of my take home pay. So in that sense, I have been there and done that.

However, luckily I got a far better job with a company provided car and over the next several years I had the opportunity to both own and drive generally decent cars - at least as per our standards then.

Frankly things only changed big time in terms of car choices in India in these last twelve years or so, when bigger, better and more high tech cars became freely available to the regular earning common bloke. Until then it was perfectly normal for any young bloke to start with the Maruti as his first car.

Why, even as recently as the early 2000's, I only had a regular HardTop Gypsy which I used in its own terrain, to the hilt! No regrets at all! In fact, my dogs, various friends and I enjoyed ourselves in that Gyp so much that I was loath to part with it and only did so because the petrol engine's lack of fuel efficiency with the AC on, began to tell a sorry tale to my rather slim wallet!

No idea at all, where this sudden and extreme 'status consciousness' in terms of cars, came into the regular Indian working bloke's psyche. Must have happened quietly and insidiously sometime in the last few years!

Buy a car that does your job for you nicely. Don't buy it for 'status' or as a 'fashion accessory', because these are very ephemeral things and are liable to change each time the wind blows in a different direction!

Buy it as another 'utility' + 'semi-luxury' product and use it as such too. Try and keep the EMI exposure as low as possible while not compromising on comfort, utility, luxury, safety and your other priorities.

Remember, attempting to keep up with the Joneses when you cannot afford to, can lead to absolute financial chaos and constant consternation and dissatisfaction. That's an unhappy one way street that a sensible bloke should not go down!

I did say earlier that 12-15% of take home should be the EMI. Personally I prefer to operate at an even lower rate. Closer to 7%, no more if that can be managed.
A car, however desirable it may be, is not supposed to take over your whole life to the exclusion of practically everything else!

Bottom-line;

Be cool. Enjoy. Peace! ( I don't want to be preachy. Just want to suggest the sensible options. Beyond that, hey, its your money!)

[ampere]

Quoting GTO from the new Liva 1.5L review thread

Originally Posted by GTO

One thing this car has is superb modification potential. Slapping a well-designed free flow & air intake onto the engine should take the horsepower rating close to a 100. Cars like this prove that you don’t need to spend a lot of money to have fun behind the wheel. I’m just really happy to see another addition to the VFM enthusiasts club.

As against "those times" (I am already sounding old!), we now have many products which satisfy the "fun to drive" aspect and which also keep a tab on our purses.

[stringbh]

Originally Posted by shankar.balan

Maruti Suzuki 800 DX.
Paid a princely 75K for it by taking a loan where the EMI was exactly 27% of my take home pay.

practically, agree with what you said ( and enjoyed reading - btw, wrote it as you went along with the flow ?! )

small clarification though: your EMI was 27% in your heyday (if i may say so) and now you suggest only around 7% ! unfair

[shankar.balan]

Originally Posted by stringbh

practically, agree with what you said ( and enjoyed reading - btw, wrote it as you went along with the flow ?! )

small clarification though: your EMI was 27% in your heyday (if i may say so) and now you suggest only around 7% ! unfair

Thats why I said Ive been there and done that! I would not do it again though.
Buying that first car was the result of several motorcycle prangs which left me quite hurt physically and quite scarred too and I simply could not take it any more!
Nowadays, loans are easy. Pay cheques are mostly monster size compared to the tiddlywinks I was earning back then.

One can, if one wishes, save money enough for a good solid down payment and thus reduce the loan amount and EMI exposure. A decade and a half ago, these things were not options for most of us, unless we asked for help from our homes. That was not an option for me as it simply went against the grain!

To clarify I have suggested 12-15% of take home as car EMI. However, I said I personally prefer to operate at around the 7% mark.
The last three or four vehicles I have changed within the three to four year mark.
However, now, my intent, all going well, is to keep the vehicle for significantly longer periods - say 5 to 6 years or more if I can manage it.

All my inferences and reactions are on account of the fact that I live and work and earn in India. However, if I lived abroad somewhere and earned in that currency and lived by those laws, I might think and do things differently.

Example; It is only in this country with its often skewed priorities and attitudes that a common or garden utility vehicle such as an SUV becomes blurred and confused with the 'luxe' angle. Thats rubbish really, especially if your intent in buying an ute, is to use it as one! Think Landrover Freelander at a very expensive 44 odd lacs or Audi Q3 at roughly the same price here in India, vis a vis a far more realistic affordable equivalent of the mid-twenties (lacs) in other places such as Oz and the UK and there you have it!

A second hand Merc of 6-7 years vintage can, on the other hand, be yours in India for a shade over 12 -14 lacs. A similar car abroad in the named countries would have depreciated far more, thereby making the whole concept of owning one far far more affordable for a regular bloke. Additionally it is likely to be in a better state of repair abroad, on account of the far better roads and infrastructure and generally gentler climatic conditions than we have here! Don't forget that car and home loans are generally cheaper abroad in terms if interest rates too and one can really bargain like the blazes!

[vasanthn21]

Originally Posted by shankar.balan

To clarify I have suggested 12-15% of take home as car EMI. However, I said I personally prefer to operate at around the 7% mark.

I do not disagree with you, but i would like to point out a few things.

Originally Posted by shankar.balan

Nowadays, loans are easy. Pay cheques are mostly monster size compared to the tiddlywinks I was earning back then.

So you spending 27% of your salary on EMI back then would translate to a much bigger expenditure now considering:
1. Salaries are much better now.
2. Loan rates are much lower now.

I guess what I am trying to say is that, it all depends on a lot of things, general economy, your personal financial status, your responisbilities, where in the corporate ladder you are etc.

It might be very difficult to put a formulae for it.

[shankar.balan]

Originally Posted by vasanthn21

I do not disagree with you, but i would like to point out a few things.

So you spending 27% of your salary on EMI back then would translate to a much bigger expenditure now considering:
1. Salaries are much better now.
2. Loan rates are much lower now.

I guess what I am trying to say is that, it all depends on a lot of things, general economy, your personal financial status, your responisbilities, where in the corporate ladder you are etc.

It might be very difficult to put a formulae for it.

Different strokes for different folks. Thats what it is!
Cheers mate.

[apachelongbow]

For all who are advocating 20/30/40% of net take home salary as EMI, please consider the following implications.
For every 10Rs earned your EMI is eating away Rs 4 leaving you with just Rs 6 for
a) Every day expenses
b) Luxury items (dinners, parties, movies, clubbing, travelling, fuel etc etc)
c) Savings for future
d) Eventualities (loss of job, money for training, education, health reasons, parents etc)

Instead had you saved 40% of your net take home and then spent 40% of remaining in EMI you would have
a) Saved 40% i.e Rs 4 out of Rs 10
b) EMI of 40%Rs 6= Rs2.4. i.e. only 24% of your net take home
c) Leave 36% of your income for daily expenses and luxury/frivolous spending.
How cool is that?

Remember, in India we have no social security, education, health benefit nets. If you lose your job god be with you, for the society or the govt doesnt care if you live or not.

[abeerbagul]

I guess the first car people buy can have EMI which is a larger percentage of monthly salary.
As your income increases, the EMI for car as a percentage of monthly salary should decrease.
When the point comes to upgrade to a new car, you should ideally be in a position to buy it cash down.
If you cant buy your second car in cash, consider two options:
1. Use the current car for 3 more years.
2. Buy the same car in pre owned category.

[amtak]

A lot has changed in the last 3 years that this thread is on. I was the second person to post here! Back then, I had loans and hence, I couldn't think of a bigger car even though I could afford it.

Coming to the present, I am thinking of the future and what my needs are? I realized that even if I can afford to spend 18K a month on a C segment car, that is not my priority at this point of time. I was in need of a small car as our family car is almost 8 years old; those who know, I liked the nano and my wifey gifted one to me. It is on loan and the % is just a fraction of my salary - in single digits. Do I regret driving around the town in world's cheapest car? Hell no! Those who have sat in my car, don't even know that this is the cheapest car in the world and I haven't added anything aftermarket to the car. Plus, I don't have to worry about car being stolen. the EMI is similar to what one would be paying for monthly insurance policies.

Having said the above, please see what your needs are. when I was single, I wanted to show off, now that I am married with a kid, I have responsibilities and car is just a mode of personal transport for us. As long as it is niggle free, I would continue to use the car and upgrade it at a later stage when I feel that I need to "arrive".

[faustus77]

Shankar.balan.
Very prudent view and definitely to be followed.
When you have a Maruti you want a Merc and when you have a Merc you want a Maybach.No end to it.
One more point I would add.A car is a depreciating asset so always be prudent.
Incidentally as far as I remember Azim Premji goes in a Toyota Corolla.
A high earning president of an American company went about in an ordinary car.His saying was that that he just needs it for going from point A to B.Sorry cant recall the name.
Regards

[kaks15]

Just to add, with the recent finance gimmicks by companies like 'balloon schemes- larger last installment', 'step up schemes-emi grows with time' etc. nothing seems out of question at first. I remember i was preparing for an Audi but read a sensible post here at T BHP at the last minute which said

'dude, ultimately you are paying the full price with interest, one way or the other'

I think EMI capacity depends on every body's own life cycle, and current needs however falling in for the tricks which auto manufacturers have mastered is what we should be careful about.
So at any salary i may be able to afford an AUDI for the first year but its the total calculation that counts! If we dont get into that trap its easy to calculate your disposable income and what part of it do you want to part away with.
My advise - Take your salary, subtract your expenses and subtract the savings(imp!) and use the remaining to plan your car!

[oxyzen]

Originally Posted by kaks15

My advise - Take your salary, subtract your expenses and subtract the savings(imp!) and use the remaining to plan your car!

Will that not always be zero?
Salary = Expenses + Savings


I follow a simple rule.
6 months saving. (If you plan to keep the car for 5 yrs)
9 months savings (If you plan to keep the car for 10 yrs) - Recommended
Then add the amount obtained by selling your old car.

So, If I save 50K a months, I will spend 50X9 + 100(Resale of existing car) = 550K and then use it for 10 yrs.