[Hayek]

Originally Posted by ZMG

Hi Guys

How much do people really make to buy a 20 - 25L rupee car? More than just earning that much salary what % of your net worth should your car be?

As Axe said, this can vary a lot

But assuming you have no responsibilities other than those for yourself and your spouse / children, I would set the following benchmarks based on age:

1) Below 30: 6 - 8 months salary
2) 30-35: 4 - 6 months salary
3) 35 - 50: 3 - 4 months salary
4) Above 50: Higher of 3% of net worth excluding value of your principal residence or 3 months salary

I would work with post tax salary and count bonuses at 30% below the last 3 year average (in sectors like financial services where these can vary)

If you have a company scheme which lets you benefit from cheap financing or the EMI going from pre tax income, you can adjust for that.

Would assume you buy a car every 4 years - so you retain a car for 8 years with a 2 car family.

If you replace cars more often, you need to downgrade.

[wheelspinner]

Personally, I was advised against taking loans on a depreciating asset. In my opinion, it should be a few months of your salary at most. I'm a frugal person though

Please take a step back and understand the implications. The car loan has ~8-9% interest. The car depreciates ~20% the moment you take it out of the lot. On top of depreciation, you are taking another hit from the interest. I always recommend my friends to buy in full cash whichever car they can afford. I feel I should never go out of my means to buy a car.

[avira_tk]

Originally Posted by ZMG

Hi Guys

I was wondering that in Bangalore Koramangla - I hardly see anyone driving a Swift, let alone an Alto.
Almost every other car is a Creta, Seltos etc.
For the salaried class:
How much do people really make to buy a 20 - 25L rupee car? More than just earning that much salary what % of your net worth should your car be?
Also net worth measured in terms of what - assets which can become liquid easily (equity, MFs etc) or a house (which has an emotional value, and you maybe super rich on paper)?

Koramangala is one the richest post codes in the country, the rest of Bangalore is not that way. To buy a 20 lakh car, while living there, should be a cakewalk, parking is another matter.

The salaried class can early take a loan for a long term without a sweat, buy a car that's a bit of a stretch but usable for a longer time. The emi won't pinch and once you have some progress in your career, you can pay it off early. Car as percentage of assets isn't a great gauge for financial acumen, you need a fancy car in certain professions, if you try being simple by choice, you run a very high risk of being so by circumstance.

The big difference between the salaried class of the previous generation and those if today are the new classes of income and opportunity, onsite employment, hikes for specialist skills when job hopping and esops. The basic rule of thumb is that you can afford to splurge if your home is paid for, most would invest in a property than get a fancy car.

[automowheels]

Originally Posted by Hayek

1) Below 30: 6 - 8 months salary
2) 30-35: 4 - 6 months salary
3) 35 - 50: 3 - 4 months salary
4) Above 50: Higher of 3% of net worth excluding value of your principal residence or 3 months salary

So you mean someone of age 36 making 3 lakhs net (post-tax) a month should buy something that costs between 9-12 lakhs on-road? Just making sure I got it right.

[antz.bin]

Originally Posted by automowheels

So you mean someone of age 36 making 3 lakhs net (post-tax) a month should buy something that costs between 9-12 lakhs on-road? Just making sure I got it right.

Well the person should have bought a year earlier to get a budget up to 18 lakh . Too bad, Mid life crisis has now kicked in. The remaining 6 lakh now have to go towards a motorcycle

Just kidding. I feel these arbitrary limits are somewhat restrictive. 12 Lakh on road will not get you top of the line safety features that a Slavia / Kushaq / Virtus / Taigun offer. But the life of a person earning 3 Lakh / month is worth a lot more (to the family and to the nation) than the 6 lakh rupees (even less, considering TCO) saved by not getting that 18 lakh car.

The point is that you can afford anything you want! But not everything. You have to pick and choose what you want in life and what you can live without. If you have this in order, you can figure out for yourself.

[Bhodrolok]

Originally Posted by Hayek

But assuming you have no responsibilities other than those for yourself and your spouse / children, I would set the following benchmarks based on age:

1) Below 30: 6 - 8 months salary
2) 30-35: 4 - 6 months salary
3) 35 - 50: 3 - 4 months salary
4) Above 50: Higher of 3% of net worth excluding value of your principal residence or 3 months salary

I would work with post tax salary and count bonuses at 30% below the last 3 year average (in sectors like financial services where these can vary)

So, to buy a 20-lakh car at age 40, one would need a monthly take home of 5 lakhs post taxes?

[SoumenD]

Originally Posted by antz.bin

Well the person should have bought a year earlier to get a budget up to 18 lakh . Too bad, Mid life crisis has now kicked in. The remaining 6 lakh now have to go towards a motorcycle

While you were kidding I can relate to this. Mid life crisis is kicking in as I approach 40 and more than cars my louuuu for bikes in clawing back. Hopefully can gift myself a decent bike by the time I hit 40. YOLO afterall

Edit:

Originally Posted by Bhodrolok

Be careful! I bought a motor cycle when I turned 40, rode it for 500 km in a year and sold it at a loss of 40k.

I know right. My current bike has same running but its 15+ years old, so restricted to subzi-bhaaji runs only. But then I plan to FIRE by mid 40s(different topic), so hopefully would utilise a bit. If not, still its ok to splurge once on your wants. Atleast I would know I tried one last time

P.S: Hopefully Triumph gets that Tiger 400 within a year

[Bhodrolok]

Originally Posted by SoumenD

Mid life crisis is kicking in as I approach 40 and more than cars my louuuu for bikes in clawing back. Hopefully can gift myself a decent bike by the time I hit 40

Be careful! I bought a motor cycle when I turned 40, rode it for 500 km in a year and sold it at a loss of 40k.

[Hayek]

Originally Posted by Bhodrolok

So, to buy a 20-lakh car at age 40, one would need a monthly take home of 5 lakhs post taxes?

Yes, assuming you are a 2 car family and keep each car for 8 years. The ₹ 5 l includes 30% of bonuses as well assuming bonuses are material. Your EMI would be ₹ 50 k - add running costs, insurance, maintenance et al and you could well be spending well over 15% of your take home on a car. That is as high as I would go.

Barring my first car, that is as high as I have gone.

[greyhound82]

Originally Posted by SoumenD

Mid life crisis is kicking in as I approach 40 and more than cars my louuuu for bikes in clawing back. Hopefully can gift myself a decent bike by the time I hit 40. YOLO afterall

Off topic : same here. At 41, am watching a lot of motorcycle reviews. Mid 30's it was cycling tours and trekking . Never owned a motorcycle but eagerly watching the reviews to buy one.

[e46]

Good thread, wonder how I missed it all these days!

My take: Spend less than 3/4th of your annual take home salary.

I have a family with child, dependent parents & housing loan. Could have gone for a sub compact crossover, but settled for a humble i10 last year considering everything.

Of course, individual situations differ and for a lot, heart takes the final call. : )

[dass]

Originally Posted by Bhodrolok

Be careful! I bought a motor cycle when I turned 40, rode it for 500 km in a year and sold it at a loss of 40k.

I can understand the feeling , always wanted to buy a thunderbird and finally bought it when I turned 40, now 5 years down the line, it has done 10k kms and is only used for office commutes. Seriously thinking of replacing this for an electric scooter.

For anyone contemplating getting into biking, I suggest rent one for a longer duration and see if you really will be using it. Makes no sense to buy it if the usage is similar to mine.

[buzzy_boy]

A car is an appliance at the end of the day. My mantra is to buy, without credit, what you like with your "disposable" savings. Disposable savings = salary - sips for all your life goals.

I bought a car that costs ~20 lakhs after working for 13 years with avg. monthly salary of ~1 lakh rupees.

[dicor]

Question: What car what salary?

The question should be
What car? What salary? What age? and What is your passion?

Case study 1:
Me being a petrol-head since childhood. I was 23 years old when I had started earning.

Age 23: I was earning 7 thousand per month when I bought a used hatch at 1.45 lakhs. (2X of my annual salary)

Age 31: I was earning 8 lakh per annum, I bought a sedan which was 9.5 lakhs on road. (1.2 x of my annual salary)

Age 35: I was earning 21 lakhs per annum, I bought a big crossover which was 19 lakh on road. (0.9 x of annual salary)

Age 42: I make 52 lakhs a year, and if I were to buy a car right now, I wouldn't shell out more than 20 lakhs for it. (0.4 X of my yearly salary)

Despite being a car enthusiast, I've begun to appreciate the distinction between assets and liabilities. I now priorities things like my children's future education, saving money for the care of the elderly, a better home, and yearly vacations.

Case Study 2:
A resident in my building, owns 4 vehicles. He is real estate developer. The cars he owns in a family of 4 are

A 2010 model Toyota Fortuner
A 2016 ML 250
A 2021 Innvoa Crysta
A 2021 Santro

Even when I add together the costs of all these automobiles, it still comes to less than 0.1 X of his yearly income.


Case Study 3:
A Thakur sahab of my tehsil (and relative of a member on this forum). Monthly income (unknown), Net woth (few crores). Vehicle he own

• A 6 decade old Willys Jeep.
• MM540 Jeep
• Scorpio-N
• 3 Tractors

According to what I understand, spending power is determined by priorities and interests. not income.

[Small Bot]

I initially planned to get a car that was worth a specific portion of my annual CTC. But I ended up buying a car that was worth a smidgeon more than that in the Brezza.

That's because I really thought about it and decided to buy a car that I'd really require 3-4 years down the line, as compared to a car that I require right now. Ergo, a more spacious taller crossover as opposed to a low-slung hatchback like the Altroz or i20.

I got married a week prior to the delivery, so I had no choice but to take a loan on 90% of the car value for a five-year tenure.

That said, I know that I don't require another car for the next ten years or more, and this car is frugal and easy on the pocket too. I also have a running of less than 10K kms per year.

All my extended family members are known for keeping their cars for around a decade or more, so I'm pretty sure that logic and pragmatism and good maintenance will make me keep this car till it dies on me.