[SoumenD]

Originally Posted by Acharya

Attachment 2487331

A conservative guidance map of spend on cars, at certain age vs income combination.
The idea being, one is allowed to splurge a bit if earning well in early years. Go slow during 40s on Auto spend. If one has saved enough and continue to earn well during 50s, you can spend slightly more on yourself.

Thanks for this. Seems about right. But am surprised why it reduced for a 40-45 year old if annual household income is 45LPA? Says 11L on a car. Is it because at that stage usually people have other expenses like kid's school, Home-Loan EMIs etc?

Originally Posted by SLK

4) Social standing is another issue, driving a hatch to work and parking it in between the brigades of SUVs takes some courrage. But trust me, its all in the mind because I do drive a hatch to work!

Originally Posted by ralto

As someone pointed out a few posts ago, looking at how people are buying cars as per the monthly reports published on the forum and looking around in my circle, I think not even 1/4th of them are following any such thumb rules.

Yes, very very few actually do it. In India its more about “keeping up with the Joneses” when it comes to houses and cars. Mine should be bigger than my peers/relatives

As long as people care about such things and define their own social standing based on that, its a never ending race. I have been guilty of the same in the past as well but thankfully COVID taught me there's way more to life, than this contest.

Originally Posted by SLK

5) With zero social security in India, post 40 years of age, it is not wise to overspend of cars, unless they are say about 15-20% of the annual income.

Can't stress enough on this. It's such an important point, specially for IT folks in India.

[Hatari]

Originally Posted by raghavrayudu

"Anyone who lives within their means suffers from a lack of imagination." - O Wilde

What a great line for Visa/Mastercard!

[astrodex]

Going by some of the numbers quoted here, nobody will be able to afford a 60 lakh+ car!

Financially, some of this math might work for salaried people, but for people in business many of these don't add up. Cars then become pre-tax assets that depreciation can be claimed on, making them more valuable than for salaried folks. If left as profit, taxation is close to 30%, better put it towards a new vehicle and claim depreciation.

Taking a philosophical view, we have to think of what are you saving that money for? The lack of a social net has made Indians to be too frugal and saving oriented. If all you do is save when will you get to spend it? I like some of the western thoughts on finance where it says you should have the most savings at 40 and then look into spending it so that by the time you die, you are penniless and had a chance to enjoy all of the money you earned. By that I mean, you have given money to your kids as much as they need, paid off all your social and health dues etc. If you look from that lens, there are only a few depreciating things worth spending money on, like vacations and cars.

[neoonwheels]

Originally Posted by Acharya

Attachment 2487331

A conservative guidance map of spend on cars, at certain age vs income combination.
The idea being, one is allowed to splurge a bit if earning well in early years. Go slow during 40s on Auto spend. If one has saved enough and continue to earn well during 50s, you can spend slightly more on yourself.

Best wishes finding a good car if you follow this table

[Amey Kulkarni]

Originally Posted by Acharya

Attachment 2487331

It is an incorrect interpretation of what one should do. It cannot be even treated as an approximation. It is really misleading information for the TBHP true lovers and followers.

Cheers
Amey

[bhargavd]

Originally Posted by Acharya

A conservative guidance map of spend on cars, at certain age vs income combination.
The idea being, one is allowed to splurge a bit if earning well in early years. Go slow during 40s on Auto spend. If one has saved enough and continue to earn well during 50s, you can spend slightly more on yourself.

This is very interesting. Can you please explain the logic pls? The basic idea of 50% of salary is extremely short term thinking. Salaries increase overtime in most cases while car is a spend for 7-8 years on average.

A lot of factors need to be incorporated while planning finances and such back of the hand calculations are actually worse indicators.

I remember the anology- a poor person will buy cheap shoes multiple times while a rich person will buy the best once for lifetime.

[Turbohead]

Financial prudence and the love of automobiles/living your dreams can never be alloyed together without high income/ networth. No wonder this thread is going on for 30+ pages

IMHO, you really need to have a profitable business to own a car in India. Else I personally can't comprehend the taxes involved in the purchase, maintenance and running of a vehicle with your taxed income. It's truly treated as a luxury good by the govt and simply kills any personal tax saving measures you take.

The ability for a business to claim depreciation, GST etc are simply brilliant. Another reason/merit to put up with the pain of entrepreneurship.

Now coming back to financial prudence for salaried class, I feel one should consider opportunity cost of owning a vehicle rather than outright percentage of income. This will really help one to understand whether they want to miss out on the fun or the power and fun of compounding.

[Acharya]

There are various factors at play, if we purely look at Salary and strictly assume that total household income is limited to a given range, then spending beyond given numbers open up certain financial risks. Many people take the risk and still come out okay, but incase risks play out, there could be undesired consequences.

Moreover, lets also not forget, many people not only have Salary but have auxiliary economic means to back up car purchases for example - investments, savings, inheritance, windfall gains and extra ordinary career/income growth. All of this, provide multitude of options to upgrade cars and throw this table out of window.

Potential income growth plays big role in purchase decision.

But for someone solely dependent on Salary, I would certainly advise caution, if they wish to see comfortable golden years.

Originally Posted by ralto

Thanks for putting this in an organized manner. Kind of matches the overall discussion of the thread so far.

However, I'm taken aback to see that if someone is between the age of 35-45 and household income is also 35-45 LPA (pretax), then it is sensible for them to spend just around 12 lacs on a car. Yikes!
.

Originally Posted by Rahkehs

I would like to respectfully disagree with these random conservative figures which suggests a person (aged 35-40 yrs) earning 35 lakhs should buy Tata Punch or similar car. There is no such formula, it all depends on an individual's circumstances e.g., a person in a good Govt.

Fully understand and agree, for example: there would be greater financial maneuverability for someone who has confirmed pension.

Originally Posted by Bhodrolok

Are the number in green percentages of yearly income or absolute value in lakhs?

Absolute numbers in Lakhs.

Originally Posted by SoumenD

Thanks for this. Seems about right. But am surprised why it reduced for a 40-45 year old if annual household income is 45LPA? Says 11L on a car. Is it because at that stage usually people have other expenses like kid's school, Home-Loan EMIs etc?

During 40-50, people with family get dual financial load of aging parents and growing kids, hence reduced allocation to cars.

Originally Posted by bhargavd

This is very interesting. Can you please explain the logic pls? The basic idea of 50% of salary is extremely short term thinking. Salaries increase overtime in most cases while car is a spend for 7-8 years on average.

The base logic is allocating certain percentage of income towards car. It starts with high percentage @50% for below 25 years, reduce to 25% between 40-50 years age group and increase slightly at 50-55 years group.
Title of the thread is What Car @ What Salary. Therefore, other influencing factors (stated above) are not included in the table, one might have to write an algorithm to include all sundry factors

Originally Posted by neoonwheels

Best wishes finding a good car if you follow this table

Tell me about it my friend, cars prices are making us car enthusiast sick.

To conclude - I'm no financial expert, the table is a conservative advise for people solely on Salaried income. When multiple other facts come into play, it becomes an individual choice based on specific personal factors.

Many of us let our heart rule in any topic related to wheels. Thats life!

[Lobogris]

There are certain other considerations to be kept in mind besides some charts and ratios. First of all, no one should buy a vehicle costing less than 15 to 20 lakhs as far as possible. The reason is the lack of safety and the lack of quality in cheaper vehicles. A vehicle like Volkswagen Taigun / Virtus, Kia Setos, MG Astor, Hyundai Creta etc should be the minimum benchmark regardless of any other factors.

Only people earning very little or people who are in the beginning of their career and are trying to be frugal should buy anything inferior. Even they would be better off buying a used higher end vehicle. So even if my income were to be just 8 lakhs per annum, I would definitely strive to buy a vehicle costing at least 15 to 25 lakhs.

I just don’t understand why people earning well buy vehicles like Tata Tiago /Punch or Hyundai i10. What’s the point of having money or earning a good salary if you can’t have a decent vehicle, decent TV, phone and other appliances?

[DCEite]

Originally Posted by Lobogris

First of all, no one should buy a vehicle costing less than 15 to 20 lakhs as far as possible.

From various replies and insights on this forum, a person buying 15 to 20 lac vehicle must earn > 50 lac post tax per annum.

Now, you have the data on internet, just check what percentage of population of India currently earns > 50 lac per annum. In this forum, majority maybe earning more than that, but if we talk about India as a country, that would be less than 0.5% I bet. It's not practical to speak for that 0.5% only, in my opinion. Let's see the bigger picture.

I just don’t understand why people earning well buy vehicles like Tata Tiago /Punch or Hyundai i10. What’s the point of having money or earning a good salary if you can’t have a decent vehicle, decent TV, phone and other appliances?

lol.

I know some people who earn > 1 Cr per annum and drive cars like Nissan Magnite/Tata Nexon and even Hyundai i20. They are no less or more happy than someone driving a D or E segment car. In fact, they are more stress free, given that they don't care much about dents/scratches or breakdowns and have more peace of mind than those owning and maintaining luxury cars.

[PrasannaDhana]

Originally Posted by Lobogris

So even if my income were to be just 8 lakhs per annum, I would definitely strive to buy a vehicle costing at least 15 to 25 lakhs.

I just don’t understand why people earning well buy vehicles like Tata Tiago /Punch or Hyundai i10. What’s the point of having money or earning a good salary if you can’t have a decent vehicle, decent TV, phone and other appliances?

So, All vehicles <15 lakhs are inferior?

To each, his own, I guess.

[Mike_Schumacher]

Originally Posted by Acharya

Attachment 2487331

A conservative guidance map of spend on cars, at certain age vs income combination.
The idea being, one is allowed to splurge a bit if earning well in early years. Go slow during 40s on Auto spend. If one has saved enough and continue to earn well during 50s, you can spend slightly more on yourself.

May I know the logic behind it or are they some random numbers?

Going by the above approach, for a mobile purchase most likely I have to stick to a nokia 1100.

[Rahkehs]

From various replies and insights on this forum, a person buying 15 to 20 lac vehicle must earn > 50 lac post tax per annum.
……

Monthly sales of Fortuner/Creta/Seltos/XUV700/ Grand Vitara suggest otherwise!
It seems the conservative suggestions for car wrt salary is based on the assumption that salary will remain constant over a period of time & there’s high probability of layoffs

[N.A.GTC]

Originally Posted by Rahkehs

It seems the conservative suggestions for car wrt salary is based on the assumption that salary will remain constant over a period of time & there’s high probability of layoffs

Which, in my very humble opinion, is a very good and important assumption to make. A very basic accounting principle too: account for all the losses but do not anticipate any profits. Planning as per a salary you may have in the future is the same as spending the money you do not have.

Of course, personal situations and preferences differ. I know people who have spent all of their savings to buy their dream cars. I (and it seems like a lot of members here) do not feel comfortable doing so.

There's a relevant quote in my signature, in fact!

[SLK]

Originally Posted by PrasannaDhana

So, All vehicles <15 lakhs are inferior?

To each, his own, I guess.

That is how it is looked at socially. So many people in my neibourhood own XUV700 AX7, that anything cheaper makes you feel poor (in comparison).

I'm sure everyone of us have our own ways of feeling better about what we have! Even if it involves thinking what we could have had! and then feeling good about the decision of not buying it

The problem with public discussion is, we can only exhange beliefs and not facts.

When it comes to actual shopping, I'm sure cars get better of us and most of us would spend more than what we would have budgeted.