[Hayek]

Originally Posted by Axe77

Assuming I wanted to apply this formula to the entire garage cost at any given time instead of a single car purchase (using purchase cost as the reference), i.e. bikes in garage + 2 cars - how would you articulate this formula for both 45 - 50 (I’m 46 today) as well as 50+.

Is it ok to count any car over 8 years as zero cost? (I know it will still consume in terms of maintenance but not too fussed with that).

Would I be reading your math correctly if I were to restate it as - aggregate garage cost, if 50+, should not exceed 6% of net worth / 3 - 5 months post tax salary? Or aggregate garage cost not to exceed 4 - 6 months post tax salary if between 45 - 50 yrs of age?

To be clear, this was a rule of the thumb - but you would be broadly right that any vehicle beyond 8 years could be considered as being worth nothing, and you could double the benchmarks I had set per car for a 2 car garage to arrive at a total garage cost over 8 years. So at 45-50, it would be 6-8 months (think I had mentioned 3-4 months post tax salary) and at more than 50, 6% of net worth or 4-6 months salary, whichever is higher.

Agree fully that sometimes you exceed these limits a bit - especially if you don’t spend too much on other things. For example I spend a lot on holidays and travel - for those who spend less on that or do all their holidays as domestic driving trips, you could allocate part of that budget to the cars (or garage for those who also have bikes).

[Hatari]

Originally Posted by Amey Kulkarni

I’m grateful that you tagged two of my threads there and I completely agree to your post.

It’s a simple saying which I heard from an Entrepreneur at his 60+ age. He stated “Eat while you can, before you realise it’s too late.”

Its the same with cars. Fulfil your dreams when you can. Don’t repent when you retire and look back at your career realising you never enjoyed the journey.

Cheers
Amey

Thats the previous generation not the current one, most of whom are way too busy eating and buying even cell phones on EMIs!

[LordSharan]

I'd like to look at it differently. Salary is a forward looking decision making signal (bound to change and has uncertainty). What about considering net-worth of person? Net worth is all assets - all liabilities, and a fraction of this should be the guidance of car value that is being considered.

Example, If X's net worth is 10cr right now, probably 5% (50L) is the right threshold to purchase a car. or may be this can be combined with salary to come up with a thumb rule.

What is the fraction of net-worth that'd be acceptable to be spent on car purchase?

[Axe77]

Originally Posted by LordSharan

I'd like to look at it differently. Salary is a forward looking decision making signal (bound to change and has uncertainty). What about considering net-worth of person? Net worth is all assets - all liabilities, and a fraction of this should be the guidance of car value that is being considered.

Indeed. This is exactly what Hayek too had outlined in a post some time ago (linked below). But its not one or the other I guess in absolute. Earlier in the age profile, salary is the only realistic benchmark while once a person is in his late 40s and onwards, net worth may be the better filter.

Linking part of Hayek's post below, which covered both these aspects well depending on age (do see the complete original post though for full context - I've not quoted in entirety).

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

[Car-pe_Diem]

Guys,

I have had the immense pleasure of being the owner of a Honda City, bought new in 2012. Happy to say that per usual Honda standards, not a single issue till date except replacement of Ac compressor last year. But the time has come for planning for an alternative.

However, wanted to know what is an acceptable budget for a new car. Have seen several personal finance videos suggesting 50% gross annual income etc. Is there a financial rule that will give me a decent car without looking to be either skimping or forking out for something that I shouldn’t be owning?

[RROD]

I have been planning an upgrade for the past 2 years. During this time our new house construction was going on, and I wanted to buy an Innova Crysta.
Every time I decided to buy the car, I had to take an additional loan or withdraw from my savings to cover the house construction cost and we had to go through a medical emergency which put additional strain, which put even by travels/travelogues on hold.
My dream of upgrading to a car is still on.
The house construction cost went over budget by 100%, but that was for the family and I don't regret it. Just that my dream of owning a BMW has been pushed down the line.

Anyways now the priorities have changed, we have a new member in our family (he is 2 years old now). Looking for an MPV. Still with the ongoing loans I am hesitant to buy a new car.
BTW will be upgrading from an S-Cross, just not sure when I'll upgrade, but mind says to keep a look out for those EMI's.

[DasAuto1985]

Unfortunately, before buying my car I read all the ownership threads, reviews but missed out on this thread. Now I own a car for which the EMI is too much and its putting a dent on my finances. I am married with a kid, and yes I know it was stupid and should have done more financial planning and put in some thought into it, but now its too late and I can only curse myself. Any tips/ideas on how to mitigate this, other than of course to get a job that pays more

[Caffeinated]

Originally Posted by DasAuto1985

Unfortunately, before buying my car I read all the ownership threads, reviews but missed out on this thread. Now I own a car for which the EMI is too much and its putting a dent on my finances. I am married with a kid, and yes I know it was stupid and should have done more financial planning and put in some thought into it, but now its too late and I can only curse myself. Any tips/ideas on how to mitigate this, other than of course to get a job that pays more

Advantage of Bangalore car market is that it's very forgiving in cases like this. If you wish to go for a more wallet-appropriate car and assuming your car is still new-ish, you can look to resell and probably command close to OTR price with a bit of waiting.
No harm in calling up Spinny/Olx for a quote.

The other option is to just enjoy it as you have worked hard for it, and keep using it for a really long time so that maximum value is realised. The way the car prices are going up, you may feel you got a bargain in 4-5 years time.

[fordday]

Originally Posted by DasAuto1985

Any tips/ideas on how to mitigate this, other than of course to get a job that pays more

If it is an ICE car and your running is mostly within the city, sell it. Buy an EV, like Punch or Tiago. Both your maintenance and running cost will come down to almost zero.

[antz.bin]

Originally Posted by DasAuto1985

Any tips/ideas on how to mitigate this, other than of course to get a job that pays more

You can have anything you want but not everything. BUT, selling a new-ish car is not financially prudent. You might not save that much going that route and might end up with something significantly older / smaller / less powerful requiring more maintenance than a brand-new car does under a factory warranty.

Try cutting back on other expenses if possible. Try carpooling or using the Metro to cut your fuel expenses AND driving stress. Alternately, try talking to your financier and figure out a way to reduce monthly payments and include a balloon payment at the end instead.

Have you tried quitting alcohol or smoking? That cuts a lot of expenses and keeps you healthier in the long run reducing future medical expenses and loss of working days.

DO NOT Reduce insurance IDV or remove zero-depreciation cover to cut your car related expenses. This may end up biting you back.

[Rajat347]

As per SBI, car's ex showroom price should not be more than 60% of your annual take home income.
This is what I was told when I went there for a car loan.

[Geo_Ipe]

Originally Posted by DasAuto1985

I am married with a kid, and yes I know it was stupid and should have done more financial planning and put in some thought into it, but now its too late and I can only curse myself. Any tips/ideas on how to mitigate this, other than of course to get a job that pays more

Well, now that you've fallen into the river, you might as well enjoy a swim and get out!

Selling your new car is extremely stupid - financially speaking - and we are financially speaking on this thread, aren't we? So the next step is to foreclose the loan as soon as you can. As others have pointed out, talk to your bank and work a plan out.

Second step would be to hold on to your car for a longer period of time - maybe 10-12 years. Go through this thread to see the value in holding on to your (more expensive) car for longer:
https://www.team-bhp.com/forum/buyin...to-longer.html (How a more expensive car can work out cheaper (if you hold onto it for longer))

[adimicra]

Originally Posted by DasAuto1985

Unfortunately, before buying my car I read all the ownership threads, reviews but missed out on this thread. Now I own a car for which the EMI is too much and its putting a dent on my finances. I am married with a kid, and yes I know it was stupid and should have done more financial planning and put in some thought into it, but now its too late and I can only curse myself. Any tips/ideas on how to mitigate this, other than of course to get a job that pays more

I was in this situation some 12-13 years back. My sincere advice is - enjoy the car and try to save other expenses. I am assuming it must have been a dream car for you and that's why you would have stretched. So, enjoy it and may be later stage in life, you will look back and think you made the right decision
At least, that's what I feel now about my decision 12-13 years back, probably because things have worked out career wise and financially and I hope the same for you as well.

Remember, financial planning and wealth creation is a lifelong journey and you can always make up as you have a long way to go.

Good luck

[androdev]

Originally Posted by DasAuto1985

Unfortunately, before buying my car I read all the ownership threads, reviews but missed out on this thread. Now I own a car for which the EMI is too much and its putting a dent on my finances. I am married with a kid, and yes I know it was stupid and should have done more financial planning and put in some thought into it, but now its too late and I can only curse myself. Any tips/ideas on how to mitigate this, other than of course to get a job that pays more

Not many have the courage to admit such things in public, that shows you have your mind and heart in the right place!

If the EMIs are negatively impacting your lifestyle and causing financial stress, you should get rid of the car (it's a decent market to sell) and restore normalcy.

OTOH, if you are regretting it because you've read a lot of internet advice about starting the saving habit early, 8th wonder of the world compounding, etc. I say relax. According to me, the best time to own a car is when you have small kids so you can travel and make memories with your wife and kids. You will be the master of your sea. Soon they will have school, exams, friends and by far the worst thing - their own preferences - turning you into a chauffeur without pay.

[kaps454]

Cars are a depreciating asset. Rule of thumb, never buy a car more than 3-4 months salary (on-road price). Not worth it.
regards kaps454