[F150]

Originally Posted by DCEite

Assuming you are taking loan of 80% of total on road price, your loan amount would be for 5 years 3360000 with EMI of around 69000 @ 9% ROI. So including your HL EMI total outgo will be around 1.2 L per month.

Ideally this should be capped to around 25% of your salary (Total EMI outgo).

Hence you should be earning atleast 480000 per month or around 5760000 Annual post tax income (That roughly, translates to a CTC of around 65-70 Lacs).

The calculation is aggressive in terms of risk aversion, but I see the benefits. But then being car enthusiast, I think 40-50 % should be good threshold.

Originally Posted by amitayu

What car at what salary is a very simplistic querry.
What realy matters is how much EMI you can afford to pay after all possible kind of expenses you have.

A good way to go about it (and I did it the first time) is to set an RD for an year at an estimated EMI you think you can afford. Try it out for one year and see if you can really live with it. After an year, take a call whether you can bump it, or need to reduce it.

An additional bonus is the RD itself, which I used as part of the downpayment, which helps you lower the total loan amount!!

Excellent suggestion, I will try this right away.

Originally Posted by Herschey

These calculations should provide an overview of the income required to satisfactorily service EMIs for a VW Taigun along with a Housing Loan EMI of 50k:

Attachment 2570051

While most probable values have been taken for calculating the gross and net income required to service the EMIs, changes in variables like RoI, loan tenure, down payment amount etc. would affect the resultant outcome.

Here, the amount of annual income tax liability would be nearly equal to that of the amount of both housing and car loan combined.

Thank you very much for the extra effort , the excel lays it out very clearly.

[SiddharthR]

Originally Posted by UD17

One of my friend was on lookout for the Used car with maximum 1 years life and <10K Kms on it.

Forget 30% depreciation on OTR price, we could not get a car with price which is <10% of the OTR price. The used car market is crazy right now and this 30% depreciation hit rule do not apply anymore.

Can you please get me one example of a new preowned car (lets say just came out of showroom), owned by 1 owner and priced at 0.7xOTR price?

I agree, traditional advice on this forum suggests that there is a 25-30% depreciation immediately post purchase but the reality today is this number is closer to 10%

As used-car sales becomes more and more organised, the number will only reduce even further as there is no meaningful reason for this depreciation and it will become easier to find buyers willing to pay higher prices for a near-showroom condition car

[Axe77]

Originally Posted by UD17

One of my friend was on lookout for the Used car with maximum 1 years life and <10K Kms on it.

Forget 30% depreciation on OTR price, we could not get a car with price which is <10% of the OTR price. The used car market is crazy right now and this 30% depreciation hit rule do not apply anymore.

Can you please get me one example of a new preowned car (lets say just came out of showroom), owned by 1 owner and priced at 0.7xOTR price?

Image below. As requested. This is on one quick random search on CarWale of a popular C segment sedan.

You’re not wrong that the used car market is a bit richer than what it used to be and there is definitely some truth to the used car market holding its values a bit better than maybe 3 - 5 years ago. But I wouldn’t go so far as to say that it’s closer 10% across the board. You also haven’t mentioned what kind of car / segment your number is premised on. But a quick search of a random popular C segment sedan revealed the numbers in the images below. It’s approximately 20% of OTR at the “quoted price”. Even some nominal negotiation should bring the number down to closer 75% at least I would reckon.

Closer home, my own Jeep Meridian, which I bought for something like ~43/44L sold 18 months and 19,000 kms later for ~30.5L to a used car dealer. I doubt he will sell it for more than 32 at most. I am seeing CarWale prices being “quoted” at about 33 - 34L which will surely leave ‘some’ room at least for negotiation. Admittedly this is the hit on a “failed” product of course. If you’re on the lookout for a used car, sometimes a not so successful product but which is inherently capable, can yield some decent value deals, specially if you plan to hold them for a long time.

Sure a popular car like a Toyota Hycross with a long waiting may be harder to get at a bargain. And the depreciation on popular entry level models might perhaps be lesser. But as a general proposition, I don’t think the market is at <10% across the board like you described. Perhaps closer 80% (i.e. depreciation of 20%) for popular models but not as bad as you’re fearing either.

Originally Posted by SiddharthR

I agree, traditional advice on this forum suggests that there is a 25-30% depreciation immediately post purchase but the reality today is this number is closer to 10%

See above.

As used-car sales becomes more and more organised, the number will only reduce even further as there is no meaningful reason for this depreciation and it will become easier to find buyers willing to pay higher prices for a near-showroom condition car.

Yes, this is true to some extent. The other phenomena is a place like Bangalore, which is bordering on being cartelized by such used car dealers to some extent and is resulting in people having to pay higher prices for their used cars.

Won’t take the What car / What salary off topic anymore but the point is as far as an individual customer is concerned, the depreciation hit is still a very real thing. If middle men are making more money on account of getting organised it still doesn’t significantly change the depreciation consideration from the first owner’s perspective, which is the more central point of discussion in the context of this thread.

[manub22]

As somebody mentioned about CTC % logic for buying a car, I believe its applicable for a person with no business background. In this case I don't believe the car budget should be based upon your current CTC (somebody quoted 20-30% of CTC, which is too much IMO, however YMMV). If you have a good business income or other sources then its a different story. I always relate my car buying budget to what I'm saving for my future, kids higher education, marriage, and my post retirement life. Things have gone 10x fold in last 10 years, not sure how much inflation I will face in next 20+ years. Due to this thought I'm not getting lured in upgrading unnecessarily !!!

Many times I get lured into buying a new car with all bells & whistles, but I feel my existing 7 year old HondaCity is giving me a good time. I bought my City after owning i10 for around 10 years which I still have (15+ years now). Many a times I feel, do I really need a 30lac+ car, or should I invest this amount into SIP, or buying a land, or flat which will appreciate in long term?

With all this in my mind I've thought to give my 2017-HondayCity at least 10+ years of ownership, and post that I will think of buying a new car. But again after 3-4 years the same question will arise to put 30+ lac amount on a new car, or to go with a decent ~15-20 lac one, and invest in rest in something else !!!

[Burgman_tales]

Originally Posted by quasimodo

Apologies for missing out on the excel attachment. Here it is.Attachment 2569974

The EMI savings will also grow at Nifty returns (12%). You missed that. That would make both scenarios almost equal future value.

[V.Narayan]

Wise words by @manub22 below. My advice, which I have practised, is when buying a house/apartment to live in buy one grade higher than what you can comfortably afford. When buying a car buy one grade lower than your financial comfort zone. A house/apartment is an appreciating asset while a car is a depreciating one. For salaried folks I'd say first put away the money you need for your long term savings, your house EMI, your children's education and then look at what you can spend on a car. Too many young people lived their whole working life in an era {1999 to 2019} of economic growth and ever increasing pay packets for India's top 10% to which we all belong. Constant increase in salaries was assumed for life till the pandemic shook all those assumptions. If you are a young family and don't own your own house yet then see if you can buy a car without an EMI. It will help you one day if things go south.

Originally Posted by manub22

Many times I get lured into buying a new car with all bells & whistles, but I feel my existing 7 year old HondaCity is giving me a good time. I bought my City after owning i10 for around 10 years which I still have (15+ years now). Many a times I feel, do I really need a 30lac+ car, or should I invest this amount into SIP, or buying a land, or flat which will appreciate in long term?

[headbanger]

Originally Posted by manub22

With all this in my mind I've thought to give my 2017-HondayCity at least 10+ years of ownership, and post that I will think of buying a new car. But again after 3-4 years the same question will arise to put 30+ lac amount on a new car, or to go with a decent ~15-20 lac one, and invest in rest in something else !!!

Excellent analysis!!! Been there done that. Replace your i10/City combo with Ritz/Dzire for my case.

However, all we need is one external factor to challenge the story. Imagine your place also getting impacted by NCR 15 years rule. Would love to get perspective on how your new car buying shapes up. You have already experienced City so would you go for a lesser or similar segment for new car respecting the financial argument or a segment higher than City due to aspirational reasons. FIRE or YOLO?

[SidharthaN]

Buy a car with no EMI is my mantra.

At 46 I have paid off my home loan, car loan, bike loan. I am debt free and do not owe money to anyone. There cannot be a better feeling than this. I am at this stage due to unforeseen life circumstances of job losses, loan implications etc which made me suffer, and wonder are those EMI really worth.

My requirements for a car are: power windows all four, power steering, AC, music system, ABS, that's it! I do not need a fancy car to take me from point A to B in our insane city traffic conditions. As far as driving pleasure, I have done ample cross country runs on my previous i10, and my current Zest 1.3MJD and have never needed requirements of a higher powered larger vehicle.

Come to think of it the other day I was watching a vlog of Ladakh, Umlingla la being done in a S Presso from Kolkata. What is the requirement of a 4x4 then.

I repeat again feeling of being debt free cannot be matched. The earnings can be put in MF, stocks, savings etc or better still be used to drive open highways than being stuck in a 20+ lacs or maybe higher priced car on city roads, and a whopping EMI fulfilled by a job which takes a toll on you since you do not get leave, or cannot afford the highway runs.

[selfdrive]

Originally Posted by Herschey

Here, the amount of annual income tax liability would be nearly equal to that of the amount of both housing and car loan combined.

This calculation is very useful. It makes me question the intended purchase and evaluate against a precise quantified number. RoI for the win!

Sorry for nitpicking, but in the last row, did you intend to state monthly pre tax income?

[Senotrius]

Originally Posted by SidharthaN

Buy a car with no EMI is my mantra.

At 46 I have paid off my home loan, car loan, bike loan. I am debt free and do not owe money to anyone. There cannot be a better feeling than this. I am at this stage due to unforeseen life circumstances of job losses, loan implications etc which made me suffer, and wonder are those EMI really worth.

Same here. I agree with you. Unless it's for tax depreciation benefits as advised by the CA, even upper premium cars don't make any sense. If one has throw away money with some additional tax depreciation benefit; (would need annual salary close to 1CR region to begin plus home/real estate and a stable portfolio) go for the 'finer' things in life WITHOUT loans.

Luckily, cheaper (comparatively) cars are getting better now. Similar to smartphones having almost all features in 15-30k INR bracket. A 70k to 1 lakh INR smartphone makes zero sense now as they also get outdated in a few years time.

[Cayman360]

When I bought a car in 2022, I knew what I wanted, but the decision to buy it was based on the fact that the EMI after a 10% down payment, would be 10% of my monthly take home. I had a 50% savings/investment target, and the EMI amount wouldn’t be difficult after all my other expenses. Also, I wanted an EMI that I could pay comfortably if I lost my job. Which actually happened six months after buying the car. So I don’t really regret not buying a segment above.

[Neeraj_S]

Just like there is no perfect car for everyone there is no perfect guideline to buy a car for everyone.

It all depends on if you have a reasonable disposable income, obligations or not, family responsibilities or not, existing EMI or not and then a few more things. Have no responsibilities and a good chunk of your salary after savings can be allocated to your car EMI.

Have responsibilities, sure, go ahead and reduce that amount based on your judgement.
What worked for me might not work for others. I purchased my first car with total value roughly 0.7 times my annual take home salary. Half down payment and remaining a 5 year EMI of less than 9% monthly salary.

I am sure it was not a financially good decision. But, did I make memories with the car by having multiple trips with the family. Yes. You really cannot put any price on those.

You should save for your future, but while doing that you should not lose out on the fun and enjoyment that you can have right now. You should not regret not saving enough but neither should you regret not spending enough to be able to enjoy the moment when you had the chance.

[Way2Jimny]

Originally Posted by Neeraj_S

What worked for me might not work for others. I purchased my first car with total value roughly 0.7 times my annual take home salary. Half down payment and remaining a 5 year emi of less than 9% monthly salary.
I am sure it was not a financially good decision. But, did I make memories with the car by having multiple trips with the family. Yes.
You really cannot put any price on those.

Buying a car costing less than your annual salary is definitely a good decision.

My first car was 2x of my annual salary. But I was able to do that because I was young, not married, living with parents and most importantly it was the first car in our family. I was tired of going to family functions with parents in crowded government buses all sweaty when others come comfortably in cars. My dad used to run and put a cloth towel from window to capture a seat and fight with others to get us some space. He won few times but many a times we used to go standing for 3-4 hours straight being crushed among crowd.

Right from young age I was waiting for the moment to get a car home and take my parents in it. I'm glad I did that. Got my first car a Punto which was better than the marutis everyone else had.

No financial number can put a value to that feeling. The pride in the face of my mom that all her hard work to get me educated paid off. She was able to fetch that respect from her little circle of relatives. Finally she was able to travel in comfort atleast in her old age. So many good memories!

Yes I extended my budget and got a loan. SBI even rejected my loan application. Then got the loan from a private bank. My manager was playing envy with me coming to office in car when he came by splendour. He gave me bad ratings and assigned less challenging projects. It pushed me to work even harder, improve my tech skills , switch jobs and make better money. Three more cars later , I don't regret that decision a bit. Some times you have to act fast in life.

As you said what works for you might not work for others. Just gave my example. Don't just go by numbers. Work out what suits the best for you and may be have a exit plan if something goes south.

All that being said, I would not be so adventurous at this moment in my life with kids education, retirement and home loan as priorities. Still the Jimny tugged my heart and had to get her home

[ajitmoses]

The rules that most people in mature markets are advised is as below:

- The maximum cost of your car should be less than 35% of your annual salary pre tax.
- Your loan should be for 4 years with a down payment of 20% (shorter term and higher down payment is better)
- Your EMI and insurance and running costs (gas, parking, toll) should be less than 20% of your monthly salary post tax.
- And most importantly, owning your car for every year post loan completion has a positive impact on your finances. 10 years for a modern car is a very decent time.

Based on my interactions with my friends and family back in India, majority of them don’t follow the above rules.

[shankar.balan]

Originally Posted by Way2Jimny

Right from young age I was waiting for the moment to get a car home and take my parents in it. I'm glad I did that. Got my first car a Punto which was better than the marutis everyone else had.

No financial number can put a value to that feeling. The proudness in the face of my mom that all her hard work to get me educated paid off. She was able to fetch that respect from her little circle of relatives. Finally she was able to travel in comfort atleast in her old age. So many good memories!

As you said what works for you might not work for others. Still the Jimny tugged my heart and had to get her home

I LOVE this post. I can feel the Pride that you are writing it with. And I LOVE the sentiment behind what you wrote. Brings ‘tears’. People like you are the Embodiment of the New Age, Self-Made, Confident, Proud Indian. And that makes me Proud too. Wishing you the best ahead!