What Car Should Be Bought at What Income?

[sachinj12]

There are those who live life king size, well beyond their mean. Well, literally. And then there are kings who lead a normal life.

A know person got a 2nd hand A4. Used it for a few months and sold because of the upkeep.

I know of another friend who can afford a fleet of German in his garage but owns an Innova,a Logan and a Swift.


According to me, if you have no liability on your head and are reasonably well off, you can spend around 40% of your annual income on the car. 30% for the car, remaining 10% as running cost. If you have liability, you need to get that off before you get the car or get a car which won't pinch your pocket. Of course, my assumptions are simple but it gets real complicated when you factor other uncertainty.

 

[autosafari]

According to me, if you have no liability on your head and are reasonably well off, you can spend around 40% of your annual income on the car. 30% for the car, remaining 10% as running cost. If you have liability, you need to get that off before you get the car or get a car which won't pinch your pocket. Of course, my assumptions are simple but it gets real complicated when you factor other uncertainty.

You mean to say 40% of the annual income every year or one time?

If 30% of the annual income is the max. limit set for purchasing a car, then most of the salaried persons will not be able to buy a car.

10% of the annual income as running cost for a car will make the family budgets go for a toss.

 

[sachinj12]

You mean to say 40% of the annual income every year or one time?

If 30% of the annual income is the max. limit set for purchasing a car, then most of the salaried persons will not be able to buy a car.

10% of the annual income as running cost for a car will make the family budgets go for a toss.

40% one time. You buy a car every year?


Maintenance+fuel and other miscellaneous will easily come up to 10% of your annual income.

If 30% of the annual income is the max. limit set for purchasing a car, then most of the salaried persons will not be able to buy a car.

You don't buy a car the moment you get a job, do you? You save a bit for few years,say 3-4 years and then you go get one.

 

[TSIVipul]

There are those who live life king size, well beyond their mean. Well, literally. And then there are kings who lead a normal life.

A know person got a 2nd hand A4. Used it for a few months and sold because of the upkeep.

I know of another friend who can afford a fleet of German in his garage but owns an Innova,a Logan and a Swift.


According to me, if you have no liability on your head and are reasonably well off, you can spend around 40% of your annual income on the car. 30% for the car, remaining 10% as running cost. If you have liability, you need to get that off before you get the car or get a car which won't pinch your pocket. Of course, my assumptions are simple but it gets real complicated when you factor other uncertainty.

Well,quite impressive words you wrote buddy,you are right that there are normal people who live like a king as well as people who are kings but live normal life but what makes the difference between both of them is the way they react to a situation.
Simple it is,the guy who has bought a second hand A4 may drive it but if his car gets a dent or gets a headlamp/tail-lamp broken then these guys can be seen fighting with a poor three wheeler driver or a biker or any other road mate because they don't have those 30k in spare to spend on their car.You can spot them near the road with some weird and helpless expressions on their face and after that they make some great deals for others in used car market as they are forced to sell their cars for some nonsense price and as a result the guy who was already running out of cash has been put back by some more lacs.HOW GOOD THIS KING SIZE LIFE IS!!!
You can also spot these people downgrading from an Audi to an Alto after they get married and then they explain you how the Alto is better than the Audi!!

On the other hand is the person who has bought Innova when he could plonk for an Audi this person is happy with his car,he does not really know if the car has any service bills.He does never feel the heat of maintenance charges.If his car ever gets dented by someone then he needs just a sorry from other person and he leaves the spot by ignoring the situation and just after an hour or two his car is in the service station irrespective of the cost of repair,he gets it repaired in very short time..

NOW CALCULATE AGAIN AND TELL ME BUDDY WHOSE LIFE IS REALLY KING SIZED??

You mean to say 40% of the annual income every year or one time?

If 30% of the annual income is the max. limit set for purchasing a car, then most of the salaried persons will not be able to buy a car.

10% of the annual income as running cost for a car will make the family budgets go for a toss.

40% of annual income on cars!!!then what will be done of other works to be carried out.
Its a fact that if more than 50% of family income goes into the car as mentioned by Sachin,then what is to be eaten,what of other liabilities.I think even singles also are unable to manage such high expenses on a car.

40% one time. You buy a car every year?


Maintenance+fuel and other miscellaneous will easily come up to 10% of your annual income.

You don't buy a car the moment you get a job, do you? You save a bit for few years,say 3-4 years and then you go get one.

Yeah,40% one time=a new car every year.Then comes installments,running costs etc etc.I mean,is it really practically possible?

 

[nickandre]

suppose a person has an income in the range of 3.5 - 5 lakh per month and also has good savings.
what car to fit it.
and if the said person has the cash to pay for it in whole and even maintain/run it. do you still suggest the person buys it on a loan or pay for it on his own?

btw must say this a very good and helpful thread

 

[TSIVipul]

Well,if you buy the car against a full cash payment,that means there is no additional load of EMIs on your head so all you now have to spend on the car is for fuel and maintenance only.
In my views if you have cash for buying the car then its better to buy it for cash only.Why?
Get the loan only if you have some income tax dept. people behind you else car for cash is okay.
If you are a businessman,then here is the way we follow:-
Buy the car for cash,run to the CA or income tax advocate with the bills and show that you have bought your car for running your business and get the car's price involved in your expenses.But for this,you must have strictly shown your income enough to buy such a car for cash and must have paid enough tax in the passed quarter/year.In other words,simple it is if you have paid your taxes quite smartly and in apt amount then buy the car for cash only.

 

[amiti]

I am also with the cash thing. Whether in business or for individual purpose. A car is a depreciating thing ( I won't call it as an asset).

 

[shailinder]

I am also with the cash thing. Whether in business or for individual purpose. A car is a depreciating thing ( I won't call it as an asset).

Anything which depreciate cannot be called an asset or the person is living in fools paradise.

One should always pay attention to others examples before sealing a deal be it new car or old. Because " Before you can really start setting financial goals, you need to determine where you stand financially." - David Bach.

 

[nickandre]

what about people who are in service(working for companies) or retired. what should they do?

 

[TSIVipul]

I am also with the cash thing. Whether in business or for individual purpose. A car is a depreciating thing ( I won't call it as an asset).

Well,buying a car for cash helps a lot,first of all no load of EMIs at all and hence now you can make your running according to your needs,not according to your pocket.Why?
Because if you have to pay EMIs,then at least 4-5k from your salary/income is going into EMIs and then adding running cost too will make up something about 10k per month but if there is no EMI then there will be no pain in stretching your running cost to even 7-8k per month.

Anything which depreciate cannot be called an asset or the person is living in fools paradise.

Fool's paradise!!Until its a Prancing horse or a Raging bull,its definitely not an asset but if I can get one then I am ready to be called a fool(these cars are assets,whatever you call them)even Shailinder will also be happy being called a fool..

One should always pay attention to others examples before sealing a deal be it new car or old. Because " Before you can really start setting financial goals, you need to determine where you stand financially." - David Bach.

+100,000
No doubt,if a person before investing makes out what is his/her current state then GOOD DEALS WILL VANISH FROM USED CAR MARKET..

what about people who are in service(working for companies) or retired. what should they do?

If any person is taking 3-4 lacs per month salary then his/her company will be providing with a lot of facilities like loans at 0% interest and car fuel expenses etc etc,here the scenario changes.Here my calculation fails as the person's most of the expenses are filled by company as a facility.Else what is better than a loan at 0% interest?
Still in this case any person with 3 lacs per month can plonk for any car in 4-5 lacs per month range without any trouble.

About retired people,I'd say that if they are earning this income then definitely they are in business,so again in my opinion the wrods I have posted in previous threads validate here...
Guys I am just a 19 saal ka baccha(19 year old child),with an experience of not more than a year or two of facing financial situations,my real life experiences are still very much lesser then you people and hence many questions send me out of words..

 

[nickandre]

haha you are younger then me by 4 years. Actually my dad will be retiring in a year or two and plans to upgrade to a luxury sedan. only thing is no bank will provide a loan. The current verna we wanted to buy by cash but the banker advised against that and hence we went with a loan.
So i am stuck up if we will be able to buy the car without loan and have no issues on the income tax side which dad faithfully pays.

 

[amiti]

If any person is taking 3-4 lacs per month salary then his/her company will be providing with a lot of facilities like loans at 0% interest and car fuel expenses etc etc,here the scenario changes.Here my calculation fails as the person's most of the expenses are filled by company as a facility.Else what is better than a loan at 0% interest?
Still in this case any person with 3 lacs per month can plonk for any car in 4-5 lacs per month range without any trouble.

About retired people,I'd say that if they are earning this income then definitely they are in business,so again in my opinion the wrods I have posted in previous threads validate here...
Guys I am just a 19 saal ka baccha(19 year old child),with an experience of not more than a year or two of facing financial situations,my real life experiences are still very much lesser then you people and hence many questions send me out of words..

Vipul, in case of salary of 3-4 l pm, the scenario changes drastically. I was offered a car at 0% int in my previous company, at one clause of sticking to the company for 5 yrs. In such a case loan makes sense as I can then put same amount of monies in FD and earn 10% interest on it.

Retired people will first check their account balance and then think of purchasing usually on cash.

Well you are 19 yrs old grown up adult dude.

 

[nickandre]

my dads company offered the same but its more like a lease no interest monthly emi's will get deducted and at the end of a certain period if we want the car have to pay a certain amount. i guess thats not worth and a loan is way better.

 

[TSIVipul]

Vipul, in case of salary of 3-4 l pm, the scenario changes drastically. I was offered a car at 0% int in my previous company, at one clause of sticking to the company for 5 yrs. In such a case loan makes sense as I can then put same amount of monies in FD and earn 10% interest on it.

Retired people will first check their account balance and then think of purchasing usually on cash.

Well you are 19 yrs old grown up adult dude.

Well,that depends on conditions buddy,either you buy car for cash or at 0% interest,both are equal.Why?
Because you have increased the load of EMIs on your head.
About FD,I believe if you don't have any other place to invest then only FD sounds good.

my dads company offered the same but its more like a lease no interest monthly emi's will get deducted and at the end of a certain period if we want the car have to pay a certain amount. i guess thats not worth and a loan is way better.

Guys,you can consider all and everything,but at last the simple business rule sounds best:-
Buy a car for a price on cash then use it for carrying out your business,take the work of more than 4-5 times the car's price and then sell it off at half or even one-fourth of its price as it is now nearly retired and you have already taken a lot of profit from it.

Rest about analysing your income,I'd say just take a look at yours FORM-16 and you will get complete idea of which car you can buy for cash and income tax department won't be able to even touch you.

 

[neivindamin]

thanks for sharing this useful info as iam supposing to buy a new car.