What Car Should Be Bought at What Income?

[Markiv]

A very good thread started by vipul and am thankful for all the views expressed by all members here. Let me give my personal experience here which I did in my own crude method.My car costed 17 lakhs on road Bangalore a few months ago.

An investment of 17lakhs carries an interest of 17000per month(@12%) which totalled upto 205000 per year.*

A car of 17 lakhs fetches a resale amount of 4lakhs after 5 years i.e a capital loss of 13 laks which translates into 260000 per year.

A 17 lakh car shall give a maintenance service bill of around 17000 twice per year,or 34000 per year.(if run for 1500kms per month for 5years).

A 17 lakh car's insurance per year shall be around 11000 per year.( 3rd years insurance amount taken as average for all 5years).

The total expenditure on an average was 205000+260000+34000+11000=510000 per year. Or around 42000 per month plus fuel expenses. Only when I knew, I was comfortable with this figure for the next 5years, did I go ahead with the purchase.

This is the way i calculated, i felt i was more or less near the real picture? (if not the accurate picture). **

 

[TSIVipul]

A very good thread started by vipul and am thankful for all the views expressed by all members here. Let me give my personal experience here which I did in my own crude method.My car costed 17 lakhs on road Bangalore a few months ago.

An investment of 17lakhs carries an interest of 17000per month(@12%) which totalled upto 205000 per year.*

A car of 17 lakhs fetches a resale amount of 4lakhs after 5 years i.e a capital loss of 13 laks which translates into 260000 per year.

A 17 lakh car shall give a maintenance service bill of around 17000 twice per year,or 34000 per year.(if run for 1500kms per month for 5years).

A 17 lakh car's insurance per year shall be around 11000 per year.( 3rd years insurance amount taken as average for all 5years).

The total expenditure on an average was 205000+260000+34000+11000=510000 per year. Or around 42000 per month plus fuel expenses. Only when I knew, I was comfortable with this figure for the next 5years, did I go ahead with the purchase.

This is the way i calculated, i felt i was more or less near the real picture? (if not the accurate picture). **

That was a great explanation,in fact I'll next time add this way of making cay purchase while carrying out my next observations.

Still,those people who jump their budget are also very important.Why?Because if they don't do so,then who will get us fantastic deals in used car market?..

 

[Markiv]

In continuation of my earlier post, apart from the financial implications, there is also an element of personal satisfaction, utility, reliability, needs etc along with a car purchase.

I thought about the things this 42000 figure per month would give me month after month for the next 5 years.i am not advocating saving of this money,I am only thinking what this figure could do for me for pleasure.

Maybe, Indian holidays every month or an international holiday once in a few months, branded stuff every month, new gizmos every month, hosting 5 star hotel parties every month, society snob value attached with those high stye living, buying those expensive gifts for your lady every month....for five years! Sounds tempting!

But I still went ahead and bought the car ,

As vipul said, if there are no fools around, a wise man would not have any value!

 

[TSIVipul]

That's a great compilation buddy..But now let's have a look at the positives of buying the car:-
1):We are businessmen(I am,don't know about you) and have a to travel a lot.
2):Driving a small car means journeys ending with tiredness,which can't be afforded.
3):Being fresh means less time taken to complete the work and completing the work correctly.


In other words,those 16-17 lacs are not an expense,instead they are an investment from which we are going to earn 20 lacs in a year and even after earning 60 lacs from that in three years we can sell it for 4.5 lacs...see how it became a smart investment!!

About fools being around...as we say "FOOL PEOPLE ARE THE APPETITE OF WISE PEOPLE".

 

[TSIVipul]

Guys since I explore the finance thing a bit too much and hence I came across a shocking fact:-

Recently I met with the managers of some banks for the purpose of some loan.During the meets I met a manager of a branch of SBI and ICICI and when talking to them about EMI and all for car loans they gave me some shocking estimates,the estimates are as follows(For SBI):-
1):About 90% of the car loan takers are unable to maintain perfect return even for first 2 years with an EMI or two broken till date.
2):Out of those 90%,the 90% are those who work for some private firm and take good salary too but they ares till unable to smoothly pay back while the government officials with even lower salary and same amount of loans are paying it with no issues.
3):Last year(March 2011-2012)bank seized seven cars and shockingly all seven owners had no savings to pay back the loan or even pay 2-3 installments of the loan after their financial status got disturbed and all the cars had a loan of over 4 lacs.

Amazingly,for ICICI,the condition was even worse..

 

[vaibhav]

@vipul people these days are dumb and just for showoff buy cars on loans.Then they face the heat in future

WE have a monthly saving of 1 lac per month and still have only bought dezire @6.5 lacs. Many people would have bought a XUV/CRUZE etc for showoff

 

[brandoo]

House loan EMI means you've got a house of your own. So why the 20K rent?

Under construction. So EMI and rent both.

I believe one should not spend more than one's 8-10 month salary.
Markiv is spot on in his analysis and 1+ to him

One should keep at least 1 L in saving account for any exigency i.e. for accident or any untoward incident. This will serve twin purpose of medical and repair bill. Though I wish safe journey to all the owners but you never know

 

[TSIVipul]

@vipul people these days are dumb and just for showoff buy cars on loans.Then they face the heat in future

WE have a monthly saving of 1 lac per month and still have only bought dezire @6.5 lacs. Many people would have bought a XUV/CRUZE etc for showoff

One more amazing fact is that most of the businessmen and people working in finance sector didn't face any such issues.Why?
Because they move ahead after doing a financial planning,and the people who doesn't plan the usage of their money most of the time end up being trapped.

Under construction. So EMI and rent both.

Ah,its impossible to save yourself from this issue if you are building your house.

I believe one should not spend more than one's 8-10 month salary.
Markiv is spot on in his analysis and 1+ to him

+10..

One should keep at least 1 L in saving account for any exigency i.e. for accident or any untoward incident. This will serve twin purpose of medical and repair bill. Though I wish safe journey to all the owners but you never know

Definitely,this much saving is a must,it helps not only in car way but it helps in the financial emergencies.

 

[krish_go]

Definitely,this much saving is a must,it helps not only in car way but it helps in the financial emergencies.

I hope this 1L saving in SB fundaa is not "Ready credit" offered by Banks to corporate employees.

 

[TSIVipul]

I hope this 1L saving in SB fundaa is not "Ready credit" offered by Banks to corporate employees.

I hope no one will feel bad if I say:-
Now a days a lot of people are felling prey to this bait thrown by the banks.First of all the bank gives a credit limit of a lac or two saying "Sir your account transaction makes you qualified for even the gold/platinum card".
After that you give it to your wife or go anywhere and starts the swapping game.
Until your account has enough money to get it auto-paid to your credit account everything is okay.And after that you pay interests..and from interests I mean 'HIGH' INTERESTS.

Actually,as per a new survey report by me,myself(will be presenting complete reports within 4-5 days) "The financial issues with people have increased by many folds since last ten years and similarly...
A HIGH RISE IN PURCHASING CAPABILITY OF MANY PEOPLE IS OBSERVED as well as over-capacity purchases have increased by many folds".

So at last I find myself helpless when I tell people "SIR MOVE AHEAD WITH FINANCIAL PLANNING ELSE THERE ARE CHANCES THAT IT WILL LEAD YOU SOMEWHERE ELSE"
And most of the people reply me "Humne bahut duniya dekhi hai,beta abhi thode bade ho jao fir baat karna(We have seen a lot of world,beta first you grow up then we will talk on it)" And I am left like

 

[vaibhav]

@ TSI bhai people are veyr jealous also

I told i have booked a dezire ldi and one of my colleague got so jealous that she forced her husband to buy at toyota etios worth 8 lacs on corporate lease.
Man so much one upmanship

 

[TSIVipul]

^^Actually these are the signs of lack of maturity in people.
Everyone wants people to know that the person has arrived even before he/she has really arrived.And this at last results in a pathetic situation.
I really feel very bad when I see people taking wrong decision and then killing their car slowly and at last instead of accepting their own fault,they declare the car as a 'crap'.

 

[Markiv]

Conservative may be my approach, but I do not go ahead with any upgrade purchase (car or house) unless I am sure that I can afford all the frills and fancies associated wit that purchase. What I mean is that a bigger house or car comes along with a burden of a higher lifestyle as well. You don't want to be in a situation where u sit in big house and don have money to lead a lifestyle associated with it. It's like buying a merc and worrying about maintainence expenses or worrying about whether it's a petrol or diesel rather than pleasure or typical " what's the mileage?" etc.

 

[TSIVipul]

Well,buddy its all about the financial planning.

Simple it is,by any hose or car only when you know that its maintenance etc will not make you think twice.
My father's car runs on petrol and runs too much too but still since he can easily afford running it hence he moves happily in it and says "Corolla is not that silent,corolla is not that comfy etc etc".
In other words,buy the car which suits your budget,not your neighbor's.
No car is bad,no car has very costly maintenance...its the owner who makes the car bad or costly to maintain.

 

[brandoo]

Well,buddy its all about the financial planning.

Simple it is,by any hose or car only when you know that its maintenance etc will not make you think twice.
My father's car runs on petrol and runs too much too but still since he can easily afford running it hence he moves happily in it and says "Corolla is not that silent,corolla is not that comfy etc etc".
In other words,buy the car which suits your budget,not your neighbor's.
No car is bad,no car has very costly maintenance...its the owner who makes the car bad or costly to maintain.

Car is personalized mode of transportation where choice of car is highly subjective in nature which is shaped by the rational and not so rational decisions made by individuals /families etc based on their income, perception, comfort quotient, average running and cost associated with it, and sometimes snob value associated with a car.
Having said this, many people fell pray to snob value neglecting their financial liabilities and income. Often outcomes are disastrous.

In my views:
Top priority: House,
Second priority: Mobility
Third: Life style.
If I have big enough house then only will go for a fancy/expensive car otherwise will be contended with sedan or Indian SUV at max. These are personal views. I want a personalized mode of transport which should take me from Place A to place B with comfort and safety, thats it. Any car within my means (TCO) is welcome and criterion will change as we move up the income chart.