Buying a vehicle based on you're income!

[jcl]

Obviously, it's up to the buyer how much they're willing to spend on a new/used vehicle, but in "you're" opinion, realistically how much should one spend on a vehicle based on say, an annual income?

Opinions please, thanks...

[Earthworm]

That's an impossible question. Mostly, you need to consider how much extra money you have lying around. You could be making $200k but spend most of it paying for your $1M house.

[jcl]

That's an impossible question. Mostly, you need to consider how much extra money you have lying around. You could be making $200k but spend most of it paying for your $1M house.

Yeah, I know there are a lot of variables, but generally speaking....(living in you're means so to speak)

[7jaii]

I'm paying around $300 a month for my Accord. That's what I can afford on my salary. It was about the same for my old Civic but that was because I was paying for a lot of years. Buy the best for your money man or if your old lady is really hot then get heated leather seats :cheesygri

[jcl]

I'm paying around $300 a month for my Accord. That's what I can afford on my salary. It was about the same for my old Civic but that was because I was paying for a lot of years. Buy the best for your money man or if your old lady is really hot then get heated leather seats :cheesygri


lol, well I currently drive a 97 Acura 2.2 cl, which is a nice car, but it's getting old, I figured to sell it, and get something newer, and more spacious, like a 4 door. Plus it'll be cheaper on insurance, im currently paying $310 full coverage on the 2 door.

[Xiggy]

living in you're means so to speakOK, you've made the same mistake twice in this thread... so obviously, it's not a typo.

you're = "you are"

[jcl]

OK, you've made the same mistake twice in this thread... so obviously, it's not a typo.

you're = "you are"

errr "your" thanks for the correction.

Haha redflagdeal spellcheck police on duty!

[blue_xii]

General rule of thumb for me is that the total purchase price of the vehicles you own should not exceed 1/3 of your gross income.

[mau108]

financed my lude at prime +1, payed 8000 of the 14000 in less then a year, past few months havent paid anything due needing money for the RRSP.

I'm a 20 year old student with only 1 part time job.

[nx2k]

their annual salary should be the worth of their car, if u make $25k, and nto a whole lot of other expenses, u should drive a $25k car after a few years of savings of course, if umake $80k, then u should drive an $80k car

i dont' follow this rule cuz im super cheap, i don't make that much but i drive a second hand $6k car, atleast the original value when new was close to what i make annualy now

[boonjaca]

their annual salary should be the worth of their car, if u make $25k, and nto a whole lot of other expenses, u should drive a $25k car after a few years of savings of course, if umake $80k, then u should drive an $80k car

i dont' follow this rule cuz im super cheap, i don't make that much but i drive a second hand $6k car, atleast the original value when new was close to what i make annualy now

Shoot, I don't think your annual salary should be the cost of your car, that's kind of excessive. Somone making 25K/yr probably won't be able to afford a car that's 25k, even with not very many expenses. I think it should be 1/2 to 2/3rd of your annual salary at most.

[chicadam]

General rule of thumb for me is that the total purchase price of the vehicles you own should not exceed 1/3 of your gross income.

I think thats a little conservative...

I mean you are probably right because a car is totally a liability but I enjoy a nice car. You are only live once and I think happiness is the key to life. I'm not saying to go crazy but you'll have to make $150K/yr to drive a BMW 325i? To get that salary you'll have to be at least around mid fourties and holding down a good job.

For me its about 1/2 annual income.

[nsr250]

lol, well I currently drive a 97 Acura 2.2 cl, which is a nice car, but it's getting old, I figured to sell it, and get something newer, and more spacious, like a 4 door. Plus it'll be cheaper on insurance, im currently paying $310 full coverage on the 2 door.

97 acura getting old? Damn then my 1990 integra must be ancient!!!
Actually I'm getting a car soon , my anually salary is about 30k and I'm planning on financing a car around 20k range. With the monthly payments and insurance plus gases , expenses , rent and bills I'll still have around couple hundred bucks a month to put away in savings.
Just budget yourself that you'd have couple hundred dollars that you can put away per month so in case anything happens you still have a lil nest egg.

[kfc]

according to the wealthy barber:

1. the value of your car should not exceed 10% of the value of the home you own. For example if you own a 400K home, you should not dive a car worth more than 40K

2. cars depreciate and are a horrible investment so as little as you can in them the better.

[blue_xii]

I think thats a little conservative...

I mean you are probably right because a car is totally a liability but I enjoy a nice car. You are only live once and I think happiness is the key to life. I'm not saying to go crazy but you'll have to make $150K/yr to drive a BMW 325i? To get that salary you'll have to be at least around mid fourties and holding down a good job.

For me its about 1/2 annual income.

That's only if you're talking about buying a new car. But yeah if you like nice cars it's hard to follow that rule. I'm trying to follow it myself but I'll see what happens when I have to buy a second car.

On the other hand it feels awesome to have as few monthly expenses as possible. The more of my paycheque I keep the happpier I feel every other Friday.

[eelfliw]

Don't buy cars based on income. Buy cars based on your needs. And let income dictate whether you can satisfy that need or not.

I have never heard of a guideline that car cost should be directly related to income. Probably some sales guy invented that. And probably the same sales guy who invented the guideline that engagemet rings should cost 3X monthly salary.

Don't believe the guidelines. Go with your own need. The vast majority of cars out there depreciate horribly fast (not uncommon to have 10 - 20% depreciation per year). The only cars that appreciate in price we can't afford anyways (eg. Ferrari Enzo). So, the more you spend for something you don't need, the more money you're burning.

[kfc]

Don't buy cars based on income. Buy cars based on your needs. And let income dictate whether you can satisfy that need or not.

I have never heard of a guideline that car cost should be directly related to income. Probably some sales guy invented that. And probably the same sales guy who invented the guideline that engagemet rings should cost 3X monthly salary.

Don't believe the guidelines. Go with your own need. The vast majority of cars out there depreciate horribly fast (not uncommon to have 10 - 20% depreciation per year). The only cars that appreciate in price we can't afford anyways (eg. Ferrari Enzo). So, the more you spend for something you don't need, the more money you're burning.

true but if you NEED a car, I would suggest spending at most 10% of the value of your home.
If you're renting you don't afford a car so you should take ttc and get a metropass

[kfc]

I think thats a little conservative...

I mean you are probably right because a car is totally a liability but I enjoy a nice car. You are only live once and I think happiness is the key to life. I'm not saying to go crazy but you'll have to make $150K/yr to drive a BMW 325i? To get that salary you'll have to be at least around mid fourties and holding down a good job.

For me its about 1/2 annual income.

if you're married and both spouses make 75K it's not unlikely to have a household income of 150K. There are people that are accountants with 3 years out of school and they are making that much. So definitely possible in the late 20's or early 30's if you're married.

Waiting til you're in your mid 40's is not realistic. Maybe in 1970 but not in 2006 where an average salary in toronto is 60K

[actng]

The 1/3 figure is how much you should spend of your pre-tax income on shelter, preferably a mortgage, since it will actually generate a return. A car on the other hand will not generate a return so the 10% of shelter rule makes sense.

[CompWizrd]

according to the wealthy barber:

1. the value of your car should not exceed 10% of the value of the home you own. For example if you own a 400K home, you should not dive a car worth more than 40K
Well, that doesn't work for those that live in an area where housing costs are reasonable... my house was around 115k, my car is about 40k when new(bought it three years old for 22k)

[kfc]

Well, that doesn't work for those that live in an area where housing costs are reasonable... my house was around 115k, my car is about 40k when new(bought it three years old for 22k)

well ok cmon it's not the hard and fast rule.

Fore most people it makes sense to spend no more than 10% of the value of their home on their car. Of course there are tons of exceptions like my friend who drives a mercedes c class but rents a place for $250 a month sharing a 2 bedroom apartment with 6 other people.

To each their own. Car fanatics would do that and sacrifice in other areas. I say in general it's good to spend no more than 10%.

[Kenneth]

Doesn't JD Powers or DeRosiers keep a tally of this info? The average American vehicle is purchased with 36~ weeks of after tax income and the average Canadian purchase is 42~ weeks of after tax income (IIRC).

Car purchasing is never a rational decision; even considering depreciation, maitenance, petrol, and insurance, your still come out a loser regardless what car you choose. So you might as well buy what you like when the mood strikes you. If you can write automotive write-off can cover your expensives; even better :) .

Income can change easily from year to year; net worth is a better measure when correlating durable goods purchases. Your vehicles purchase price should be about 5% of your net-worth (imo).

[rf134a]

Doesn't JD Powers or DeRosiers keep a tally of this info? The average American vehicle is purchased with 36~ weeks of after tax income and the average Canadian purchase is 42~ weeks of after tax income (IIRC).

Car purchasing is never a rational decision; even considering depreciation, maitenance, petrol, and insurance, your still come out a loser regardless what car you choose. So you might as well buy what you like when the mood strikes you. If you can write automotive write-off can cover your expensives; even better :) .

Income can change easily from year to year; net worth is a better measure when correlating durable goods purchases. Your vehicles purchase price should be about 5% of your net-worth (imo).
The last stat I saw similar to this was that the average price of a car sold in the US was 54 weeks salary of the average US worker. Scary.

[BD006]

The last stat I saw similar to this was that the average price of a car sold in the US was 54 weeks salary of the average US worker. Scary.

That might explain why you see some of the nicest cars in some of the worst parts of a city.

[Bullseye]

I buy whatever vehicle I can afford to pay cash for. As I said in another thread, financing a depreciating asset is a poor financial decision, a good way to keep yourself in perma-debt.

Currently we have an '02 Rav4 (family car), and an '87 Mustang Cobra (fun car). I plan to keep the Rav for 10+ years, as long term ownership is the least expensive way to have a car. The Mustang I bought when it was already as depreciated as it will ever get, so I could sell it now for what I paid for it, or quite likely more. It has a good chance of appreciating in value over time, as it's a desirable collector car, within a certain group of car fans. It is stored in winter, so every year I buy a cheap Japanese subcompact to get to work with. Because I'm only holding it for 5-6 months, and not putting many km's on, I am always able to sell it in spring for what I paid for it, making my cost of ownership the price of an oil change or two, usually.

This scenario is what I've deemed to be the best and lowest cost way to keep two vehicles on the road. We still get to drive nice vehicles, and not spend a lot to do so.

[chicadam]

if you're married and both spouses make 75K it's not unlikely to have a household income of 150K. There are people that are accountants with 3 years out of school and they are making that much. So definitely possible in the late 20's or early 30's if you're married.

Waiting til you're in your mid 40's is not realistic. Maybe in 1970 but not in 2006 where an average salary in toronto is 60K

I knew I would get one of these... My statement is for the general population, of course its possible. And its definitely more wide spread now that we're not in the 70s lol. I'm sure everyone on this board does well, as do I, that said, I know its not the norm to pull down $150K on salary (meaning a consistent long term income) before 45, please check the stats. My statement was also stating 1/2 of your annual income: $100K/yr salary for a $50K car, quite reasonable no?

Usually dual income homes have 2 cars or more, since we're not talking about the 70s ;)

If this is not a salary based question. I think 10% of your home value is an accurate gauge of how much your car should be b/c as stated previously income does fluctuate. A $500K home with a BMW 325i seems to go hand-in-hand. $500K houses are acutally quite modest around the GTA.

[yatko]

I buy whatever vehicle I can afford to pay cash for. As I said in another thread, financing a depreciating asset is a poor financial decision, a good way to keep yourself in perma-debt.

Currently we have an '02 Rav4 (family car), and an '87 Mustang Cobra (fun car). I plan to keep the Rav for 10+ years, as long term ownership is the least expensive way to have a car. The Mustang I bought when it was already as depreciated as it will ever get, so I could sell it now for what I paid for it, or quite likely more. It has a good chance of appreciating in value over time, as it's a desirable collector car, within a certain group of car fans. It is stored in winter, so every year I buy a cheap Japanese subcompact to get to work with. Because I'm only holding it for 5-6 months, and not putting many km's on, I am always able to sell it in spring for what I paid for it, making my cost of ownership the price of an oil change or two, usually.

This scenario is what I've deemed to be the best and lowest cost way to keep two vehicles on the road. We still get to drive nice vehicles, and not spend a lot to do so.


Finally some smart response to this thread.

[galanz]

General rule of thumb for me is that the total purchase price of the vehicles you own should not exceed 1/3 of your gross income.

Agreed, that seems to work well for me.

[gheart008]

Don't buy cars based on income. Buy cars based on your needs. And let income dictate whether you can satisfy that need or not.

Very well said. :)