The Maximum You should spend on your car(s)

[virgo]

Hiya

I came across a very interesting post by Mr Financial Samurai recently. (i love his blog) . While it may be US-centric, i thought it was very thought provoking...

It says the max amt one should spend on one's car(s) is 5% of your net worth.
Eg if your net worth is 1 million, you should spend max 50,000 on your car(s).

Based on this, i find i should give myself (or rather my hubby )a big boost

What is your situation? Care to share?

 

[investor2009]

Pay cash for cars. If you can't afford it then you can't afford it. You will very rarely win financially with a car.

It depreciated greatly
It costs alot to run
It doesn't 'give' you an income, but can help you work for one, in which a percentage of your work will go toward paying for that car

 

[Ideo]

Hiya

I came across a very interesting post by Mr Financial Samurai recently. (i love his blog) . While it may be US-centric, i thought it was very thought provoking...

It says the max amt one should spend on one's car(s) is 5% of your net worth.
Eg if your net worth is 1 million, you should spend max 50,000 on your car(s).

Based on this, i find i should give myself (or rather my hubby )a big boost

What is your situation? Care to share?

Well, that approach would completely destroy every car manufacturer across the world and lead to widespread economic problems, so I don't see that as being a positive move in the long term.

All depends on priorities. Some people skimp on other things to get a car they love, others get a cheap car because it is not important to them.

It's one of those personal choices.

 

[Aaron_C]

Pay cash for cars. If you can't afford it then you can't afford it. You will very rarely win financially with a car.

I don't think anyone expects to win (financially) with a car. Buying a nice car is like buying a nice jacket, nice food or a nice handbag - for enjoyment. You know it will devalue as soon as you drive it off the floor but that's what money is for isn't it?

The other thing I'd add is buying a car as a business is less expensive than buying one as a PAYG which is why many people have nicer cars than they otherwise would have.

 

[Ace in the Hole]

1% of net is my comfort zone for a car.
5% of net seems way too much, except if you really love cars and the expenses which come with them.

 

[VYBerlinaV8]

I don't tend to look at car buying in terms of % of net worth, but rather in terms of cashflow.

These days I manage pretty much everything in terms of cashflow, figuring that if my strategy and cashflow are correct, everything else will follow.

 

[Peter_Tersteeg]

A client has a Porche 911 from the 1990s. Apparently it's held it's value quite well.

I think I've got a matchbox car around somewhere from when I was 8. Doesn't drive very well though.

 

[spludgey]

I wouldn't put a percentage on it.
When I got my car, it would have been over 25% of my networth ($6k car at the time), however even if I had $10M of networth, there is no way I would ever spend $500k (5%) on a car.
I think I'm very unlikely to ever spend more than $40k on a car.

 

[D.T.]

I wouldn't put a percentage on it.
When I got my car, it would have been over 25% of my networth ($6k car at the time), however even if I had $10M of networth, there is no way I would ever spend $500k (5%) on a car.
I think I'm very unlikely to ever spend more than $40k on a car.

No aspirations of Ferrari / Lamborghini ?

 

[spludgey]

No aspirations of Ferrari / Lamborghini ?

No, never.
Sure I might go and hire a fast car at the track for a day, but I actually despise of status symbols. If you need to show off to other people, then there's something wrong with your self-worth, in my opinion.
I've never been in a Lambo or a Ferrari, but from my experience of sitting in a Porsche, I don't expect them to be all that comfortable.

 

[DaveM]

Whats a dented 2003 corolla worth and how does that translate to net worth?

 

[Ideo]

Whats a dented 2003 corolla worth and how does that translate to net worth?

I find bed/mattress to net worth ratio a better measure of things

 

[BayView]

5% of your nett worth might have no correlation at all to your cashflow situation.

Recommend it probably should be 5% of your cashflow...that is on the purchase price....

The maintenance and running costs will be that much (5%) again.

That'll cut a lot of folk out of the equation immediately. We see folks all week long who can't afford their car.....completely neglected, way overdue for services, need tyres (and want the cheapest), etc, do the least amount of repair/service work as possible to get by, and so on.

The scary thing is many are cars with baby seats inside.

But can still manage to buy ciggies (both them and the car stinks) and get a few tatts.

Priorities.

 

[ok180]

I don't tend to look at car buying in terms of % of net worth, but rather in terms of cashflow.

These days I manage pretty much everything in terms of cashflow, figuring that if my strategy and cashflow are correct, everything else will follow.

Good post. That is the way I look at it too. We need good reliable cars so we are looking in the 30-50k range for what we need. If I have that in cash I would rather use it as a deposit on an IP. Cars are just part of monthly expenses for us. Keep them for 5-10 years, drive it into the ground then flick it.

 

[The Y-man]

I've never been in a Lambo or a Ferrari, but from my experience of sitting in a Porsche, I don't expect them to be all that comfortable.

Correct - and if your going to drive on a track, do it properly - open wheelers. Fantastic if you're into fast cars but even on a go-kart:

- be prepared to be bruised up unless you got the seat made for you specifically (there's almost no suspension movement - so you feel *every* bump) and even a tiny gap between your sides and the seat will make you black and blue after even a few laps.

- be prepared to be ripped to shreds (I got on a decent fast go-kart once - was bleeding down my back from where the seat rubbed against me)

- be prepared to be embarrassed if you are like me and cannot hold onto the steering wheel any longer than 3 laps because of the physical effort required.

Ahhh.... give me a rally car any day. I still say driving a cheapo front wheel drive at 140 kmh on a dirt road with trees and wildlife jumping out at you is a lot more "fun" than doing 300km/h down the main straight of a purpose built race way.

The Y-man

 

[Melbournian]

I used to do a couple of refix on old minis in the late 90s to early 2000s that were damaged during hailstorms or accidents and bought them dirt cheap and drove it for 3-4 months and sell it a slight premium.

depends as well if you are into cars as they are a liability as opposed to an asset say for example a 20K watch over a 20k car - the watch actually can retain its value and go higher as opposed to a car.

 

[ozmale42]

No, never.
Sure I might go and hire a fast car at the track for a day, but I actually despise of status symbols. If you need to show off to other people, then there's something wrong with your self-worth, in my opinion.
I've never been in a Lambo or a Ferrari, but from my experience of sitting in a Porsche, I don't expect them to be all that comfortable.

Although some would, I don't think in most cases showing off to people is the key reason people buy a Euro sports car. Their thought process is probably along the lines of..."well I can afford it so here's another thing I can tick off my bucket list"...Life is to be enjoyed and if cars are your thing then go for it I say.

Ideal car value as % of wealth is BS in my opinion.

I have always said that sometime during my lifetime I wanted to own a new BMW. That reality happened last year. Sure after 3 years when the warranty runs out it the car will probably be worth a fraction of what I paid for it...but so what, I don't care as its another life experience I've had.

It would be pretty boring to be sitting in the nursing home with a huge bank balance bragging to all your fellow croonies about what you "could have had" or what you "could have done" with your life .

 

[westminster]

I suspect my husband would like his car slightly crushed into a coffin shape and be buried in it Or not crushed at all but we'll need a very big burial plot

 

[Gargamel]

I don't tend to look at car buying in terms of % of net worth, but rather in terms of cashflow.

These days I manage pretty much everything in terms of cashflow, figuring that if my strategy and cashflow are correct, everything else will follow.

So what percentage of available cashflow do you adhere to?

 

[DEC]

I drive a $5000 car
My car is based directly on Klm/year + costs and convenience Vs cost of taxi and rental car to take me those same Klm's.
Its easy enough to find relatively new and well maintained cars with around 100,000 on the clock these days for that price.