The Maximum You should spend on your car(s)

[The Y-man]

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

Holy...... are you like.... uh.... planning an untimely end to your husband?

Don't let the insurance companies know.......

The Y-man

 

[DEC]

No aspirations of Ferrari / Lamborghini ?

No aspirations of paying for the speeding fines, maintenance, insurance or worry of getting it damaged.
I have had an expensive euro before, I found it to be more trouble than it was worth and reality was, it was just a means of transportation.

 

[Ed Barton]

My first car would have been upwards of 1000% of my net wealth.

As I don't use cars much I'd cringe at paying more than 1% of my wealth on one now.

 

[weg]

I think people rarely think, 'ok this is my net worth so I will spend so much'.

If that was the case you wouldn't have people worth many millions driving 80K to 150K vehicles, just as those worth a couple of million often do.

In fact I've known a couple of people who were worth next to nothing and they purchased vehicles worth in excess of 100K - one was renting, on a good income and had no assets, so have no idea how he got the loan, and the other conned his parents into giving him a deposit for a home which he spent on a car .

I think most are likely to consider cashflow first and what they are able to repay, and how important a car is to them (over and above a nice, safe, practical car).

When my children were young they would sometimes point out an expensive car and comment that the people must be very rich. I would reply, 'possibly, or they are not rich but can afford the repayments'.

Myself, I prefer to pay cash - up to 15 - 20K. Not having payments means I can save and have close to, if not the available cash when the time comes to buy another car.

 

[wylie]

We've just bought a car for a demo price. We are getting $1K for our old car (which has been trouble free for 11 years, but now running rough) and I would have liked to buy for around $20K to $30K (depending on quality, level of bells and whistles).

We ended up buying for purpose (renovation gear can go in the back) but equally important was safety. I only looked at vehicles with a 5 star safety rating, and with front, side, curtain airbags.

Had I not found a brand new (but demo price) model I would have looked at two or three year old vehicles, but the extras we got for the new model were worth it, and we will drive this car for probably ten years.

If we turned our car over more frequently, I would have paid less for less quality add-ons, but seeing we will keep this for ten years, the most up-to-date inclusions were worth paying a little extra for in our opinion.

Impressing someone didn't come into the equation. It was safety and price for us.

 

[Brady]

I purchased a car for $22k and have spent ~$30k on modifications. And yes I regret it as thats a house deposit or the development costs I'm currently saving for. In saying that it's the best car I've owned and will likely keep in for many many years.

 

[VYBerlinaV8]

So what percentage of available cashflow do you adhere to?

No particular rule, but single digits. I am also an itinerant worker, and so get considerable tax benefits from driving a newer vehicle.

I made a taxable gain on my last car.

 

[Jamie M]

I don't see an issue with spending a fair bit on a car if you're in a position to do so - like Aaron a said, you wouldn't be buying under the assumption that it's a money maker but rather for enjoyment.

On the flip side, I see far too many young clients wanting to buy their first home but have taken out a massive car loan which kills their servicing. It's nice to have a flash merc, but not when half of your income goes to paying it off and you have no other assets.

Cheers

Jamie

 

[pieman]

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.

Agree there, 1 or 2% and then only for cash. I never would borrow for a car - unless a big tax deduction (like the 50% write off a few years ago). I generally buy high end cars where all the major depreciation is ripped through the price and then factor in 5k for major repairs in the next 2 yrs of ownership

 

[spludgey]

I don't see an issue with spending a fair bit on a car if you're in a position to do so

I don't think there is anything "wrong" with it, obviously it's everyone's personal choice.
But it seems to be a bit of a trend that people that built their own wealth don't tend to spend large amounts of money on cars, watches, etc.
"The Millionaire next door" is an interesting read.

 

[BayView]

I don't see an issue with spending a fair bit on a car if you're in a position to do so.
Cheers

Jamie

It's all about priorities and spending habits, and % of income as this thread is about.

For eg; I see loads of young apprentice tradies driving around in very recent model utes and other types of hotted up mobiles, "P" plates in the windows.

Yeah, you could argue that you need to be safe - the safety lies with the driver - no car will keep you 100% safe. Not much point having a $20k ute if the steel belts are hanging out of the 19" back tyres. Soccer moms in SUV's, and careful elderly folks still die too, and younger folks in safe cars who drive like idiots are more likely.

Australian retirees are littered with folks who had that philosophy when younger and working, and are now pensioners who whine and moan about their lot, and wear their pension like a badge.

They were no doubt in a position to spend the money way back when, but the % of the income was no doubt wrong (and in other areas of their spending too no doubt).

That's when there is something wrong with spending a fair bit on a car.

 

[VYBerlinaV8]

My grandfather once told me I should be spending 1 years income on a car and 5 years income on a home, and that these were the 'right numbers'.

He was a wonderful man, but full of **** financially.

 

[Jamie M]

I don't think there is anything "wrong" with it, obviously it's everyone's personal choice.
But it seems to be a bit of a trend that people that built their own wealth don't tend to spend large amounts of money on cars, watches, etc.
"The Millionaire next door" is an interesting read.

Yeah I agree. I'll always be a tight a** at heart.

Personally, I couldn't buy a new car - I just don't see the value in it. Instead, I usually work out the sort of car we'd like - and then opt for the model a few years older that costs half as much. Most of the time they still have a new car warranty too

Cheers

Jamie

 

[cimbom]

My grandfather once told me I should be spending 1 years income on a car and 5 years income on a home, and that these were the 'right numbers'.

He was a wonderful man, but full of **** financially.

I think 5 years (household) income for a house is pretty spot on. 1 years income for a car is a bit OTT though

 

[Ace in the Hole]

I think 5 years (household) income for a house is pretty spot on. 1 years income for a car is a bit OTT though

Agree on 5 years gross household income would be about right, more or less.
Problem is, on lower incomes or those with dependants will have trouble saving any money at all.
The minimum cost of living makes it difficult, especially if you are renting and have no deposit.

 

[DEC]

I only looked at vehicles with a 5 star safety rating, and with front, side, curtain airbags.

As Bayview says

Yeah, you could argue that you need to be safe - the safety lies with the driver - no car will keep you 100% safe.

When I drive I am always appalled at the amount of really poor drivers on the road probably not caring because they are in a 5 star safety rating car with front, side, curtain airbags.
It also allows them to pull up in very short distances at the traffic lights.
And then the truck that was behind them drives over the top of them.

 

[Scott No Mates]

Most importantly I'd put 10% into my transport (a good road bike).

I couldn't justify more than 40% on a car for myself but upwards of 50% for a family vehicle of choice.

Rather than chewing up all my hard earned $, I would head towards one of the super low interest rate deals or a lease.

 

[BayView]

As Bayview says

When I drive I am always appalled at the amount of really poor drivers on the road probably not caring because they are in a 5 star safety rating car with front, side, curtain airbags.
It also allows them to pull up in very short distances at the traffic lights.
And then the truck that was behind them drives over the top of them.

Yeah;

the amount of our customers who ask me; "Is my car safe?" after and before anything is done to it is staggering. FFS.

I tell them; "Sorry, but noone will give you that guarantee",

But I feel like telling them; "Yep; as long as it stays in your garage, locked."

But you can't say that and keep customers.

 

[wylie]

As Bayview says

When I drive I am always appalled at the amount of really poor drivers on the road probably not caring because they are in a 5 star safety rating car with front, side, curtain airbags.
It also allows them to pull up in very short distances at the traffic lights.
And then the truck that was behind them drives over the top of them.

I'm a safe driver. Having extra airbags won't change that. It just protects me a lot more than my 12 year old car from the other idiots on the road.

 

[VYBerlinaV8]

Modern cars are so safe that comparing one to another is like comparing the acceleration of a porsche and a ferrari.