Car payments = what % of income
Discussion
Whats the highest % of your monthly income that a car payment has ever consumed? And what do you think is the highest but still somewhat rational % to spend on a car each month?
I know this is PH, where everyone is a powerfully-built company director who always pays cash for his cars (or is it always finances? I forget the ideology of the moment), but most of us 'normal' people have to finance if we want a new car.
A mate of mine reckons that one should spend no more than 25%
I know this is PH, where everyone is a powerfully-built company director who always pays cash for his cars (or is it always finances? I forget the ideology of the moment), but most of us 'normal' people have to finance if we want a new car.
A mate of mine reckons that one should spend no more than 25%
Edited by BlackPrince on Saturday 7th January 04:57
I think about 25% seems sensible but is obviously dependent on your other outgoings and how secure your job is. Another good point already made is to be in a position to able to sell the car and cover all if not most of what you have borrowed. You also need to take into account repairs and maintenance/insurance.
I am now very lucky and cars are now all paid for but in my poorer days wmy borrowing was at the 25% level.
Pip
I am now very lucky and cars are now all paid for but in my poorer days wmy borrowing was at the 25% level.
Pip
Pip1968 said:
Another good point already made is to be in a position to able to sell the car and cover all if not most of what you have borrowed.
This was key for me. Also, as raised in another post above, it needs to be cheaper (or better value) to take the finance than to go without.For example, with my Fabia, I borrowed ~60% of the total purchase price. This meant that if needed, I could service the entire debt by selling the car. Also, the cost of the loan was cheaper than putting my old car through another MOT, even considering the likely extra value it would hold with a 12 month ticket. Not to mention the lower fuel cost.
I think very briefly I had two loans and a low income so possibly as much as 40%! That wavirtually with my parents virtually rent free though.
As of now, and for the next year until it has gone, about 10%. No plans for getting any further car financing once it has gone as the extra money will help offset my wife giving up work when we have kids!
As of now, and for the next year until it has gone, about 10%. No plans for getting any further car financing once it has gone as the extra money will help offset my wife giving up work when we have kids!
Currently about 14% although it was nearer 20% when taken out.
To be honest I think that's too high but I'd had one used car eat a year's worth of payments in non-warranty repairs, and another runaround that lasted me 10 months before dying so I wasn't in the mood for buying anything that wasn't properly warranted.
Aim is to buy the next car with a three-year personal loan next year (rather than PCP) and keep below 10% (tending towards zero) over the next five years.
Of course the other question is - for how long? My mother probably puts 10% of her income into a car purchase when she has the finance agreement, but the car is paid off for as long as she has the loan before she sells it.
To be honest I think that's too high but I'd had one used car eat a year's worth of payments in non-warranty repairs, and another runaround that lasted me 10 months before dying so I wasn't in the mood for buying anything that wasn't properly warranted.
Aim is to buy the next car with a three-year personal loan next year (rather than PCP) and keep below 10% (tending towards zero) over the next five years.
Of course the other question is - for how long? My mother probably puts 10% of her income into a car purchase when she has the finance agreement, but the car is paid off for as long as she has the loan before she sells it.
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