Setting a car budget - %age of income, salary?
Discussion
Morning All,
Ive been working at sea for the last decade and i am finally coming home. So i need some cars. Im going round and round in circles whether to get 2 nice cars (VW Tiggie & fast A6) or 3 lesser cars (Tiggie, Mondeo & Fiat 500 Abarth (for example). Or should i go for more?
Im in negotiations with my missus about the budget and im wondering if you guys have any rules of thumb or your own experiences to help set the budget. We need to buy a house and all furniture & fittings etc and obviously she wants more cash for her house in wardrobe.
For example -
Do the cars in your household amount to 1 years salary?
Or 1 months wage?
Or 1/2 your net worth etc?
etc
Ignoring maintenance costs, insurance, finance. Just the purchase price
Thanks in advanced
Ive been working at sea for the last decade and i am finally coming home. So i need some cars. Im going round and round in circles whether to get 2 nice cars (VW Tiggie & fast A6) or 3 lesser cars (Tiggie, Mondeo & Fiat 500 Abarth (for example). Or should i go for more?
Im in negotiations with my missus about the budget and im wondering if you guys have any rules of thumb or your own experiences to help set the budget. We need to buy a house and all furniture & fittings etc and obviously she wants more cash for her house in wardrobe.
For example -
Do the cars in your household amount to 1 years salary?
Or 1 months wage?
Or 1/2 your net worth etc?
etc
Ignoring maintenance costs, insurance, finance. Just the purchase price
Thanks in advanced
Interesting question.
We have two cars. Their combined cost when purchased was around 75% of my annual wage although they were not bought at the same time. Current value about 40%.
I’ve never really looked at it in those terms. But for my car I kind of have a maximum budget of around a third of my annual income and is usually kept for three years. My wife’s cars tend to be a bit newer so slightly more expensive to buy because we use hers as the family motor. She keeps hers longer in general though.
If I were you I’d be inclined to spend a bit less until you get established with the house and everything. You can always upgrade later. Two cars will be cheaper than three with less maintenance, tax, insurance etc. Also if you buy three you would be spending less on each so they might not be as good. Remember you can only drive one at a time.
We have two cars. Their combined cost when purchased was around 75% of my annual wage although they were not bought at the same time. Current value about 40%.
I’ve never really looked at it in those terms. But for my car I kind of have a maximum budget of around a third of my annual income and is usually kept for three years. My wife’s cars tend to be a bit newer so slightly more expensive to buy because we use hers as the family motor. She keeps hers longer in general though.
If I were you I’d be inclined to spend a bit less until you get established with the house and everything. You can always upgrade later. Two cars will be cheaper than three with less maintenance, tax, insurance etc. Also if you buy three you would be spending less on each so they might not be as good. Remember you can only drive one at a time.
It doesn't really matter how much it costs - only if you can afford it. Leasing seems to make many cars affordable to people who wouldn't have a hope of owning them.
Personally, I've never had a car which cost more than about half my annual income, but I prefer to spend much less if possible. I've never leased - In the early days I had a personal loan to buy my first car, then I did HP, but more recently I've just bought them outright. There's so little interest to be earned by keeping money in a bank account that you may as well avoid finance if you can. Now that I've discovered cryptocurrency investment, I may have to change my tune!
Personally, I've never had a car which cost more than about half my annual income, but I prefer to spend much less if possible. I've never leased - In the early days I had a personal loan to buy my first car, then I did HP, but more recently I've just bought them outright. There's so little interest to be earned by keeping money in a bank account that you may as well avoid finance if you can. Now that I've discovered cryptocurrency investment, I may have to change my tune!
The other factor to consider is where you are in your working career.
If you are in your 30s, paying a decent amount into your pension and expecting salary increases then I'd say 1/3 to 1/2 your annual salar(ies) (talking purchase value, regardless of how you pay for them) seems reasonable. In your fifties, with the possibility, by choice or otherwise, of your purchasing power heading downhill I'd make a different call.
And as I'm in that latter bracket, the current value of our two cars probably represents 1/5 of our theoretical income.
Also, as you are probably aware, car finance payments will reduce the amount you can borrow for a house, which might be relevant.
If you are in your 30s, paying a decent amount into your pension and expecting salary increases then I'd say 1/3 to 1/2 your annual salar(ies) (talking purchase value, regardless of how you pay for them) seems reasonable. In your fifties, with the possibility, by choice or otherwise, of your purchasing power heading downhill I'd make a different call.
And as I'm in that latter bracket, the current value of our two cars probably represents 1/5 of our theoretical income.
Also, as you are probably aware, car finance payments will reduce the amount you can borrow for a house, which might be relevant.
My car is worth about as much as a decent meal.
I think you're looking at it all wrong, it doesn't matter what you earn it's about what you can afford.
You could have 2 people with vastly different salaries and the lower earner have more disposable thus 'afford' the better car.
Buy what you want in your budget. Everyone's circumstances are different.
I think you're looking at it all wrong, it doesn't matter what you earn it's about what you can afford.
You could have 2 people with vastly different salaries and the lower earner have more disposable thus 'afford' the better car.
Buy what you want in your budget. Everyone's circumstances are different.
I have 2 cars, one bought 18 months ago for £14k, the other bought last month for £18k. Both were funded by selling my previous cars, and adding cash from savings.
This is about 1.5 times my current annual income.
Thing is, I'm 2 years away from state pension age, mortgage paid off 13 years ago. I save a few hundred a month, and when my savings go over a set amount (basically enough cash so that I could get by if I never worked again, plus enough to do a few big house repairs), I just spend the surplus on cars or hobbies.
I haven't borrowed to finance a car for about 35 years, except for once when it was cheaper to get a bank loan than withdraw money from my savings.
I used to borrow to buy a new car pretty much every year when I lived in a rented flat. That changed when I bought my first house at 27.
This is about 1.5 times my current annual income.
Thing is, I'm 2 years away from state pension age, mortgage paid off 13 years ago. I save a few hundred a month, and when my savings go over a set amount (basically enough cash so that I could get by if I never worked again, plus enough to do a few big house repairs), I just spend the surplus on cars or hobbies.
I haven't borrowed to finance a car for about 35 years, except for once when it was cheaper to get a bank loan than withdraw money from my savings.
I used to borrow to buy a new car pretty much every year when I lived in a rented flat. That changed when I bought my first house at 27.
Thanks All for the comments,
1/2 seems to be fair enough budget then for our combined salaries. Thanks.
And i agree with all of you regarding what i can afford vs what i actually need vs buying a house etc. If all i could afford is a £300 Mondeo (which was my 1st car) then that's all i would have. But, i'm in the fortunate position where i can afford my dream car however it wouldnt be the smart thing to do and i should keep the cash invested.
Thanks again!
1/2 seems to be fair enough budget then for our combined salaries. Thanks.
And i agree with all of you regarding what i can afford vs what i actually need vs buying a house etc. If all i could afford is a £300 Mondeo (which was my 1st car) then that's all i would have. But, i'm in the fortunate position where i can afford my dream car however it wouldnt be the smart thing to do and i should keep the cash invested.
Thanks again!
On the other hand, my car is worth about 2 days wages, and serves absolutely fine. No loan, no worries, and if you have 3 of them, the chances of them all breaking at the same time seem remote. And if it breaks big time, it goes in the bin. Money into the house for me, pay off any debt, and go from there.
I get bored with cars, they are just a commodity. Nice cars are the same as rubbish cars once you've driven them for a few months. And in fact nice cars seem to irritate the hell out of me - just too much fiddly tech. So for me, it's a cheap something that I like driving. Currently a 1.4 diesel 207. It's actually quite good.
Not very PH though.
I get bored with cars, they are just a commodity. Nice cars are the same as rubbish cars once you've driven them for a few months. And in fact nice cars seem to irritate the hell out of me - just too much fiddly tech. So for me, it's a cheap something that I like driving. Currently a 1.4 diesel 207. It's actually quite good.
Not very PH though.
bearman68 said:
On the other hand, my car is worth about 2 days wages, and serves absolutely fine. No loan, no worries, and if you have 3 of them, the chances of them all breaking at the same time seem remote. And if it breaks big time, it goes in the bin. Money into the house for me, pay off any debt, and go from there.
I get bored with cars, they are just a commodity. Nice cars are the same as rubbish cars once you've driven them for a few months. And in fact nice cars seem to irritate the hell out of me - just too much fiddly tech. So for me, it's a cheap something that I like driving. Currently a 1.4 diesel 207. It's actually quite good.
Not very PH though.
Lot of sense and truth in this post.I get bored with cars, they are just a commodity. Nice cars are the same as rubbish cars once you've driven them for a few months. And in fact nice cars seem to irritate the hell out of me - just too much fiddly tech. So for me, it's a cheap something that I like driving. Currently a 1.4 diesel 207. It's actually quite good.
Not very PH though.
Lincsls1 said:
bearman68 said:
On the other hand, my car is worth about 2 days wages, and serves absolutely fine. No loan, no worries, and if you have 3 of them, the chances of them all breaking at the same time seem remote. And if it breaks big time, it goes in the bin. Money into the house for me, pay off any debt, and go from there.
I get bored with cars, they are just a commodity. Nice cars are the same as rubbish cars once you've driven them for a few months. And in fact nice cars seem to irritate the hell out of me - just too much fiddly tech. So for me, it's a cheap something that I like driving. Currently a 1.4 diesel 207. It's actually quite good.
Not very PH though.
Lot of sense and truth in this post.I get bored with cars, they are just a commodity. Nice cars are the same as rubbish cars once you've driven them for a few months. And in fact nice cars seem to irritate the hell out of me - just too much fiddly tech. So for me, it's a cheap something that I like driving. Currently a 1.4 diesel 207. It's actually quite good.
Not very PH though.
fflump said:
Having to keep 3 such cars in a roadworthy condition for when one breaks doesn't make much sense IMO.
I'm not suggesting that the OP does keep 3 cars - the OP is doing that. I'm just thinking that if you have 3 cars, the chances of more than one being broken seems remote. Bearing in mind the OP is talking about VW and a Fiat, he's clearly not risk averse. In my view, the biggest determinant of reliability is manufacturer design, followed by maintenance. Age, and especially cost is barely relevant in that consideration.
fflump said:
Having to keep 3 such cars in a roadworthy condition for when one breaks doesn't make much sense IMO.
I said a lot of sense, not complete sense!
For me, my £1000 Astra estate which I've had for 3 years has cost me about hmmm 50p to keep roadworthy.
OK, so not 50p, but very little in the grand scheme of car costs. Its a thoroughly brilliant smoker, but it doesn't smoke! It has NEVER let me down, has got 160k on the clock, does 50mpg and drives remarkably well, even judged at the side of much newer more expensive 'run of the mill' cars.
Anyway back on topic...spend as much as you want on a car, as long as its truly affordable and won't slowly month in month out drag you into debt and compromise more important areas of live such as mortgages, pensions and savings.
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