Does the salary to car value ratio actually mean anything?
Discussion
irish boy said:
Personally I see your logic, especially if it has to be brand new, but in this case would probably take a chance on a lightly used example to minimise the depreciation.
Exactly, if you really feel the need have a brand new expensive car every few years then finance options will likely work out better, but a 1 or 2 year old car would offer hugely better value.Still, as long as there are people pissing money away like this it gives a much better choice of cars for the more financially aware.
FredClogs said:
Out household income is ~ x25 the current value of our fleet.
i.e we have 3 shed cars.
I've been down the being in debt road, for the first time in my life I've got some savings, it's much harder to spunk away on new stuff when it's actually money in your account and not borrowed.
Also there are so many good cars around these days for sub £5k it really beggars belief why average people on average money are buying new cars at 5 times that, obviously I'm glad they are.
There is a definite question however as to whether spending 5k on a six year old car with 60k miles is better value than spending 10k on a two year old car with 10k miles and a warranty (that will be worth 5k after four years). i.e we have 3 shed cars.
I've been down the being in debt road, for the first time in my life I've got some savings, it's much harder to spunk away on new stuff when it's actually money in your account and not borrowed.
Also there are so many good cars around these days for sub £5k it really beggars belief why average people on average money are buying new cars at 5 times that, obviously I'm glad they are.
CivBrum said:
I currently pay 238pcm on a personal loan (i.e. I will have an asset at the end) for a 2014 Civic I paid 10600 for and expect to be worth around 5k after four years. That amounts to about 10% of my monthly net salary. I am single, renting, no dependents.
However, it does impact on my ability to save aggressively for a deposit. I do not intend to buy soon, whereas for a lot of my contemporaries it is their greatest aim. Sometimes I do wonder whether I should sell it, buy a car for 1500, and save more aggressively.
However, it is difficult to quantify just how much cheaper that is. I have a service plan and a 2.5 year warranty. That peace of mind is worth something! Though perhaps not the extra I am paying for it.
To be fair you can get a much nicer car on a lease deal for less than your monthly payments.However, it does impact on my ability to save aggressively for a deposit. I do not intend to buy soon, whereas for a lot of my contemporaries it is their greatest aim. Sometimes I do wonder whether I should sell it, buy a car for 1500, and save more aggressively.
However, it is difficult to quantify just how much cheaper that is. I have a service plan and a 2.5 year warranty. That peace of mind is worth something! Though perhaps not the extra I am paying for it.
Of course, you won't have an asset at the end of it. But still.
The richest person I know drives a Hyundai i10.
xjay1337 said:
CivBrum said:
I currently pay 238pcm on a personal loan (i.e. I will have an asset at the end) for a 2014 Civic I paid 10600 for and expect to be worth around 5k after four years. That amounts to about 10% of my monthly net salary. I am single, renting, no dependents.
However, it does impact on my ability to save aggressively for a deposit. I do not intend to buy soon, whereas for a lot of my contemporaries it is their greatest aim. Sometimes I do wonder whether I should sell it, buy a car for 1500, and save more aggressively.
However, it is difficult to quantify just how much cheaper that is. I have a service plan and a 2.5 year warranty. That peace of mind is worth something! Though perhaps not the extra I am paying for it.
To be fair you can get a much nicer car on a lease deal for less than your monthly payments.However, it does impact on my ability to save aggressively for a deposit. I do not intend to buy soon, whereas for a lot of my contemporaries it is their greatest aim. Sometimes I do wonder whether I should sell it, buy a car for 1500, and save more aggressively.
However, it is difficult to quantify just how much cheaper that is. I have a service plan and a 2.5 year warranty. That peace of mind is worth something! Though perhaps not the extra I am paying for it.
Of course, you won't have an asset at the end of it. But still.
The richest person I know drives a Hyundai i10.
I'd never heard of car value to salary ratio (before I got married I had always just bought the cars I wanted and made my finances work around that, and if cars is your thing then I still see absolutely nothing wrong with that) but I have heard people saying your car should be worth 10-15% of your house - assuming you own a house!
irish boy said:
Ares said:
It doesn't have to be dream territory.
I currently have a 640d GC. Bought brand new, it costs me £561/mth and I put £4,000 down. This was on a 4 year PCP (12k/yr - currently 3yrs 3 months in). The current settlement figure is £22k and the car is worth somewhere between £25-27k.
That means, to date, it has cost me just under £26k for 39 months. If I sell it tomorrow, I'll get £3-5k 'back'.
If I'd bought it brand new, and sold it tomorrow, it would have dropped a lot more than £26k in that 3yrs 3 months, let alone the net £21-23k.
It's also been risk free, and a fixed outgoing.
My next car is being leased. £65k Alfa Quadrifoglio, again over 4 yrs, but at 15,000 per year. £572/mth, £1,700 upfront, and includes RFL for the duration.
Over the 4 years, 60,000 miles it will cost me £29,156. Even with the best deals available, a £65k Alfa will easily lose £29k (44%) of it's value over 4 years and 60,000. And that's before you factor in £1800 of RFL that the private buyer will also have to pay for.
On top of all of those, my investments over the last 3 years have risen by 20-25%. So tell me again why I would tie my capital up in a car for no commercial reason...and with significant Opportunity Cost??
Thats a good example of how it can work out better than cash.I currently have a 640d GC. Bought brand new, it costs me £561/mth and I put £4,000 down. This was on a 4 year PCP (12k/yr - currently 3yrs 3 months in). The current settlement figure is £22k and the car is worth somewhere between £25-27k.
That means, to date, it has cost me just under £26k for 39 months. If I sell it tomorrow, I'll get £3-5k 'back'.
If I'd bought it brand new, and sold it tomorrow, it would have dropped a lot more than £26k in that 3yrs 3 months, let alone the net £21-23k.
It's also been risk free, and a fixed outgoing.
My next car is being leased. £65k Alfa Quadrifoglio, again over 4 yrs, but at 15,000 per year. £572/mth, £1,700 upfront, and includes RFL for the duration.
Over the 4 years, 60,000 miles it will cost me £29,156. Even with the best deals available, a £65k Alfa will easily lose £29k (44%) of it's value over 4 years and 60,000. And that's before you factor in £1800 of RFL that the private buyer will also have to pay for.
On top of all of those, my investments over the last 3 years have risen by 20-25%. So tell me again why I would tie my capital up in a car for no commercial reason...and with significant Opportunity Cost??
You've also spent £54k in payments in just over 7 years, which some people will never get their head round.
Personally I see your logic, especially if it has to be brand new, but in this case would probably take a chance on a lightly used example to minimise the depreciation.
Most expensive, ratio wise was about 35% of my annual wage... but I didn't enjoy driving it because I had no money in the bank at the time and hated everything being wrapped up in it! I sold it a year later and bought something 10% of my wage, which I felt much more comfortable with.
In fact that's how I've kept it ever since and it seems perfect to me
I also save up 10% of my monthly wage to spend on modifications, throughout the first half of my ownership of the car (around 4 years in total)
In fact that's how I've kept it ever since and it seems perfect to me
I also save up 10% of my monthly wage to spend on modifications, throughout the first half of my ownership of the car (around 4 years in total)
Ares said:
irish boy said:
Ares said:
It doesn't have to be dream territory.
I currently have a 640d GC. Bought brand new, it costs me £561/mth and I put £4,000 down. This was on a 4 year PCP (12k/yr - currently 3yrs 3 months in). The current settlement figure is £22k and the car is worth somewhere between £25-27k.
That means, to date, it has cost me just under £26k for 39 months. If I sell it tomorrow, I'll get £3-5k 'back'.
If I'd bought it brand new, and sold it tomorrow, it would have dropped a lot more than £26k in that 3yrs 3 months, let alone the net £21-23k.
It's also been risk free, and a fixed outgoing.
My next car is being leased. £65k Alfa Quadrifoglio, again over 4 yrs, but at 15,000 per year. £572/mth, £1,700 upfront, and includes RFL for the duration.
Over the 4 years, 60,000 miles it will cost me £29,156. Even with the best deals available, a £65k Alfa will easily lose £29k (44%) of it's value over 4 years and 60,000. And that's before you factor in £1800 of RFL that the private buyer will also have to pay for.
On top of all of those, my investments over the last 3 years have risen by 20-25%. So tell me again why I would tie my capital up in a car for no commercial reason...and with significant Opportunity Cost??
Thats a good example of how it can work out better than cash.I currently have a 640d GC. Bought brand new, it costs me £561/mth and I put £4,000 down. This was on a 4 year PCP (12k/yr - currently 3yrs 3 months in). The current settlement figure is £22k and the car is worth somewhere between £25-27k.
That means, to date, it has cost me just under £26k for 39 months. If I sell it tomorrow, I'll get £3-5k 'back'.
If I'd bought it brand new, and sold it tomorrow, it would have dropped a lot more than £26k in that 3yrs 3 months, let alone the net £21-23k.
It's also been risk free, and a fixed outgoing.
My next car is being leased. £65k Alfa Quadrifoglio, again over 4 yrs, but at 15,000 per year. £572/mth, £1,700 upfront, and includes RFL for the duration.
Over the 4 years, 60,000 miles it will cost me £29,156. Even with the best deals available, a £65k Alfa will easily lose £29k (44%) of it's value over 4 years and 60,000. And that's before you factor in £1800 of RFL that the private buyer will also have to pay for.
On top of all of those, my investments over the last 3 years have risen by 20-25%. So tell me again why I would tie my capital up in a car for no commercial reason...and with significant Opportunity Cost??
You've also spent £54k in payments in just over 7 years, which some people will never get their head round.
Personally I see your logic, especially if it has to be brand new, but in this case would probably take a chance on a lightly used example to minimise the depreciation.
£54,000 renting cars to have a better car on your drive than next door ?
Please don't take it as an insult / having a go but numbers like this always shock me.
That said out of all of my friends I am the only one who doesn't do this.
del mar said:
£54,000 renting cars to have a better car on your drive than next door ?
That would indeed seem like a bad reason to do it. Like taking on a big mortgage to have a bigger house than your friends, or spending a fortune on exotic holidays to impress others, or not living on beans on toast simply because you want to brag about what you eat. But have you considered the possibility that he's doing it for some other reason?del mar said:
I appreciate we are all different with different out looks on life and what works for me wont work for you, but
£54,000 renting cars to have a better car on your drive than next door ?
Please don't take it as an insult / having a go but numbers like this always shock me.
That said out of all of my friends I am the only one who doesn't do this.
Don't judge others by your own standards. My neighbours cars don't factor into it. (one is 90 and has a 3yr old Polo, the other mid-50's and has a Wraith and an SQ5)£54,000 renting cars to have a better car on your drive than next door ?
Please don't take it as an insult / having a go but numbers like this always shock me.
That said out of all of my friends I am the only one who doesn't do this.
I spend c£7k per year on having a nice car. Would it make it more acceptable to you if I paid more by buying each one for cash?
My £600/mth is less than 5% of my income, so hardly a stretch, and is done purely on economic grounds. I could afford to pay cash for it, but would be stupid to do so.
I don't think anyone could own a £70k BMW, soon to become a £65k Alfa (a 500bhp Alfa
) and not pay an annualised £7,000 per year. Both are damned straight going to depreciate more than that!Really can't why people have such a chip on their shoulder about non-cash purchase of cars (and fell the ignorant assumption that it is for the neighbours benefit???)
otolith said:
del mar said:
£54,000 renting cars to have a better car on your drive than next door ?
That would indeed seem like a bad reason to do it. Like taking on a big mortgage to have a bigger house than your friends, or spending a fortune on exotic holidays to impress others, or not living on beans on toast simply because you want to brag about what you eat. But have you considered the possibility that he's doing it for some other reason?The bigger mortgage does get you as house at the end of the "loan/finance" period though......
I think all concepts of correlating someone's earnings to their car have gone out of the window now. people (if they have any sense) will judge each situation independently.
i have 2 cars, one is leased and one is owned. each made sense individually.
my commuter car is my i3, for tax reasons i got it through the business. the numbers made it significantly cheaper to lease than buy outright due to BMWs business model.
my night time, non client facing car i own outright because i don't plan on selling it any time soon.
horses for courses
i have 2 cars, one is leased and one is owned. each made sense individually.
my commuter car is my i3, for tax reasons i got it through the business. the numbers made it significantly cheaper to lease than buy outright due to BMWs business model.
my night time, non client facing car i own outright because i don't plan on selling it any time soon.
horses for courses
MorganP104 said:
Tucker1 said:
There is a lot of very wealthy people out there with zero interest in cars so they don't feel the need to sink money into them, Plenty of millionaires driving bangers that just "do the job" Its not compulsory to spend as much as you possibly can on a vehicle.
Nothing screams "old money" more than a ropey old LR Disco V8 and a Volvo 244DL parked outside a 35 bedroom castle. 
Jonno02 said:
I couldn't afford to buy my car twice, but I can afford the lease cost associated with 'owning it'. I don't want to own it. I don't want to have the unknown financial responsibility of a depreciating asset. I want to know exactly what it'll cost me for 2 years and if I'm happy with the price, I'll pay it. I owned my last car and it stung me come trade-in time because the market is constantly shifting. If the market shifts with my lease car, I don't take the hit.
That and I like to change my car often.
A: you cannot really change your car often in a leaseThat and I like to change my car often.
B: a Lease will cost you more than buying the car and selling it ! (this is how lease companies make money you know)
lol o well.
Ares said:
Don't judge others by your own standards. My neighbours cars don't factor into it. (one is 90 and has a 3yr old Polo, the other mid-50's and has a Wraith and an SQ5)
I spend c£7k per year on having a nice car. Would it make it more acceptable to you if I paid more by buying each one for cash?
My £600/mth is less than 5% of my income, so hardly a stretch, and is done purely on economic grounds. I could afford to pay cash for it, but would be stupid to do so.
I don't think anyone could own a £70k BMW, soon to become a £65k Alfa (a 500bhp Alfa ) and not pay an annualised £7,000 per year. Both are damned straight going to depreciate more than that!
Really can't why people have such a chip on their shoulder about non-cash purchase of cars (and fell the ignorant assumption that it is for the neighbours benefit???)
I think a lot of the times it's nothing to do with non-cash purchase etc, it's comes down to people not understanding that some peoples salaries are a lot higher than theirs.I spend c£7k per year on having a nice car. Would it make it more acceptable to you if I paid more by buying each one for cash?
My £600/mth is less than 5% of my income, so hardly a stretch, and is done purely on economic grounds. I could afford to pay cash for it, but would be stupid to do so.
I don't think anyone could own a £70k BMW, soon to become a £65k Alfa (a 500bhp Alfa
) and not pay an annualised £7,000 per year. Both are damned straight going to depreciate more than that!Really can't why people have such a chip on their shoulder about non-cash purchase of cars (and fell the ignorant assumption that it is for the neighbours benefit???)
Porsche911R said:
B: a Lease will cost you more than buying the car and selling it ! (this is how lease companies make money you know)
normally, yes...but not always.
my i3 is loads cheaper as a lease than buying it outright (excluding tax savings which compound the benefits)
if you add up all the money that bmw will ever get for my car (govt tax break, deposit, monthly payments, VAT and auction price) it adds up to £10k less than RRP, and BMW give £0 discount on any 'i' product.
You would be absolutely certifiable to buy an 'i' product outright.
Edited by Greg_D on Wednesday 28th June 16:57
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