Setting a car budget - %age of income, salary?
Discussion
The most expensive car I’ve bought was listed at £12,000 (used VW Scirocco), and I’ve rarely thought of spending more, although for performance cars it’s difficult to spend less than £15,000 now if you want something reasonably new and with a low mileage. I wouldn’t overthink it though, it’s just what you’re comfortable with after prioritising a house and mortgage payments etc. Doesn’t sound like there’s a need for three cars if they’re for you alone, but could justify buying two if one’s a weekend toy and the other’s for practicality.
I try to stick with the three-thirds rule, i.e. 1/3 of my monthly net income goes on the mortgage/house, 1/3 on general living costs/leisure/cars, and 1/3 invested/savings.
Within that 1/3 our two cars make up about 1/3, so about 10% of my net monthly income.
In terms of car purchase price vs annual salary, the two cars together when new were about 40% of my net salary.
Back when I was young and single(ish) my car value was equal to my annual salary and the finance was closer to 20%. Now with a family there are other priorities. YMMV.
Within that 1/3 our two cars make up about 1/3, so about 10% of my net monthly income.
In terms of car purchase price vs annual salary, the two cars together when new were about 40% of my net salary.
Back when I was young and single(ish) my car value was equal to my annual salary and the finance was closer to 20%. Now with a family there are other priorities. YMMV.
The Porsche 981 was worth 25% of my annual salary back when I purchased it. This is a rule I live by and never buy something that is a) worth more than 25% of my annual gross salary and b) that is at the start of its depreciation curve. I bought 4 years old and have lost maybe £8k in the 4 years I’ve had it.
Like people have said, buy what you can afford but make sure you’re investing in your future as well, through pensions etc
Like people have said, buy what you can afford but make sure you’re investing in your future as well, through pensions etc
Over over under steer said:
The Porsche 981 was worth 25% of my annual salary back when I purchased it. This is a rule I live by and never buy something that is a) worth more than 25% of my annual gross salary and b) that is at the start of its depreciation curve. I bought 4 years old and have lost maybe £8k in the 4 years I’ve had it.
Like people have said, buy what you can afford but make sure you’re investing in your future as well, through pensions etc
25% of gross salary and circa 4 years old is pretty much my ethos too. Not a hard and fast rule but just approximately what my gut tells me is affordable vs. over-indulgent.Like people have said, buy what you can afford but make sure you’re investing in your future as well, through pensions etc
Totally agree about saving for your future and investing pensions-although the alternative is to buy a TVR and drive it in all weathers, whereupon things like pensions are no longer needed
I just get the car I want. IMO, owning nice things pushes me harder to accelerate my career and more recently business. I’m 28 with no children so of course this makes things a lot easier.
I would find it hard to live my life by percentage of annual salary rules. I mean, the thought of getting something that I don’t really want but still spending money every month on it is scary!
If we are talking about low value cars (under 40k) it’s really not that hard to make an extra £500 a month if you really want so you can pay for it.
I would find it hard to live my life by percentage of annual salary rules. I mean, the thought of getting something that I don’t really want but still spending money every month on it is scary!
If we are talking about low value cars (under 40k) it’s really not that hard to make an extra £500 a month if you really want so you can pay for it.
Londonvaper said:
I just get the car I want. IMO, owning nice things pushes me harder to accelerate my career and more recently business. I’m 28 with no children so of course this makes things a lot easier.
I would find it hard to live my life by percentage of annual salary rules. I mean, the thought of getting something that I don’t really want but still spending money every month on it is scary!
If we are talking about low value cars (under 40k) it’s really not that hard to make an extra £500 a month if you really want so you can pay for it.
I would find it hard to live my life by percentage of annual salary rules. I mean, the thought of getting something that I don’t really want but still spending money every month on it is scary!
If we are talking about low value cars (under 40k) it’s really not that hard to make an extra £500 a month if you really want so you can pay for it.
Top trolling.
I'm 30 and me and the Mrs earn good money, we're currently toying with the purchase of an I-Pace but the figures we were given today (10% down, £866/month) had me a little taken aback, it's less than 10% of our monthly income but it's £29 more than our mortgage. It's definitely affordable for us but it may well just be more than we can justify - Whereas if it was an older but equally expensive car which may depreciation less like a led balloon then we'd probably snap it up.
Man maths is still ongoing about the savings on running costs and depreciation from an electric car but that's another story.
When I had less disposable income I spent significantly less on cars and prioritised travelling and saving for our house deposit, now that the career is doing well and the equity in the house is at ~50% I thought I'd be more relaxed about it all, but it turns out I'm still a tight arse yorkshireman and I'm hunting around for a 6month old car instead so that it's taken that first 10-15k depreciation hit for me.
Man maths is still ongoing about the savings on running costs and depreciation from an electric car but that's another story.
When I had less disposable income I spent significantly less on cars and prioritised travelling and saving for our house deposit, now that the career is doing well and the equity in the house is at ~50% I thought I'd be more relaxed about it all, but it turns out I'm still a tight arse yorkshireman and I'm hunting around for a 6month old car instead so that it's taken that first 10-15k depreciation hit for me.
My car cost roughly £20k with the modifications. Theres no finance. I have previously purchased cars on finance, even leased a CTR years ago, however, I feel I probably should have financed the car and left the money in the bank. The cost of borrowing is so cheap, that offsetting the finance against savings would leave me in a stronger position, subsequently would be the same for you, OP.
% of income wise, I've never thought of it that way for cars, only houses.
% of income wise, I've never thought of it that way for cars, only houses.
J1990 said:
I'm 30 and me and the Mrs earn good money, we're currently toying with the purchase of an I-Pace but the figures we were given today (10% down, £866/month) had me a little taken aback, it's less than 10% of our monthly income but it's £29 more than our mortgage. It's definitely affordable for us but it may well just be more than we can justify - Whereas if it was an older but equally expensive car which may depreciation less like a led balloon then we'd probably snap it up.
Man maths is still ongoing about the savings on running costs and depreciation from an electric car but that's another story.
When I had less disposable income I spent significantly less on cars and prioritised travelling and saving for our house deposit, now that the career is doing well and the equity in the house is at ~50% I thought I'd be more relaxed about it all, but it turns out I'm still a tight arse yorkshireman and I'm hunting around for a 6month old car instead so that it's taken that first 10-15k depreciation hit for me.
Is your combined take-home pay >£8660 per month or combined gross salary?Man maths is still ongoing about the savings on running costs and depreciation from an electric car but that's another story.
When I had less disposable income I spent significantly less on cars and prioritised travelling and saving for our house deposit, now that the career is doing well and the equity in the house is at ~50% I thought I'd be more relaxed about it all, but it turns out I'm still a tight arse yorkshireman and I'm hunting around for a 6month old car instead so that it's taken that first 10-15k depreciation hit for me.
The car I bought 2 years ago was 10 months old and its cost was close to my annual income after tax.
However, I am retired with no mortgage and it cost about 1/15 of our savings. We add to our savings most months.
I buy my car's at around a year old & keep them for around 6-7 years. The last 2 cars for 6-1/2 & 7 years. Annual mileage (without Covid) is 8K.
So the depreciation spread over 6-7 years is less than 2K/annum.
However, I am retired with no mortgage and it cost about 1/15 of our savings. We add to our savings most months.
I buy my car's at around a year old & keep them for around 6-7 years. The last 2 cars for 6-1/2 & 7 years. Annual mileage (without Covid) is 8K.
So the depreciation spread over 6-7 years is less than 2K/annum.
Londonvaper said:
fflump said:
Top trolling.
This is just my mentality and maybe others are a lot more risk averse. I just can’t stand penny pinching when it comes to your passion in life. If you can afford it go for it!
I was just surprised that you genuinely believed those statements.
Jellybeans2016 said:
AudiMan9000 said:
My Q3 on PCP is about 17% of my monthly income.
Sounds sensible about 1/5 of salary for a car. I’m similar as I like my cars17% of monthly income for A Q3. £400 per month for a Q3. OTR is around £35k.
income is £2350 a month( based on 17% assuming monthlies is 400 p/m all in (inc depo), so around 28k a year salary.
poster has spent over 120% of annual salary on a car!
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