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How much of your NET income should you spend on a car?
- Thread starter maxtdi
- Start date
nouse4aname
Go Kart Champion
The loan is 7%. After insurance and gas I'm just squeaking in at 10.1%
I love cars but I'll stick to new or used <$25k for awhile. Early retirement more important.
Rule of thumb I was taught was purchase price shouldn't exceed 1/3 annual salary and loan terms shouldn't exceed 48 months. But that last bit doesn't matter so much with these low rates.
Ah forgot annual bonus, that brings me in < 10%
I love cars but I'll stick to new or used <$25k for awhile. Early retirement more important.
Rule of thumb I was taught was purchase price shouldn't exceed 1/3 annual salary and loan terms shouldn't exceed 48 months. But that last bit doesn't matter so much with these low rates.
Ah forgot annual bonus, that brings me in < 10%
troyguitar
Go Kart Champion
My company only does 24 paychecks a year smarty pants
Curious - Does that mean paychecks are not always on the same day of the week?
thedude4bides
Go Kart Champion
15th and 30th, or the last business day prior if those fall on holidays or weekends.
troyguitar
Go Kart Champion
Strange haha I've never been paid any day but Friday at any job, haven't had that many though I guess.
maxtdi
Go Kart Champion
I am on the same schedule as well.
Before we all continue arguing down the what is net income...
We're talking take home pay of your paycheck (what you get deposited in your bank account every week or other week or on the 15th and 31st :laugh
nouse4aname
Go Kart Champion
Yeah I've had that odd dual monthly setup before. Currently just once a month on the 14th.
troyguitar
Go Kart Champion
So people who invest pre-tax will be posting artificially higher numbers, OK.
But the car buying decision for each individual is obviously based on home much take home pay they have.
I don't think many sit around and make decisions on how much car they can afford (or anything for that matter) based on how much gross they make.
What you get paid is what you have to spend. What you have to spend is what you buy a car with.
And not to turn this into an investment discussion but you should have both pre and post tax investments, anyhow.
thedude4bides
Go Kart Champion
I made this point earlier, although not as clearly. There are many levers to pull in this calc. For example, what you do pre-tax can be changed to make your car budget look better or worse. In any case, Max is just trying to keep it simple so people are apples to apples with their %.
Btw- I recalced and I'm closer to 18%
Desert MVIGTI
Go Kart Champion
Max, in computing what your "increased" costs of a new vehicle would be, don't forget about all the money you are saving by not wining, dining, and otherwise wasting money on miss whatserbucket anymore. Your net income just skyrocketed, brah.
RS5.
troyguitar
Go Kart Champion
Take health insurance as an example. I pay for it pre-tax. My sister post-tax. Therefore "what she has available to spend" is NOT her entire paycheck. Very simple point but it can change these numbers max is asking about radically. Sorry I care about details, I thought you of all people would understand.
rawbdog
Go Kart Champion
maxtdi
Go Kart Champion
I did try to itch that scratch... there is only 1 in a 500 miles radius so I am going to guess that it has a 20,000 markup on top of a 70K sticker price.
If anything I'd go NEW S4 with decent options. But... Used M3 sedans are ~40k now... They are sadly hard to find in a good combo (DCT+Upgraded stereo)
http://sfbay.craigslist.org/sfc/cto/3590526334.html I was going to look at this.. but manual
the DCT was originally a $2900 option and the car is more trackable, faster and get better FE
Valli666
Ready to race!
My car cost 25% of my annual net income.
I was reluctant at first but when I calculated the monthly running cost was only going to be 2% of my net monthly salary (after I purchased the car) I didn't really worry about it.
My honest advice would be to try and be realistic about how much money you can really afford to spend on a car whilst saving money at the same time.
There is no point in spending a lot of your income on a something that's always depreciating in value.
Maybe its just age and experience that's talking, but my attitude towards spending money on my car has changed over the years.
I was reluctant at first but when I calculated the monthly running cost was only going to be 2% of my net monthly salary (after I purchased the car) I didn't really worry about it.
My honest advice would be to try and be realistic about how much money you can really afford to spend on a car whilst saving money at the same time.
There is no point in spending a lot of your income on a something that's always depreciating in value.
Maybe its just age and experience that's talking, but my attitude towards spending money on my car has changed over the years.