What % of The Salary Do You Budget for a Car?

FrugalDealSeeker on 17/11/2021 - 22:36
Last edited 17/11/2021 - 23:18

Hi guys,

Just wanted to know what % of your salary do you spend on car repayments. I recently landed a new job and was just considering upgrading my car (CR-V >230k) before it fell apart. I am open to finance as I usually invest most of my income into shares, etc. and I am getting a better return than what I would pay in interest.

I try to invest 40% - 50% of my income and rent + expenses don't exceed 30% of my income, so if my car repayment was to be 20% of my salary would that be optimal?

Just wanted to hear some thoughts from the OzB community to understand how much is not too much expenditure for a car.

Cheers!

Edit 1: Forgot to mention, looking at a nearly new (<30,000 kms) 3 series, C Class, A4, XE/XF, etc. I am well aware of their rock-solid reliability and high appreciation of value but want to experience them regardless (hopefully under warranty) and leasing is not possible.

Edit 2: Just clarifying, I meant <30,000 kms not <$30,000.

Financial

Comments

              • lolz112 on 22/11/2021 - 09:49
                +2

                @FrugalDealSeeker: As I said you didn't stop there. You tried to justify why it was the conditions rather than you. You might believe it's unnecessarily harsh, I believe you are a poor driver. I also don't know you from a bar of soap. But if you're looking for validation from a stranger on the internet, you are looking at the wrong places.

                • FrugalDealSeeker on 22/11/2021 - 10:06

                  @lolz112:

                  looking for validation from a stranger on the internet, you are looking at the wrong places

                  Touché. You're free to believe whatever you want. Have a good day <gender neutral equivalent of sir>! :)

      • djmm on 19/11/2021 - 16:27
        +5

        If you need to rely on all safety gizmos to be safe driver, you shouldn't be driving

        • FrugalDealSeeker on 20/11/2021 - 11:06
          -3

          Tbh I have never even dinged my car or had a parking fine (once but it was waived off) except for that one time. It was dark and I miscalculated the safe distance based on friction, slope, etc. (my car slid for 3-4 secs easy before the collision) so I wouldn't so hard on myself and would consider myself to be a safe driver. I am just saying all those gizmos are lowering the premiums.

          • corbz on 21/11/2021 - 07:49
            +4

            @FrugalDealSeeker: You think you're a safe driver, that's why you drive too close.

        • Halc on 21/11/2021 - 09:30
          +2

          i get what you are saying but think we're being a bit harsh, no one is 100% focused 100% of the time and safety features may be that extra buffer that saves our hide at times. personally i drive on the highway for 90min daily and money on safety tech is money well spent. AEB has saved my hide once when a car emergency braked in front of me whilst I was on the phone to a family member who had an urgent health issue (on hands free of course)

          • FrugalDealSeeker on 21/11/2021 - 11:00
            -1

            @Halc: Yeah, $hit happens. Nobody is perfect. Of course, if it was a DUI or driving an unsafe car eg without headlights then this would've been fair as you're aware of the potential issue prior to the accident. But this is totally unjustified.

  • Pelicannn on 18/11/2021 - 08:30
    +2

    110%

    Big fan of my highly appreciating European car

    • FrugalDealSeeker on 18/11/2021 - 08:41

      Yep, Range Rover SV Autobiography edition… you could literally make a down payment on a decent house using the profits you make after reselling it after a few years!

  • Big Lenny on 18/11/2021 - 08:58
    +10

    wouldnt touch a used car or new car in this current environment

    highly overpriced for what youre getting

    • FrugalDealSeeker on 18/11/2021 - 09:15

      Yeah, I thought so too… I met with an accident earlier this year and my car was insured for market value. I got 19% more than what I had originally paid for around 1.5 years ago. Considering chip shortages, etc. you can hardly find 2-3 cars when you're looking for a specific model/ trim.

  • Tiredman on 18/11/2021 - 09:19
    +1

    I keep it under 3-5% of my networth.

  • Duckie2hh on 18/11/2021 - 09:25
    +4

    rock-solid reliability and high appreciation of value

    LOL that made my day.

    • Halc on 21/11/2021 - 09:35
      +2

      An A200 AMG is absolutely the next shiba inu

  • SF3 on 18/11/2021 - 09:25
    -1

    Allocate as much as you can to save towards a car, don't get a loan.

    • FrugalDealSeeker on 18/11/2021 - 10:05

      borrowing is cheaper than what you would make by investing that money.

      • Peanut money on 18/11/2021 - 10:48
        +8

        Borrowing to invest would be cheaper since that’s tax deductible agains dividends/gains

  • avoidfullprice on 18/11/2021 - 10:03
    +1

    if my car repayment was to be 20% of my salary would that be optimal?

    I would say cost no more than 30% of salary, but in terms of repayment it depends on your loan period. Repayment at 20% of salary over five years seem excessive.

  • Bid Sniper on 18/11/2021 - 10:05
    +9

    I pay cash, most people cant stomach handing over that much cash for a car but somehow acceptable in a repayment scheme.

    However if you want used luxo, get a Lexus. They depreciate like Euro but have Toyota reliability.

    • FrugalDealSeeker on 18/11/2021 - 10:09
      +4

      Lexus's remote touch interface gives me an aneurysm. I wish they sold Accuras here. I think sometimes Honda forgets Australia as a country.

      • Bid Sniper on 18/11/2021 - 10:31

        New NX have a nice UI finally

        https://youtu.be/6ezdsafocgU?t=140

        • FrugalDealSeeker on 18/11/2021 - 10:34

          I saw this yesterday, but I am pretty sure it's pre-production. It's gonna take a while before it comes here and then will have to wait a few years to avoid new car initial depreciation.

          • Bid Sniper on 18/11/2021 - 10:41

            @FrugalDealSeeker: Yeah that's true, I just use my phone for nav anyway, voice commands on it actually work.

            • FrugalDealSeeker on 18/11/2021 - 11:53
              +1

              @Bid Sniper: In that case, 2014< IS will be a great choice IMO. Just use Echo Auto and Google Maps on phone. No need to touch the horrendous infotainment ever. Preferably with adaptive cruise control, F sport and sunroof options.

    • buckethat on 19/11/2021 - 22:23

      My next upgrade, if not an EV, will be a Lexus.

      Though.. I really hate how antiquated their dash and infotainment system look.

      Hoping they update them on all their cars soon.

      • Bid Sniper on 20/11/2021 - 12:47

        Link above on new NX review, infotainment now modern and actually good.

        • buckethat on 20/11/2021 - 13:09

          They havent brought that to the IS or RC line yet. Not that I know of.

      • ymmf on 21/11/2021 - 20:35

        Haha agree I decided I won't buy a Lexus until they get rid of the CD player so the new NX plug in hybrid will be a good choice.

  • narbe on 18/11/2021 - 10:35
    +2

    Jesus if your making 27% YoY you should create a hedge fund, screw impressing people with a stupid car. Get all the chicks if own your own hedge fund. Hell i'll invest in you.

    • shnookums on 18/11/2021 - 11:18
      +17

      Lol OP makes 27% per year coming out of a pandemic/recession, assumes this is the norm…

      This is truly nature healing. Great news for the economy as people go back to making unwise financial decisions that lock themselves into working to pay for depreciating assets (because OP prefers to look at property in the next crisis) :-).a

      • FrugalDealSeeker on 18/11/2021 - 11:50
        +3

        You misunderstand… I am up >300%. I was just quoting S&P as an example.

      • FrugalDealSeeker on 18/11/2021 - 12:11
        +1

        because OP prefers to look at property in the next crisis

        Every 8-12 years something happens:

        • 1970s energy crisis
        • 1987 Black Monday
        • 2001 Dot Com Bubble
        • 2008 GFC
        • 2020 COVID-19

        So yeah, gonna buy property at a 50% discount within the next 8-12 years.

        • shnookums on 18/11/2021 - 13:15
          +8

          Good luck mate. Many said the same thing 18 months ago, my property purchased in Aug 2020 has made more money than 2 full-time professional salaries.

          (In your defense, I do drive a $10k, 14 year old car which people judge me for(?)).

          • FrugalDealSeeker on 18/11/2021 - 13:46
            +2

            @shnookums:

            my property purchased in Aug 2020 has made more money than 2 full-time professional salaries

            I am hardly surprised. At the time I wasn't a PR/ Citizen so couldn't buy one… even though I have missed this train, I am sure it will be back by around 2030. I am in no rush to buy.

          • rektrading on 18/11/2021 - 14:09

            @shnookums:

            my property purchased in Aug 2020 has made more money than 2 full-time professional salaries.

            What is that in percentage?

        • greatlamp on 20/11/2021 - 08:08

          And how did those economic crises affect the property market in Australia?

          Property prices are driven by monetary policy, which is the result of government decisions.

          The majority of new financing during COVID has been by owner occupiers, not investors. This isn't a speculative bubble, just because prices rose quickly.

          How can you be so confident prices will drop 50% in the future?

  • nephilim on 18/11/2021 - 10:53

    Merc E400 hybrid from Japan?
    Prob best car you can get under 30k, if want to impress people but goodluck with no warranty, I looked into it and youtubers are reporting 10-20k in warranty repairs for that range. Door mounts snap, engine issues ect.

    • FrugalDealSeeker on 18/11/2021 - 11:55

      Nah, preferably want the better screen and infotainment… although conflicted about that as phone + mounts do a great job anyway.

  • iforgotmysocks on 18/11/2021 - 13:29
    +2

    125%

  • md333 on 18/11/2021 - 14:05
    +2

    I put aside $200 a month for car upgrades, about 1.8% of gross salary. Plan was to update every 5 years or so, but haven't bothered for a while as old car seems to be going well.

    I suspect what other people do isn't particularly relevant to what you do though, too many individual factors and preferences to take into account.

  • Mrgreenz on 19/11/2021 - 11:36

    2013 - 5%
    2015 - 0%
    2016 - 10%
    2017 - 0%
    2018 - 0%
    2019 - 0%
    2020 - 0%
    2021 - 0% so far

    • Antikythera on 20/11/2021 - 13:31

      hehe. I was going to make a comment about why people assume car payments are a fact of life. I've only ever paid cash for my cars.

      92 - 30% - AusStudy at Uni
      96 - 50% - full time work 2 months. casual work 3 months. AusStudy 6 months
      04 - 25% - part time work 12 months
      17 - infinite - self unemployed

      lol that looks a lot worse than it was. I save money while employed but only seem to buy cars when I'm not working. had teenage job from 86-89. full time work from 93-95, year round part time work from 97—13 and 60 hour pw casual work for thirteen months straight in '14 before taking some time off.

      Roughly 5% of lifetime income spent on cars.

      • ColonelKumara on 23/11/2021 - 15:55

        When I bought a house the lending officer at the bank was really surprised that I owned my car outright.

        It was also like 6 weeks wages 4 years ago.

  • trapper on 19/11/2021 - 12:23

    Less than 1%, averaged over the last 10 years.

    • Dalton on 19/11/2021 - 13:05

      Before or after tax?

      • trapper on 19/11/2021 - 13:11
        +1

        Either way lol

        • Dalton on 19/11/2021 - 13:15

          I'm guessing this is a classic vehicle heading toward vintage status.

  • OwMeKnees on 19/11/2021 - 13:06
    +1

    Our household income is $300k+, not much mortgage left. Last car we bought was a 2017 Skoda Superb, about $27k 2 years ago. Only car on the market that can fit my 6'6, 125kg frame in the front and my son's skinny 6'4 frame behind me. Perfect car, dont feel like we need to spend more. having said that, I might be splash out on a newish one in the next couple of years.
    Oh, and I have a 2005 Holden Crewman to get around with and go to the big green supermarket. only has 67000ks on it and I do work myself. Ill drive it til it dies

    • FrugalDealSeeker on 19/11/2021 - 13:21
      +5

      name checks out!

    • ebN on 19/11/2021 - 15:38
      +1

      You need to update the personal blog this guy is asking for advice

  • Jamesrulez1 on 19/11/2021 - 13:07
    +5

    This thread isn't going to give you much insight because everyone places different values and priority on things in life.

    You might meet people who think 150% of their yearly salary is a good amount for a car whereas some people might think 0% because they catch only public transport.

    Then there's the unseen elements e.g. net assets and other expenses that throw in even more variables into the "What % of The Salary Do You Budget for a Car".

    End of the day you should make the decision based on your current financial position and priorities in life because you are in the best position to make that decision.

    Personal opinion: Just buy the car you like and if it doesn't work out then you'll learn a lesson.

    I bought 2 brand new cars for about $160k~ outright at 22 which was 80%~ of my salary at the time.
    I liked cars and I don't regret the purchases at all.
    I didn't have many expenses but I also had >$1M net assets.

    Looking back I should have leased them because I like swapping cars and i'll be looking to upgrade mid next year. I am also a firm believer of buying new European cars rather than second hand as I have had a few technical glitches which were all covered under warranty but would cost an arm and a leg outside of warranty.

    • OwMeKnees on 19/11/2021 - 13:12

      Definitely get rid of out of warranty

  • CheeseBeans on 19/11/2021 - 13:59
    +3

    Generally rules of thumb like that are talking about the total value of the car, not the payment, and they're post tax. 20% of your income long term into a payment seems stupid. I don't like Ramsay, but he'd rightfully yell at you for something like this.

    That being said, I don't always agree with them. I spend more than a lot of the 10, 20, whatever % rules, though that's because cars are a hobby for me, and there's a lot of other things I don't spend on. I'm generally also buying older cars without much more depreciating to do, and doing most of the servicing and maintenance myself, so the total cost once they're discharged is typically not all that high.

    Coming back to your point:

    "Edit 1: Forgot to mention, looking at a nearly new (<30,000 kms) 3 series, C Class, A4, XE/XF, etc. I am well aware of their rock-solid reliability and high appreciation of value but want to experience them regardless (hopefully under warranty) and leasing is not possible."

    You're not really experiencing much. If you're wanting the image of the car (and trust me, to anyone who it matters to, they know you're driving a c class, and not an e class) you should just acknowledge that. IMO, a C class is only marginally nicer to be in than a current camry, if at all. It's a budget car, but not priced accordingly. If you want people to be impressed by the badge, there's also Lexus.

    The current hybrid camry impressed me a LOT more than a current 3 series or c-class honestly. Still a boring piece of junk I wouldn't buy right now, but quite nice, will be reliable, and didn't use any fuel.

    tl;dr I don't think buying pseudo-luxury cars like base model BMW's and mercs makes sense here.

    But I think everyone should consider life-cycle cost, and NOT value of the car. If you can afford to buy the car and you're not broke, what it costs you to run, and what it loses during your ownership are MORE important than the actual value. The most expensive (in terms of value) car cost me the least to own overall once I sold it, and my $10k falcon cost me the most after it lost thousands (82%!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!), monumental repair costs, high fuel expenses, expensive tyres, high registration and insurance costs etc…

  • Drakesy on 19/11/2021 - 14:21

    Car and investment shouldn't be used in the same sentence unless it's really a classic or a Mclaren F1.

    My rule is your car shouldn't cost more than 20% of a single year's salary (in line with the OP's). YMMV
    First car was a $3000 1991 subaru liberty sh1tbox when i was a student earning ~$20k a year - so 1/7 of my salary
    Second car was a $7000 2007 Kia Sportage Mum mobile when i was a grad earning ~$65k a year - so 1/9 of my salary
    Third car is a $11,000 Audi Q7 Mum mobile when my salary is $100k so 1/10 of my salary - repair costs are phenomenal though, i'm learning to be a mechanic as a result (one of the perks of being an engineer that makes a living finding solutions to problems).

    Any more and i'd be reconsidering what i'm doing with my life.
    Working to support driving to work is not one of them.

    • CheeseBeans on 19/11/2021 - 15:03

      This is exactly my point. If you're not broke/paycheque to paycheque the running costs, depreciation, reliability etc. should be bigger considerations than the upfront cost. This is why I'll recommend a $3750 toyota over a $2500 anything else at the end of the day.

      As I'm sure you've noticed, completely irrespective of the purchase price, the kia and subaru were much cheaper cars to live with. I've seen people think they were getting amazing deals on 10 year old X5's, to end up selling a few years later having lost well over 100% of the value of the car once repairs and maintenance were considered.

      This is why rules like "car should be less than 20% of salary" aren't good. My cars probably total 40-50% of my take home salary. But they're costing me (and once I sell them, will have cost less) than any normie POS I went and dumped exactly 20% of my salary on blindly. The cost, not the value is what matters.

      • Drakesy on 19/11/2021 - 15:14
        +2

        OOF just realised the OP is considering spending 20% of his salary on REPAYMENTS.

        Thats a big nooooooo from me.

        • CheeseBeans on 19/11/2021 - 15:15

          Exactly. Applying the "20%" rule of thumb to the repayments and not even the value of the car is next level hahahaha

          • Drakesy on 19/11/2021 - 15:20

            @CheeseBeans: That's like buying a Lamborghini on a Toyota Camry wage.

            Whoever is providing the loan would be taking the piss. The interest rate alone would be huge.

        • FrugalDealSeeker on 20/11/2021 - 14:01

          considering spending 20% of his salary on REPAYMENTS.

          You are both right and wrong. Yes, I want to spend 20% of my salary on repayments. No, it's not 20% of my income if you consider shares, etc.

          • Drakesy on 20/11/2021 - 16:14

            @FrugalDealSeeker: Still a huge proportion of your income every year.

          • Hearthstone on 20/11/2021 - 18:16
            +1

            @FrugalDealSeeker: what are you worrying about? you making 300% return a year on the stock market
            65K car is nothing it will be less than a few months return on the stock market for you is it not?

            it like I am buying a 2K iPhone, it be a fraction of my CBA dividend or If I go and get 60-70K car it will cost me a year of dividend
            why stress over it? it not like you buying this stuff every week, my iPhone I keep for it for 5 years and my car I keep for around 15 years

            • FrugalDealSeeker on 20/11/2021 - 18:33
              +1

              @Hearthstone: I am not making 300% a year. This is hardly reliable as this was one of the largest bull runs. A lot of it is from GME, AMC and some crypto. I am into some good positions but I doubt this will ever be replicated. Regardless, my point was that I will easily beat the loan interest of 7.69% (assuming that's the rate they gave me).

              • shnookums on 20/11/2021 - 18:52
                +1

                @FrugalDealSeeker: Interested to understand why you see "beating the loan interest of 7.69%" as the primary justification for your purchase?

                You aren't buying an asset that will increase in value (specially the cars you're looking at). If you spend $50k, regardless of your interest, you still need to payback $50k.

                …questioning my life choices coming back to this thread. I think I just want to better understand how people convince themselves to make these decisions.

              • Hearthstone on 20/11/2021 - 23:14

                @FrugalDealSeeker: Even if it is a once off thing, say you got a modest 100 - 200K portfolio and you said you made 300%+ last year so you pocketing some where between 300-600K what a 65K car? after spending 65K on cars you still got plenty of change left over what is all the fuss?

                buy it outright, use borrow money to fund the car purchase whatever it doesn't really matter, your return on investment is more than paid for itself
                I don't know why you fussing over it?

                Seriously if you can consistently make around 15% annually on your money you can make A LOT of money in the stock market forget the 100-200% return

                Let say you got a modest 100,000 and on top of your regular saving you add 10,000 a year at 15% return compounding you end up with nearly 1.4m in just after 15 years, now if you considered that just capital gain and add say a modest 3% for dividend you are close to 2 million bucks in 15 years times, 65K car is pocket change

                • FrugalDealSeeker on 20/11/2021 - 23:32
                  +1

                  @Hearthstone:

                  you made 300%+ last year

                  This is slightly incorrect. I said I am up 300% YTD.

                  100 - 200K

                  I am here AFTER my gain. Last year was also great. Stop losses prevented any major losses in March 2020 but I was unable to put much money as I lost my job and due to some major unavoidable expenses relating to my permanent residence was unable to make bank.

                  Seriously if you can consistently make around 15% annually on your money you can make A LOT of money in the stock market forget the 100-200% return
                  Let say you got a modest 100,000 and on top of your regular saving you add 10,000 a year at 15% return compounding you end up with nearly 1.4m in just after 15 years, now if you considered that just capital gain and add say a modest 3% for dividend you are close to 2 million bucks in 15 years times, 65K car is pocket change

                  This is basically what I said regarding putting money in S&P or other ETFs and taking out a loan at a much lower rate vs paying in cash outright. I'd reckon I would also beat the depreciation and the running costs here.

                  • Hearthstone on 20/11/2021 - 23:48

                    @FrugalDealSeeker: Then it is settled, used borrowed money because you are confident you can beat the whatever interest you paying with a decent margin.

                    but I am speaking from experience it may sound easy on paper, reality may catch up with you but If you are confident good luck
                    I also made better than 10% a year but I always paying cash buying my car or anything else for that matter, never have I borrowed money
                    for car, holiday, phone or anything else, the only borrowing I have is for properties.

                    Human is a funny creature, you can be good at something but then you start to take that on and be creative that when things start to go bad
                    and I am also speaking from experience

                    • FrugalDealSeeker on 21/11/2021 - 00:00

                      @Hearthstone: I don't disagree with you. Yes, there is a chance the market might go down, I might lose my job and/or suddenly have an unforeseen expense e.g. some health issue preventing me from being able to work idk. There might be a low demand for luxury cars and the resale price might be lower the repayments to further worsen the situation. Having said that I am confident with the contingencies in place e.g. getting puts when I suspect volatility and stop losses so yeah, this is an educated purchase, not a haphazard impulse buy.

                      • wimphrel on 23/11/2021 - 02:41

                        @FrugalDealSeeker: As others have pointed out, I think what's not very clear is whether you've accounted for the 'depreciation aspect' (Maybe you have, and that's good). But you're constantly comparing percentages rather than proper $ amounts.

                        If you buy a $160K car with repayments & you can beat the interest rate with whatever principal you have "at the time", the car could depreciate $100K in like 3-4 years, so your investments with what ever principal you have needs to beat $33k per year to offset the depreciation cost before you talk about beating the interest. Note for others (I'm sure you're already aware), that any interest paid on a depreciating asset impacts the opportunity cost of your entire investment life - i.e. you never stop investing, so what if you put all those repayments into more EFTs. I hate those leasing analyses where the opportunity costs just stops at the 3-5 year mark.

                        Anyhoo - I'm only replying to make sure readers don't misunderstand the concept.

                        IMO, since you don't care about owning property (and you don't need to, you can just lease forever - perfectly normal in other countries) - you should buy what you want as long as the repayments don't affect your lifestyle AND if you lose your job, you can afford repayments for a few months with savings (No different from buying a house really - can you afford the repayments & do you have enough buffer if you lose your job)

                        Friend leased a C63 bi-turbo (note not financed-to-own), and whilst it was nice, the fun lasts about a week or two before he just pointed out (it has too much power). At least it was a lease, so he still ends up better off giving it back after 3-5 years and not having to deal with depreciation & repairs out-of-warranty.

                        • FrugalDealSeeker on 23/11/2021 - 08:14

                          @wimphrel:

                          I think what's not very clear is whether you've accounted for the 'depreciation aspect'

                          Yes, that's why - looking at a nearly new (<30,000 km) typically 3-5-year-old car and not a new one. Jags generally come with a 5-year factory warranty if you purchase a preowned one from a dealer.

                          As far as numbers go, I found one XE R-sport which comes with a ROADWORTHY CERTIFICATE, A CLEAR TITLE OF OWNERSHIP PLUS A 5 YEAR / 175,000 KLM WARRANTY PROGRAM FOR GREAT PEACE OF MIND for about $47k. Assuming it's only worth the interest I pay at the end of the term @ ~8% = $8,140 + whatever the upkeep costs like servicing (not considering insurance and fuel as I have to pay those regardless), I'd only need a 14.87% ROE YoY compounded annually if I was to put the same amount in shares etc. and take out a loan for the car, to make that money back.

  • Hangryuman on 19/11/2021 - 14:24
    +1

    I calculate the value of my car based on time-use

    I first calculate my disposable income - retired now but say it was $100Kpa

    then I calculate how much time I spend in the car - I drive very little so it may average 1 hour per week

    1 hour in 168 per week = 0.6% of my time would put the time value of my car at $600pa.

    YMMV

    I advised a colleague to 'buy the cheapest car your ego can afford - if your ego needs a shiny new car, so you will spend money you don't have (loan?) to buy things you don't need, to impress people you don't like, then sure, knock yourself out.

    If you have other attributes that attract (the guy most popular with girls I ever knew drove an old Holden station wagon) then you can spend money on other things - like growth assets, rather than assets that depreciate (lose value).

  • whitelie on 19/11/2021 - 14:48
    +1

    Always going to find a wide range of answers on forums like this with most public opinion leaning towards the "spend little to nothing on a depreciating asset" theme given we're on a bargain site. If you were on a car forum for example, the answers are going to be very different.

    I like cars, always have, always will. My wife is the same. We're probably around the 7-8% mark of our income in keeping 3 cars on the road between the two of us. 2 are owned outright and one is financed about half of the purchase price. Of the 3 cars, the cheap run around is the only one what we would have lost money on. My weekender owes me nothing and has doubled in value, the wife's car (under finance) is worth about 5-10k more than we paid 2 years ago.

    It's a tricky situation to gauge as you could have finance a car 3 years ago before the demand sky rocketed, have it paid out now and made a profit if you were to sell it (including what you would have paid in interest on the loan). But used prices now are still high, fair chance if you were to do the same and buy at the top, if/when new car supply recovers, it will be worth a lot less before you've paid it out.

    • CheeseBeans on 19/11/2021 - 15:08
      +2

      Ding ding ding, we have a winner. Ownership costs (including depreciation) are a bigger deal than purchase price. That's why these cheap pseudo luxury cars are so bad. It's not the 60k you pay up-front (or financed over 50 years…), it's the 40k you lose when you sell it to buy another, the 15k you've spent on servicing, the 5k on run flats…

      If OP was talking about buying an actual passion car, or something a bit smarter (manual cayman S would be my pick in this price bracket and european) it would be a bit different

      • greatlamp on 20/11/2021 - 08:21

        The way I see it, it costs about the same to maintain a $60k base model 'luxury' brand as a $120k one that actually has nice performance .

        Take 40k and buy a used '120k' car, keep 20k for upcoming maintenance.

        People who only recognise badges and car people are both going to be more impressed by a used C350, rather than a new C200, and you get to drive something that actually represents the badge.

    • Halc on 19/11/2021 - 18:46

      You have to attribute the covid supply chain shock to the value increase unless it's a vintage car, it's a once in a lifetime event.

      • whitelie on 19/11/2021 - 19:33

        Yes, the wife's car is a 2018 and held it's value purely due to COVID.
        My car on the other hand is a HSV and attributed to their closure. Both once in a lifetime events.

  • CheeseBeans on 19/11/2021 - 15:27
    +1

    Anyway OP, to be honest, if your concerns are the image AND you want to be frugal go buy a ~2012 Lexus IS350 F Sport. It's got a Lexus badge on it, so you can tell people you drive a Lexus. The interior is nice. The fuel economy is ok. The servicing costs are ok. The depreciation is ok.

    • FrugalDealSeeker on 20/11/2021 - 11:26

      The infotainment system is not OK. I once tried to navigate somewhere as my phone had died. I got an aneurysm. I guess that's the only drawback of a Lexus though.

      • corbz on 21/11/2021 - 07:52

        Get a phone charger jfc

        • FrugalDealSeeker on 21/11/2021 - 09:22

          Yeah, or maybe an aftermarket TomTom Supreme.

  • Halc on 19/11/2021 - 16:03
    +1

    that really depends on how long you keep it for doesnt it. a better measure would be cost per year excluding insurance/running costs like fuel and insurance - basically depreciation+maintenance costs.

    for eg. if you keep a 80k car for 3 years and sell it for 45k that's 12k per year + servicing. if your salary is 100k, that's almost 15%. personally i wouldn't want to spend any more than 5% per year.

  • field1985 on 19/11/2021 - 17:26

    0% per annum. My current car pays for itself. It has appreciated in value by roughly $1k per annum which pays the rego/insurance.

    Buy something reliable second hand. If you want performance, go with something 5+ years old. Many new models are actually less powerful (but it's got a tUrBo!!!) due to emissions regulations and heavier due to safety regulations.

  • jimsheppard17 on 19/11/2021 - 18:54
    +1

    a Toyota less than 100k, approx 10k, less than 6 yr old… upfront cash..

  • Diesmile on 19/11/2021 - 19:09

    I spent my whole year after tax wage on a car which i am driving now. I planned to keep it about 10 years, currently 6 years in.

    I had no issues with my budget.

  • chriise on 19/11/2021 - 20:26

    if my car repayment was to be 20% of my salary would that be optimal?

    Is this an actual joke…? Consider maybe 10% of your annual income towards a purchase, no finance. Or if you absolutely need to finance, then 5-7% of post-tax income.

    Edit: and to answer your question, my car cost me about 7% of my annual pre-tax income at the time… 5 years on and I reckon it's worth <1%. I could definitely consider upgrading soon…

    • FrugalDealSeeker on 20/11/2021 - 14:06

      You are confused between salary and income.

      • chriise on 20/11/2021 - 16:01
        +1

        Yep that’s fair. My comment was a bit rushed as I was so mind boggled at the idea of spending 20% on a car (salary or income, take your pick). If your question really is about “optimum”, then honestly 10% is too much.

        • FrugalDealSeeker on 20/11/2021 - 19:24

          I generally use my salary for bills, rent, food, etc. After I close my position (take profit) sometimes I reinvest in something else but many times there isn't anything worth buying so I take that money (profits only) and use it on one-off purchases like watches, phones, etc. through a different bank account.

          • chriise on 20/11/2021 - 19:47

            @FrugalDealSeeker: If these things are important to you, that’s all that matters. Run the numbers, if it all works out, then go for it! But if your question is “what is optimal”, then IMO 20% is wayyy off. There will be things I spend too much money on in other peoples opinions, but I’m not kidding myself into thinking that it’s sensible.

  • [Deactivated] on 19/11/2021 - 20:44
    +4

    Just buy what you want mate, forget the naysayers. I wouldn't do it but you're gonna get a very biased answer on this forum. All of society is geared towards housing and you're considered an idiot if you don't throw all your money into it. Just enjoy your life and if getting a fancy car is what you want, then go for it. Success isn't determined by how much money someone has, it's someone who lived life doing what they wanted. There are things that are much better if you're younger, owning an expensive car is one of them imo.

  • mrhugo on 19/11/2021 - 21:37
    +12

    I really love reading people's replies.

    I remember when I was at a similar age, 95% of my income was disposable, living with parents, rents paid the mortgage of the IP.

    Not knowing what to do I banked it and spent a bit on travel. Like you I considered a very nice and expensive car. Thing is I didn't actually need a car, but I liked cars.

    Fast forward to now, married, kids, expenses, oh so many expenses, repairs, etc.

    What do I remember from my 20's, my relationships, my experiences (travel). I don't remember the fancy clothes or the killer gaming PC's I had, forgotten them all.

    But looking back at the decisions I made in the 20's should make my next 40 years stress free. No mortgage, no stress having to worry about if I'm out of work or get sick, or if I need to support someone in my family who needs me.

    You might be having a good run now, it's a blessing. Not having financial stress in the future is so much more enjoyable than some German car.

    • ebN on 20/11/2021 - 10:49
      -8

      I'm sorry is this a personal blog?

  • Commander Shepard on 20/11/2021 - 01:28

    I am in my 20s and own four two seat sports cars. So I spend as much as I can justify without compromising relationships or mortgage. But unless your a car enthusiast, I never recommend anyone to spend too much on cars. As they are a waste of money.

    But if your really keen. I would go for a Giulia / Stelvio in Veloce trim. With a warranty if possible. Good power and good price compared to equivalent BMWs/Mercs.

    • FrugalDealSeeker on 20/11/2021 - 11:30

      Aren't Alfas built with a complete disregard for ownership costs and ease of usability?

      • Commander Shepard on 20/11/2021 - 13:00

        He said he wanted an "experiance" hahaha.

        In all seriousness though. I have owned 3 Alfas. Two with manuals, one with a selespeed gearbox. And they never let me down.

        • FrugalDealSeeker on 20/11/2021 - 13:47

          really? I didn't even consider them due to these issues. My assumption was in terms of reliability was Lexus>>>>>>>BMW>MB>Audi > Jag> Alfa >>>>>> RR.

          • Commander Shepard on 21/11/2021 - 01:27

            @FrugalDealSeeker: I may have just gotten lucky with the Selespeed. But the Giulietta QV and 159 TBI I had were rock solid cars (besides average aircon). And my mums Fiat 500 gets treated like crap and still runs fine.

            I noticed the Alfas tend not to have as much complex electrics compared to BMW/Mercs. Some of the cars from the 2000s had motors and components that came from GM and were pretty basic. If you have a good specialist. And keep up your maintenance you should be fine. But being able to do basic mechanical work and having a good scan tool is always smart to have.

            As for the newer cars. I would probably put Alfa on the same level as BMW/MERC/AUDI myself when it comes to rolling the dice and taking the risk on reliability. Only problem is the smaller dealer network which can be a problem if you don't like going to specialists.

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