Motoring Discussion > What ratio of income do you spend on a car?	Buying / Selling
Thread Author: Baz	Replies: 35

New Wed 18 Apr 12 19:00   What ratio of income do you spend on a car? - Baz

I'm just curious really. I once read somewhere that it was sensible to spend no more than 3 months or so salary on a motor. Not sure where I read this but it kind of makes sense in my head. In our drive right now is a Toyota which has cost me about 2.5 months salary and a Focus costing my wife about 4 months salary. However, across the street is about 40Ks worth and next door about the same. In short, there's an awful lot of money parked in folks'drives, around here. From which i deduce that my formula is hopelessly out and times are not that bad at all? !! Reply to this message | Report message

New Wed 18 Apr 12 19:13   What ratio of income do you spend on a car? - Meldrew

You can't really tell unless you know what the £40k car owners earn. If you aren't a cash buyer, but have a loan or a PCP the figures become meaningless anyway - £199 a month for a £15K car, over several years and a payment at the end admittedly. Reply to this message | Report message

New Wed 18 Apr 12 19:21   What ratio of income do you spend on a car? - RattleandSmoke

In case terms I spent 6 months salary on a motor. One of the best financial decisions I ever made. Far cheaper long term than spending a weeks wages on one. Reply to this message | Report message

New Wed 18 Apr 12 19:39   What ratio of income do you spend on a car? - spamcan61

A fortnight's net salary, typically. Reply to this message | Report message

New Wed 18 Apr 12 19:42   What ratio of income do you spend on a car? - Iffy

...A fortnight's net salary, typically... Which makes you the same as a Premier League footballer. Reply to this message | Report message

New Wed 18 Apr 12 19:53   What ratio of income do you spend on a car? - spamcan61

LOL, yeah it's all relative :-) Reply to this message | Report message

New Wed 18 Apr 12 20:08   What ratio of income do you spend on a car? - -

Yep, i reckon 3 to 4 months is about right as a maxiumum for most, the MB cost that 9 years ago and the C2 a similar amount 19 months ago. Reply to this message | Report message

New Wed 18 Apr 12 20:51   What ratio of income do you spend on a car? - Lygonos

I suppose the important point is how much do you want to spend on motoring costs. Spending 35 grand on a Citroen C6 is a far cry from spending 35 grand on a BMW when it comes to how much you lose over the year. Reply to this message | Report message

New Wed 18 Apr 12 21:46   What ratio of income do you spend on a car? - Woodster

4 months net salary, tops. Reply to this message | Report message

New Wed 18 Apr 12 21:55   What ratio of income do you spend on a car? - sooty123

My last one was about 2 months. Reply to this message | Report message

New Wed 18 Apr 12 21:56   What ratio of income do you spend on a car? - -

Bathtub spends half a mornings wages on his cars, he's got more sense than the rest of us put together..;) Reply to this message | Report message

New Wed 18 Apr 12 22:27   What ratio of income do you spend on a car? - CGNorwich

Is it more sensible to spend 10% of your annual income and change the car every year or spend 50% and change it after 8 years, the latter being my current strategy? Reply to this message | Report message

New Wed 18 Apr 12 22:34   What ratio of income do you spend on a car? - -

Good point CGN, lots of factors weigh up car costs not just purchase price, as noted by Lygonos too. I suppose it depends if you need finance on the higher figure where maybe not the lower finance could make a big difference to the figures. Reply to this message | Report message

New Wed 18 Apr 12 22:37   What ratio of income do you spend on a car? - Lygonos

Assuming you earn an average wage around 20-30 grand, then it's best to spend 2-3% and recycle it when it dies. If you buy a car for 2 grand and sell it a year later you'll lose maybe 500 notes - that's still only 2-3% of average income. A car that cost 50% of your income, will be worth 15% at most 8 years later - so about 4% cost pa. If you buy a new car thats 50% of you income and change every year (assuming 25% depreciation in year one) then thats 12% of income/year on a car. This doesn't include fuel/servicing/insurance etc (which is not guaranteed to be cheaper for a newer machine). If you're trying to be superthrift then maybe buying a 4x4 in March and replacing with an MX5 in October will mean you never lose a penny! Last edited by: Lygonos on Wed 18 Apr 12 at 22:41 Reply to this message | Report message

New Wed 18 Apr 12 22:58   What ratio of income do you spend on a car? - CGNorwich

So for 2-3% of income I would get to run a 10 year plus car of unknown provenance and no warranty. For 4% of income I get to run a car from new with 3 years warranty and which is statistically likely to require less repairs each year than a 10 year old car. Not a difficult choice for me Reply to this message | Report message

New Wed 18 Apr 12 22:58   What ratio of income do you spend on a car? - Zero

The lancer cost me 4% of my then financial liquidity. Reply to this message | Report message

New Wed 18 Apr 12 23:11   What ratio of income do you spend on a car? - a900ss

Surely it depends on how much usage the car gets. I am a high mileage driver so would probably spend 5 months net income on a car if I didn't get a company car. My wife is a low mileage user and we spent just under 1 month of her net salary. Reply to this message | Report message

New Wed 18 Apr 12 23:50   What ratio of income do you spend on a car? - bathtub tom

>> Bathtub spends half a mornings wages on his cars, he's got more sense than the >> rest of us put together..;) Not really fair on the rest of you. I just happened to be in the right place at the right time and was looking for a 'toy' to use off-road, although it's used as runabout. I'm able to do all the repairs and servicing myself (so far). How many wouldn't have bought it because of the stigma associated with it? Reply to this message | Report message

New Wed 18 Apr 12 23:57   What ratio of income do you spend on a car? - Dutchie

My wife pays for our car on a lease.Don't have to work out the hassle of running a car anymore.Except the diesel cost. Reply to this message | Report message

New Thu 19 Apr 12 06:38   What ratio of income do you spend on a car? - WillDeBeest

Is it more sensible to spend 10% of your annual income and change the car every year or spend 50% and change it after 8 years...? Where's our organist-accountant when we need him? I think CGN highlights a suspect comparison between capital items and income. My finance director is deeply unimpressed if I present a business case that stays cash-flow negative for more than a few months, however good the eventual return. On the other hand, capital items in domestic finance aren't investments intended to make money. I suspect we could still apply the concept of net present value, which takes into account the cost of tying up money in an asset, but emotionally I prefer CGN's buy-once-buy-well approach. Paying a seller's margin every year is hardly the way to save money in the long term. Reply to this message | Report message

New Thu 19 Apr 12 09:12   What ratio of income do you spend on a car? - Runfer D'Hills

Here's a sobering thought, for me anyway, I spent twice as much on fags in the time I had my Mondeo as I did to buy the car ! Running the car for nearly 200k miles in the period cost rather more than that however. Now I don't smoke and have a company car the amount I would have been spending on cigs more or less covers the bik so I can persuade myself that it's free ! I think. :-) Reply to this message | Report message

New Thu 19 Apr 12 09:32   What ratio of income do you spend on a car? - Cliff Pope

It's curious that the figures being quoted are very broadly in agreement with my own, even taking into account enormous fluctuations over the years in income and value of cars. At various times I've spent £10 on an old banger (100% of pocket money) to £5000 on a classic. But I am never aware of making the decision based on income. I look at my capital pool of money hanging around that I could spare without really noticing too much, and then sometimes spend some of it on a car. It's very subjective in my case, no financial analysis involved at all. Reply to this message | Report message

New Thu 19 Apr 12 10:05   What ratio of income do you spend on a car? - Bigtee

My mate said the other day there's new and nearly new cars parked in his street on a council estate!! Reply to this message | Report message

New Thu 19 Apr 12 10:11   What ratio of income do you spend on a car? - L'escargot

A nearby former resident got a new car ~ her first car ever ~ and I'm told she got it on some sort of benefit because she's a single mother and has a disabled child. Reply to this message | Report message

New Thu 19 Apr 12 10:14   What ratio of income do you spend on a car? - Dutchie

Why not?because people live on a council estate doesn't mean they are poor.I used to work with a Pier master who earned over 50 grand and he lived on a council estate. Reply to this message | Report message

New Thu 19 Apr 12 12:45   What ratio of income do you spend on a car? - Bigtee

>> Why not?because people live on a council estate doesn't mean they are poor.I used to >> work with a Pier master who earned over 50 grand and he lived on a >> council estate. >> Then in his case he could afford a nice new car and deposit for a house and leave the council house for those who need it & not those who want a cheap ride. Reply to this message | Report message       1

New Thu 19 Apr 12 10:19   What ratio of income do you spend on a car? - L'escargot

>> My mate said the other day there's new and nearly new cars parked in his >> street on a council estate!! Some may be company cars. There are all sorts of possible explanations. Last edited by: L'escargot on Thu 19 Apr 12 at 10:20 Reply to this message | Report message

New Thu 19 Apr 12 12:59   What ratio of income do you spend on a car? - L'escargot

>> My mate said the other day there's new and nearly new cars parked in his >> street on a council estate!! Some council houses have been bought by the residents at knock-down prices, leaving them with money to spare for cars. Reply to this message | Report message

New Thu 19 Apr 12 10:13   What ratio of income do you spend on a car? - Runfer D'Hills

Same here Cliff broadly speaking. Until recently I never knew how much or indeed how little I would earn in the next twelve months. Resultantly, I never bought cars I couldn't easily afford to buy and run without giving it a second thought. Certainly wouldn't take out a finance deal on one on the basis that while I might have been easily able to afford the payments one year I'd not necessarily be able to do so the following one. If I had the money to spare and I wanted a car I'd buy it. If I didn't, or didn't feel like spending it, I'd just crack on with whatever the old one was until its condition deteriorated so far as to force a decision. Not to say I've not treated myself to the odd nice car when times were good but I've never felt deprived if I've had to make do with something more basic. Ultimately, if you choose something which fits more needs rather than wants it'll be a better decision in the long run. Reply to this message | Report message

New Thu 19 Apr 12 10:24   What ratio of income do you spend on a car? - Runfer D'Hills

Just remembered something someone once said which made me smile. Roughly speaking it was along the lines of "No matter what car you choose or how much you spent on it, the view through the windscreen isn't going to change that much and if you're worried about those looking back in, well, you can always wear a hat ! " Reply to this message | Report message       1

New Thu 19 Apr 12 10:54   What ratio of income do you spend on a car? - movilogo

I think we can't really get a definitive answer here. A decent car will cost £5-£15k based on what is your actual requirement. If you spend less than that, it is often hit and miss (car might come with no warranty, older etc.). Similarly, if you spend well over necessary, additional money won't provide any tangible benefits (example - you'll still be frustrated in M25 whether you are sitting in a Corsa or an S-Class). Some people are unemployed but still need cars. So their car/earning ratio will be infinite. On opposite end, an expensive car for wealthy businessman will be nothing compared to his total earnings. Some people can afford an expensive car inspite of low income because they either have paid mortgage off or getting dole money. Some people could buy expensive car but decide to invest on private schools for their kids instead. Reply to this message | Report message

New Thu 19 Apr 12 13:00   What ratio of income do you spend on a car? - sajid

myself i tend to change cars every 3 or 4 more years, the reason are that newer cars got better safety kits like airbags, and other gizmos, also the later models the kinks are ironed out, also i tend to part exchange my car, rather than sell it independantly mainly because it takes time and you get all sort of people or timewasters, cars do depreciate and running cost increases due to the tax on petrol and diesel, so it makes sense to buy a eco tax friendly car hybrids or anything that emits below 100g Reply to this message | Report message

New Thu 19 Apr 12 13:04   What ratio of income do you spend on a car? - L'escargot

>> ........... so it makes sense to buy ......... anything that emits below 100g I reckon the eructations of cows is more harmful than the emissions of my car. Reply to this message | Report message

New Thu 19 Apr 12 13:14   What ratio of income do you spend on a car? - Dutchie

I started off buying old cars but in good condition.Hillman Imp cheap to run.Couple off old VW. Beetles I did most of the work myself keeping them road worthy.After that the same as you sajid,changed cars every three to four years.Part exchange. Reply to this message | Report message

New Thu 19 Apr 12 13:20   What ratio of income do you spend on a car? - NeilS

Mine cost about one third of my earnings. I paid 40% cash/trade in and financed 60% over 3 years. My company car allowance after tax almost covers the payments and 12,000 business miles a year gives me £5,000 which covers the rest of the payments, the fuel and a bit left over for tyres and oil. At 20p a mile just to fuel my car if I did a lot more business miles I'd have chosen something smaller and more frugal. Reply to this message | Report message

New Fri 20 Apr 12 07:33   What ratio of income do you spend on a car? - idle_chatterer

>> I think we can't really get a definitive answer here. +1 Not sure I entirely agree with your 5K-15K range but I do agree with your logic / point of view. Reply to this message | Report message