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the question is wrong. The value of the car is irrelevant – within reason. there are so many different ways you can finance cars these day’s the car you drive doesn’t bear any resemblance to what you earn or your financial status. What mugs actually buy cars these days? They’re depreciating assets…why would you put actual money into a depreciating asset? The overwhelmingly majority of new cars on the road these days are leased or company cars or are under some form of finance arrangement. I read a while back that over 90% of mercs are leased.
So the question you should be asking is how much per month can you afford to attribute to the cost of a car. I reckon I could affordably finance a car that was worth as much as my annual salary. No problem. I wouldn’t stand a chance of purchasing it..I couldn’t afford the deposit for the loan or HP agreement for it…but via other financial mechanism’s I could drive off in one without laying down a penny, or at lease a very modest amount of hundreds of pounds.
If you’re comfortable with the concept of paying an amount per month for access to a car rather than the outdated concept of car ownership then you unlock a whole new level.
I would suggest from the OP's post that we are talking about a 2nd hand car that was once bought (I say bought, I mean leased by one of you pcp types) for lots of money but has now depreciated to an 'affordable' mere 100% of their gross annual income.
You thought process might work if you must have a new car of a vanilla flavour - I sense the OP's 'lust' machine is something quite different.
Cars as a multiple of income – what is acceptable?
Doesn't matter so long as it makes you happy grinning from ear to ear without causing harm to anyone around you.
Being honest, the roads are so clogged now, there isn't much point in spending loads. I'm on of those that does polish and look after cars, so it does hiss me off if they get damaged.
My neighbour has asked if I'm getting a new car (she has a motability lease) and I say, it works, looks OK, and unless it breaks, no. What's the point in £300-£500 on a PCP or loan and add in depreciation. Don't need it, and the money is getting our lives on track and paying for other 'stuff'. We have a static caravan, so that's a big spend in ground rent.
We've just got my son a car - was from baby bond monies that matured recently. He's just started an apprenticeship, so it's equivalent to 70% of his wage, but it's paid for. It's a very nice current shape Fabia Monte Carlo, but it allows him to get to work, and he takes a colleague. He also volunteers for St Johns Ambulance, and did about 350 miles over Manchester Pride weekend ferrying stuff about...
His insurance is 15% of his monthly wage though in year 1.
Most I ever spent was 4%, currently under 1%, and I share the pos with my wife. 16 years of bangernomics has saved me over 50k compared with running something a couple of years old the whole time
Current bangernomics car @ 3.84% of annual
Next car planned will be 22%
About a third. Sometimes that seems good value and other times it seems crazy. Have always bought with cash so the affordability question was pretty straightforward... unlike the opportunity cost question, now I think about it!
Paid 20% gross of salary in cash for my last car. New the car would have been more like 90%! I’ll keep it 5 years or so.
So the question you should be asking is how much per month can you afford to attribute to the cost of a car. I reckon I could affordably finance a car that was worth as much as my annual salary. No problem. I wouldn’t stand a chance of purchasing it..I couldn’t afford the deposit for the loan or HP agreement for it…but via other financial mechanism’s I could drive off in one without laying down a penny, or at lease a very modest amount of hundreds of pounds.
Well someone's drunk the car salesman's coolaid and regurgitated it.
I call it the mobile phone purchase plan.
It's a mugs game to buy a car you can't afford just because you can finance it if you ask me.
Do you not realize that cars are worse than the Khmer Rouge, and nearly as bad as Hitler, so 33% tops.
Think my Mondeo was 3% of gross 8 years ago. When I eventually come to replace it I might strech to 8%! 100% is insane.
Ditching our car in Dec 2012 was the best financial thing I ever did to date, it was costing ~£1k including fuel per year plus repairs/consumeables to drive me ~5 miles to/from work; pick up the weekly shopping; typically a family trip out per week; the very odd long distance trip per year for a holiday and see family etc.
That ~£7+ has covered all my bike related purchases since and annual holidays at least.
But our budget is a lot tighter than most of you STW middle managers types, we roughly gross the national average of a single adult between two of us.
However, my better half has been taking driving lessons for a several months now and they are a lot more than the £10 per hour I paid back in 1991... Try £40! 😮 She was ablivious to the household budget and how much a car crippled my disposable income back then when I was the only one working, even her new role and increased salary is going to leave her worse off as and when she plans to buy a car.
On the plus side, that will give her less spare cash to throw away on art projects that clutter up the flat! 😆
Can we not ask about bikes as a multiple of salary?
Cars become dull when you finally realise nobody - absolutely nobody - cares what you drive. So you may as well save the money, drive a heap, and do something. Like buy a nice bike and do one of the aspirational journeys STW is so fond of.....
It’s a mugs game to buy a car you can’t afford just because you can finance it if you ask me.
Not really depending on your situation. When I come to replace mine I'll seriously look in to PCH. £300 a month to remove all the hassle/unexpected expense of car ownership suits some people.
My previous car wasn't an extravagant purchase and cost approx £2,700 a year in depreciation (it broke beyond sensible economic repair after 2 years of ownership). Add in everything that broke on it and I bet it's not far away from that £300/month.
Not really depending on your situation. When I come to replace mine I’ll seriously look in to PCH. £300 a month to remove all the hassle/unexpected expense of car ownership suits some people.
My previous car wasn’t an extravagant purchase and cost approx £2,700 a year in depreciation (it broke beyond sensible economic repair after 2 years of ownership). Add in everything that broke on it and I bet it’s not far away from that £300/month.
£300 a month is a lot of money. £3,600 a year. What car broke completely after 2 years of ownership and cost you a fortune in other repairs?
I must be extremely lucky, I bought a s/h Lexus for £6,500 5 years ago. The only major expensive has been front disks which were about £400. It's a very comfortable car, the only downside is it's a bit thirsty but I guess it's probably worth about £3000 now. Not that it makes any difference as I have intention of changing until it really breaks.
£300 a month is a lot of money. £3,600 a year. What car broke completely after 2 years of ownership and cost you a fortune in other repairs?
I do 20k miles/year, £300 a month isn't THAT much money for something I spend nearly 2 hours a day in. I used to enjoy playing about with cars and tinkering on them, now I just want them to work.
It was an Octavia VRS, Cost me £6,500 with a plan to keep it for 3 years, ECU got wet and it had multiple electrical issues. Repairs weren't a fortune but: Air con rad, intercooler, inlet manifold, rear calipers x2, rear wheel bearings/ABS rings x2, DPF issues. I don't mean £300 / month in repairs, I mean total cost of £300/month. I'm not including servicing and consumables.
What miles does 6500 quid get you in an octy vrs.
80/90 k ....or old.
Not surprised you had issues.
80k and 6 years old. I didn't mind sorting the smaller issues, it's expected with that mileage. It would have been nice if the ECU didn't fry itself.
I spend about 2%, but my cars are cheap (Kia Cee'd estate and a Berlingo).
I used to spend a lot on cars, not because I like cars, but because I was able to. After 5 years of having low to average cars, I am getting a hankering for something nice. My car and van were paid for cash, but are pretty much not worth anything now. The Cee'd is a 12 plate with about 70k miles and the Berlingo is a 14 plate and 65k mile. Had no expense, brakes and tyres are all that has been needed. I don't do anything to them apart from service them annually - so cost of ownership for me has been low.
I love the practicality of the Berlingo, but its not really a comfortable vehicle, especially as I drive 400 miles a week in it. No idea what to replace it with - I like the thought of the MTB always being locked up in the back, as I travel a lot its good to be able to finish work early and go for a blast somewhere. No idea what I could replace it with though, apart from a higher spec similar van.
It depends on the car. If you are spending a year's salary to get something with four rings and a big engine that will cost £500 a month in depreciation alone then that is a total mugs game.
If you've spent your life lusting after a semi classic 911 and now one is within your price range then it's a different story. Something that will hold its value or cost you very little in depreciation is less of a burden financially, although obviously still a risk as you can never take these things for granted.
Cars become dull when you finally realise nobody – almost nobody – cares what you drive.
FIFM, but it’s a very valid point and one that should be taken into consideration when purchasing a vehicle.
All those RS6 Avants that people lust after, nobody but you cares about it or what it’ll “do”
We (99% of us) don’t care about Audi RS-anywotzitz... they just look like any other car on the road.
For me it really depends on how that "asset" depreciates!
Spend £40k on a Caterham, and despite being completely useless as a car in the real world, you can sell it next year for pretty much exactly what it cost you.
Spend £40k on a top of the range diesel saloon car, and despite being a brilliant car in the real world, you can only sell it for about 13 pence next year...
My i3, bought s/h 3 years ago cost me £16k. Total running costs excluding insurance (i don't have a figure just for the insurance because it'd on a multi-car policy) but including fuel ('lecy) tyres, servicing, tax (zero) over three years and 25,00 miles have been £1267. So that's pretty much £400 a year (£33 a month) or 1.6 pence per mile driven. Today, as far as i can tell without actually selling it, the car is worth pretty much the same money as i paid for it.
Yes, i needed to have £16k in cash in the bank so to speak, but that is ridiculously cheap motoring to drive a modern, safe, pretty quick and pretty premium car around...
Ah but you should have rented it maxtorque.
Your so old fashioned buying your electric car with cash.
Just under 50% and it’s a 35 year old ford escort 😬
We lease not buy as there hasn’t seemed much point in owning a depreciating asset. We spend about 8% of take home pay. In comparison, our mortgage is about 24% - again of take home. Personally would not pay more than that and if I didn’t have 3 children and need a larger car as a result, it would be significantly less.
Hmm. 8% of Salary for the last one couple of years back currently depreciating at around 1.5% salary per annum. Reckon i’ll get 4yrs / 100k miles out of it. Seems reasonable.
Overall value of rest of my fleet circa 30% of salary and gently appreciating.
What mugs actually buy cars these days? They’re depreciating assets…why would you put actual money into a depreciating asset?
Yeah that would be me then. To lease an Octavia VRS estate would cost me £16K over 4 years and have nothing to show for it at the end of the lease, or I could buy a two year old one with 16K miles on it for £15K and actually have the car in my posession to show for it at the end.
Well, as it now works out for my current company car, it equates to 1.5% of gross including all running costs and fuel. I’ll never run a car this cheap again!
We spend 10% of income between us on two cars. Feels like the most I would ever want to spend on motoring. One is an i3 that saves on running costs, the other a poor V40 D3 that had gone from 23000 to 66000 miles in under two years!
MAR for private owned company car drivers is a great help to running your own car, but understood by few.
Am I the only one that thinks mentioning Gross income in all this "man logic" is pushing it a bit?
If your disposable income allows you to spurge on a dream then why not? I would. But for me : and I'm not alone - ball park:
What I mean is your gross disappears something like this:
tax - 30%
Mortgage / rent 30%
Alimnony / coke / addictions etc 10 %
Food / bills 10%
Pension / saving 10%.
So really - your actual available funds are maybe 20% of your gross. And you want to spend 5x times your disposable income on that interest / obsession / hobby / etc.
Our 8% is for two cars - I couldn’t justify that for one car!
Always have driven 500 quid bangers, and I earn a decent wage. Most I ever spent was 900 quid. However I'm just about to buy my first brand new car, at 1:1.
Most people spend as much on fuel than they do on annual depreciation. So it being an electric car changes the upfront sums a bit. In Scotland you can get interest free loans. It's still an expensive luxury of course, but takes the edge off. I plan to keep it 5 years or so. I am hoping it will hold it's value, but who knows. Hard to predict.
To be really boring, shouldn't this be your annual cost of motoring as a % of gross salary and not the purchase price. I.e. fuel/ depreciation/ repairs/ insurance/ VED/ maintenance/ consumables
However, comparisons are only good for your travel arrangements as others may have a higher percentage of travel costs to salary from driving more miles. (YMMV!)
I haven't done the sums in detail for a while but an EV via salary sacrifice I reckon will be one the cheapest forms, especially for something new. Even better if you get free charging in work! Or if you have children and a salary between 50 and 60k! (Not my salary I hasten to add)
My 10 year old petrol car that is fairly economical just about pips it... as long as it doesn't have any major repairs in the next 3 years! However that's my situation and I hate my car for being so boring and economical!!
What mugs actually buy cars these days? They’re depreciating assets…why would you put actual money into a depreciating asset?
I know this derived from a popular Getty quote but I don't think it's that simple. Car depreciation is well understood and, to an extent, very predictable. No one purchasing a car upfront should be surprised that in 2 or 3 years it will only be worth a certain percentage of what they paid. The thing is lease companies know this to and that's all factored into to the lease costs (plus a decent profit margin for them). So unless you're taking out a high interest loan that would work out more expensive over the term than a lease then you're saving money over 2-3 years by purchasing the asset out right. Sure, if the amount you would save by purchasing is minimal then I'd lease as something like a shift in market trend (e.g. dieselgate) might cause the car to depreciate more than expected and mean you're even worse off by purchasing.
It depends on many factors. I bought a car 5 years ago that was around 30% of my salary. It was a car that had already mostly depreciated and today is worth more than half what I paid for it despite age/mileage. It was the first time I had a car after bangeromics and I realised how much time I saved having a car that actually worked, and when it did have the occasional expensive fault it was actually worth repairing. I just want something comfortable to drive to go biking, faster than average and I can justify to keep well maintained.
When I bought my car is was about 1/7th of my annual sallary.
Today according to ebay sold prices its about 1/63!
The whole "why would you buy a depreciating asset" argument is incredibly flimsy. Almost everything is a depreciating asset, even your house would be worth less if you stopped maintaining it (the land its built on is a different matter). All leasing does is turn that depreciating asset into a financial liability in the form of a something that looks an awful lot like a loan on a depreciating asset.
The criteria for PCP working out in your favour is pretty tight,
1) You have to have that car (new, whatever) a car affordable outright is not an option at all.
2) You have a better use for the final value (the portion of its value that you never have to stump up). Could you put the cars residual value into your mortgage, pension or other investment and make more than the profit the finance company is going to make from your repayments.
We look at replacing the OH's ratty old fiesta every year when it goes for its mot. And every year it costs less than a couple of months finance (that was a bad year, most years it only needs a new pair of tyres, or brake pads) on a new car (and she does a lot of commuting miles on the motorway).
Paying a bit more a month to go on the motorway in a leather seat with a blhetooth massage function is good value to some people, but I dont think it can be be dressed up as financially savvy. Somewhere there's someone with a few £k in the bank saving up for a new car which in the meantime the bank is using to finance yours on pcp and pay them a small proffit.
It's easy to make statements like Getty's when your a billionaire.
Unfortunantly he is often misquoted by non billionaires
It totally depends.
Cars become dull when you finally realise nobody – absolutely nobody – cares what you drive. So you may as well save the money, drive a heap, and do something. Like buy a nice bike and do one of the aspirational journeys STW is so fond of….
Yeah, if you're doing it to impress the neighbours/as a clunge-wagon, don't bother.
Do think about whatever else you could spend it on.
But if it's a car you're personally very keen on, and you've saved up or budgeted the loan AND maintenance/insurance/tax on it, and it's affordable, it's nobody else's business how much you spend on it. Bear in mind that even if it is a non-depreciating car, the reason it doesn't depreciate is rarity, and that is boosted by all the people that can't afford the bills and are forced to sell for spares/repairs or take them off the road. (i.e. whatever cash you tie up in it is very much no longer liquid)
the question is wrong. The value of the car is irrelevant – within reason. there are so many different ways you can finance cars these day’s the car you drive doesn’t bear any resemblance to what you earn or your financial status. What mugs actually buy cars these days? They’re depreciating assets…why would you put actual money into a depreciating asset? The overwhelmingly majority of new cars on the road these days are leased or company cars or are under some form of finance arrangement. I read a while back that over 90% of mercs are leased.
Disagree with you here. Yes a car is a depreciating asset, but at the end of the day it's still an asset. If you lease it, you make monthly payments and at the end of the lease, what happens? You don't see any of that money back, or the car unless you start a new lease. If you buy the car outright then the car is yours, no question. Yes you lose money, but often less than you're paying for the lease (Why do you think dealers push you to lease rather than to buy? At the end of the day, they get your money AND the car back).
Besides, most people that Pcp their car are just idiots who want a big fancy German car on their driveway to keep up with the joneses, and would never, ever be able to afford to buy it outright.
Getting back to topic, I would say it doesn't matter how much you spend as long as you can afford it. Use your car a lot? Spend a bit more and get a decent one, vice versa if you don't use it much.
Why I don’t buy a depreciating asset is simple.
Despite not doing many business miles at all - I have a fairly generous company car allowance and have been lucky enough to have been in that position for most of the last 15 years.
For several of my employers this has meant a car less than 5 years old with 4 or 5 doors and the majority have stipulated it must be a reasonably ’premium’ brand e.g. BMW, VW, Audi, Mercedes, Saab (Once upon a time) or Land Rover. These are more expensive to ‘buy’ than lease/hire for the period of time I generally can have them and I would rather put that money elsewhere - e.g into our home, opportunities for the children etc.
Also, I don’t think buying a car is a mugs game. It’s a choice to finance cars as you choose as works best for you.
has OP revealed what the car is yet?! If I was a car guy, and I could afford it (i.e. had the cash in the bank) then I'd probably get a "dream car" as a 2nd car i.e. garage it, drive it but not as primary vehicle, in the hopes it'd appreciate or at least hold its value. But finance one as a daily driver to get trashed? No 😂
Either you love your job or you might be barmy ?
More seriously agree with others, but I can't see why I'd be working if I could afford to not work for 18mo (or whatever it works out after tax) to buy a car?
has OP revealed what the car is yet?! If I was a car guy, and I could afford it (i.e. had the cash in the bank) then I’d probably get a “dream car” as a 2nd car i.e. garage it, drive it but not as primary vehicle, in the hopes it’d appreciate or at least hold its value. But finance one as a daily driver to get trashed? No 😂
Depends on spares availability and pricing, but for the £300 a month some are quoting you could probably maintain something pretty nice as long as you could afford it outright to start with.
I mean even a Lancia Delta, probably the pinnacle of "if it ain't broke, wait five minutes" motoring, you could blow the engine up annually and still have change for tyre consumption at a rate consomethinge with driving like youre blowing engines up annually.