Car vs Earning bracket [Disposable income]

[DrewChan]

A lot of people (incl me), ask about which car to buy, often seeking premium cars (Audi/BMW/Mercedes)

Lets bucket disposable income and car type:

Disposable income = income after ALL expenses, relevant savings etc

Disposable income:

R1000 - car.... etc etc
R2000
R4000
R8000
R10000
R15000
R20000
R35000
R50000
R100 000

Lets assume the person wants the "best" car in their bracket

 

[SauRoNZA]

<15% of your income all in with insurance.

Otherwise you are being silly.

 

[Orihalcon]

<15% of your income all in with insurance.

Otherwise you are being silly.

Net or gross?

EDIT: I see the OP was edited to state income after all expenses.

 

[Vaughan]

<15% of your income all in with insurance.

Otherwise you are being silly.

I have read this figure a few times but honestly it is a bit silly. It all comes down to your personal situation and what you like.
If you have low expenses and cars are you hobby, passion, etc. then spending much higher than 15% is fine.

If like me it is a work tool and you have fairly average expenses then 15% is probably about right.

If you have extremely high expenses you may want to aim even lower than 15%.

It all depends on how you budget. What is important to you and how much you drive.

 

[Chevron]

<15% of your income all in with insurance.

Otherwise you are being silly.

Ha.

Mine is almost double that currently.

 

[SauRoNZA]

Net or gross?

Either or really but gross if you want. Doesn't matter all that much. It's just a mindset of affordability.

I have read this figure a few times but honestly it is a bit silly. It all comes down to your personal situation and what you like.
If you have low expenses and cars are you hobby, passion, etc. then spending much higher than 15% is fine.

If like me it is a work tool and you have fairly average expenses then 15% is probably about right.

If you have extremely high expenses you may want to aim even lower than 15%.

It all depends on how you budget. What is important to you and how much you drive.

Great way to go about it, until the **** hits the fan and your affordability is up the ****ter.

I said < 15% meaning 15% should be the maximum if you don't want to live day by day and be one pay cheque away from bankruptcy.

Use it don't use it, it's really all a matter of choice.

****

Also I find the OP's use of "disposable" income for a car to be very odd. Disposable income puts it firmly in hobby territory instead of day to day usage territory.

A normal non-petrol head person sees a vehicle as a tool and a tool only. A means of generating income to get to work and back.

As a petrol head I see it as a tool to get from A-B but my choice of vehicle is largely dictated by my petrolhead notions. Even so it will never come out of my disposable income.

Therefore the strict logic of using a percentage for affordability.

You don't use loans to fund your hobbies.

 

[Orihalcon]

Either or really but gross if you want. Doesn't matter all that much. It's just a mindset of affordability.

Well it affects the math quite severely. If you have, for example, 10k nett left after tax, all expenses, contribution to RAF and / or annuities etc, why not spend R5000 on a nice car? Why then only R1500 all in?

If that 10k was gross then HELL yes spend only 15% or less

 

[Vaughan]

Either or really but gross if you want. Doesn't matter all that much. It's just a mindset of affordability.



Great way to go about it, until the **** hits the fan and your affordability is up the ****ter.

I said < 15% meaning 15% should be the maximum if you don't want to live day by day and be one pay cheque away from bankruptcy.

Use it don't use it, it's really all a matter of choice.

****

Also I find the OP's use of "disposable" income for a car to be very odd. Disposable income puts it firmly in hobby territory instead of day to day usage territory.

A normal non-petrol head person sees a vehicle as a tool and a tool only. A means of generating income to get to work and back.

As a petrol head I see it as a tool to get from A-B but my choice of vehicle is largely dictated by my petrolhead notions. Even so it will never come out of my disposable income.

Therefore the strict logic of using a percentage for affordability.

You don't use loans to fund your hobbies.

Well my expenses in total are about 20% of my paycheck so even spending 40% on a car I could save 40% of my salary per month. Hence why I say its far more complicated than that. The 15% figure was created for low earning bracket people in 2 person house holds with 1 earner. I am not saying it is wrong for you, but it is not correct for everyone.

 

[Gnome]

I buy the cheapest car that is suitable (safety, reliability, warranty, cost. In that order)

Car is a means to an end. I only buy my cars cash, so I don't honestly understand why some people feel they need to splurge on a car that signifies their "income bracket"

(FIY: I bought my i20 1.6 for R150k, happy as a clam with it, don't give a sh#t what is says about my income)

Not having any debt except my home loan has been awesome. I save a lot every month and get to go out a lot, spend money on things I actually like, etc.

IMO your spending should be tied, partially, to how much use you get out of something. If you spend 2% of your time in your car and spend R500k on it, but spend only R1m on your house then you are a bit of an idiot in my book. Unless cars are you passion, in which case I get it.

 

[Chevron]

I buy the cheapest car that is suitable (safety, reliability, warranty, cost. In that order)

Car is a means to an end. I only buy my cars cash, so I don't honestly understand why some people feel they need to splurge on a car that signifies their "income bracket"

(FIY: I bought my i20 1.6 for R150k, happy as a clam with it, don't give a sh#t what is says about my income)

Not having any debt except my home loan has been awesome. I save a lot every month and get to go out a lot, spend money on things I actually like, etc.

IMO your spending should be tied, partially, to how much use you get out of something. If you spend 2% of your time in your car and spend R500k on it, but spend only R1m on your house then you are a bit of an idiot in my book. Unless cars are you passion, in which case I get it.

Except some of us spend more time in our cars than conscious in our homes. Sleeping doesn't count.

 

[DrewChan]

I am not sure if my meaning came across correctly, the above numbers were meant to represent seperate people,

Person 1 has R1000 spare, [Car choice 1]
Person 2 has R2000 spare, [Car choice 2] so on and so forth.

As stated above assume they are looking for the "best" car in the bracket

by best you can assume either sport/ comfort/ affordibility based on your own likes/dislikes

 

[furpile]

I am not sure if my meaning came across correctly, the above numbers were meant to represent seperate people,

Person 1 has R1000 spare, [Car choice 1]
Person 2 has R2000 spare, [Car choice 2] so on and so forth.

As stated above assume they are looking for the "best" car in the bracket

by best you can assume either sport/ comfort/ affordibility based on your own likes/dislikes

So what you actually want to know is what is the "best" car to buy for R1000, and for R2000 etc. Nothing to do with disposable income. There is no correct answer and will depend on your requirements of the car.

For me, typically only look at German and Japanese makes (and Ford). Nothing French or Italian or Chinese.

 

[SauRoNZA]

I am not sure if my meaning came across correctly, the above numbers were meant to represent seperate people,

Person 1 has R1000 spare, [Car choice 1]
Person 2 has R2000 spare, [Car choice 2] so on and so forth.

As stated above assume they are looking for the "best" car in the bracket

by best you can assume either sport/ comfort/ affordibility based on your own likes/dislikes

Like I said already your car payment shouldn't be coming out of your "spare" money.

It should be part and parcel of what comes into your pocket every month.

If your income is R30 000 (gross) then you shouldn't be spending more than R4500 on a vehicle. And preferably on a regular vehicle finance agreement not a residual/balloon abomination.

 

[SauRoNZA]

Except some of us spend more time in our cars than conscious in our homes. Sleeping doesn't count.

Surely if you do that kind of work...then you should already have an allowance for your car.

And if you are paying MORE than your allowance for a car...then you are also being a little silly.

I do understand the notion of spending more for your mobile office though having spent a few years on the road every day.

 

[TEXTILE GUY]

For me, typically only look at German and Japanese makes (and Ford). Nothing French or Italian or Chinese.

Waaal .... except that Renault and Nissan have a tie up ..... soooo but ja ............. I concur by personal choice.

 

[Rouxenator]

Last one I bought was 8% of my nett. It was too much so I settled it 5 months into the 60 month term.

 

[Wall]

Screw that, I'm happy with my tazz for another couple years. Just the thought of getting into debt scares me, not because I can't afford it but because debt is bitch and I hate paying interest.

 

[Forza]

A lot of people (incl me), ask about which car to buy, often seeking premium cars (Audi/BMW/Mercedes)

Lets bucket disposable income and car type:

Disposable income = income after ALL expenses, relevant savings etc

Disposable income:

R1000 - car.... etc etc
R2000
R4000
R8000
R10000
R15000
R20000
R35000
R50000
R100 000

Lets assume the person wants the "best" car in their bracket

Referring to the question that you asked and not discussing the disposable income and % to spend on a vehicle which the thread is going to. I think you should put further constraints in their car bracket. To ensure all is equal. eg. Over what term 48? 52? 60? 72? Also how old should the car be - New or second hand (2, 3, 4 Years Old etc) and at what interest rate?

Because when looking at the "best" it could be a10 year old car that is value for money and not new

 

[Sinbad]

R0 spare- 2 mercs

 

[dlk001]

A lot of people (incl me), ask about which car to buy, often seeking premium cars (Audi/BMW/Mercedes)

You actually need to do a proper, honest monthly budget of your INCOME less EXPENSES (living expenses, retirement expenses, savings, life insurances and all other critical basics you need to cover to have a sustainable living).

The problem I seen is people who buy a car and then have to adjust, lower standards of other living expenses and savings.