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How much to spend on a car

Discussion in 'Off Topic' started by Cobos, Jul 10, 2009.

  1. Cobos

    Cobos S60 owner since 2013

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    I thought I'd ask you guys how much you would spend on a car. I figure buying a Model S as I want to is a bit on the crazy side and I thought I'd get some feedback. How would you guys link your household income and maximum car price? As in what percentage would you say is the maximum you would consider spending on a car?

    What level of down-payment would you then require of yourself? Keeping in mind at least for me this is a bit of a statement and not just an appliance to get me from A to B :)

    Cobos
     
  2. vfx

    vfx Well-Known Member

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    Here in California it is State law to have your car worth at least 50 percent of the value of your home. Many special groups will take the number to 100%.

    :wink:
     
  3. TEG

    TEG TMC Moderator

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    Cobos, do you remember mentioning this before?
    There was a previous discussion about this, over here.
    Affordability New Cars
     
  4. vfx

    vfx Well-Known Member

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    Wow TEG, you are scary good.
     
  5. Cobos

    Cobos S60 owner since 2013

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    TEG sure is... :)

    I of course have no idea what the Model S will actually cost in a configuration I will like. Still I'm getting to the point where I have to seriously choose if I want to go for this or not. Strictly speaking with a 1% cancellation fee I can order now and then easily cancel later, but I'd rather try to make up my mind now and stick with it. At least assuming anything big and bad economy wise doesn't happen between now and 2012.

    That's the reason for this question anyway.

    I suppose we can agree that as a total purchase price this is a bit crazy, but let me narrow the question a bit. How big a car loan would you guys get in relation to household income?

    To sort of answer my own quote, courtesy of TEG, the purchase price will be below household income, and at least my student loan is gone this year as well. So things have changed a bit since then.

    Cobos
     
  6. TEG

    TEG TMC Moderator

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    Hopefully you mean good, not scary... :wink:
     
  7. walk_n_wind

    walk_n_wind Member

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    I think it's hard to apply a rule of thumb with respect to the amount of money one "should" spend on a car. I can think of so many reasons someone would select a car:

    -performance
    -status symbol
    -transportation
    -environmentally friendliness

    If you go the purely-functional route - 100% transportation - than you should probably spend $5k because you can get an extremely efficient Honda Civic with 110,000 miles on it and get insane value out of it for that price.

    On the flip side, someone with the same income may get his/her jollies in the twisties on the weekends, and will be more than willing to stretch their budget for a performance sports car. And they should, because it will probably make them happy.

    I guess I figure there's no answer to your question :)
     
  8. Tdave

    Tdave Member

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    Right. I spend extra on my car because it's part of my hobby/sport/entertainment/recreation, so all those pieces of my budget are allocated to my car purchase, unlikely someone else who may go skiing, boating, sky diving, clubbing, out drinking, etc. Other than my gym membership and some travel, I spend remarkably little on other things like that.
     
  9. Cobos

    Cobos S60 owner since 2013

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    Looking at the links TEG gave up top I've looked at statistics from Norway and compiled some of my own. (And yes TEG you are good not scary :) )

    Norway
    Median household income AFTER taxes 2007: 366 000 ($56 100)
    Median new car purchase price*: 359 000NOK ($55 050)
    Average age of cars: 10.2 years
    Cars per 1000 inhabitants 2006: 450

    USA
    Average household income BEFORE taxes 2007: $50 233
    Average new car purchase price: $28 400
    Median new car purchase price: $25 500
    Average age of cars (2008): 9.4 years
    Cars per 1000 inhabitants 2006: 460

    So according to this we spend almost 100% of our after tax income on cars the year we buy a car, or rather we get financing for a value pretty close to our yearly take home income.

    Looking behind the numbers I've seen we've got 2.1 mill households in Norway in 2008, and there was sold 110 000 cars in total (cars sold for personal transportation not including work vehicles). So about 5% of the households bought new cars in 2008 and I figure most of those either bought cars at significantely lower prices (cheapest car on top 20 list was at $35 500) or is from an income bracket quite a bit over the median listed above.
    Though these numbers does reinforce what I had thought, that buying a car is a much more significant economic event in Norway than in the US.

    Cobos
    *This is data compiled by me from the top 20 bestsellers in 2008
     
  10. vfx

    vfx Well-Known Member

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    What about local tax rebates?
    Fuel costs?
    Other financial perks like parking, registration, etc,.
     
  11. Cobos

    Cobos S60 owner since 2013

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    Tax rebates what are those? Seriously, there are no rebates for normal cars. EVs have no extra fees like ICE cars have. So for that average car at $55 050 price about $20 000 -$25 000 is sales tax and car tax. EVs don't have those. For a BMW M5 the price would be about $300 000 and only about $100 000 goes to BMW the rest in sales tax and car tax.

    Gasoline 95 octane costs about $6,4/ gallon

    Yearly registration is around $430 for an ICE car.

    EVs park for free and pay about $50 for registration.

    So the net result is that if you have bought a new ICE car you definately should be driving it as much as possible. An average car costs $55k and even with fuel at $6,4/gallon with the average car getting about 44mpg driving is cheaper than public transportation when you've got the car.

    But why did you ask VFX?

    Cobos
     
  12. felix the cat

    felix the cat P1370 (Europe)

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    An electric car changes the equation considerably: There are much less expenses for the juice, the electric drivetrain is extremely durable and could last 500'000km - or even 1 million km - so after the initial purchase the highest cost is for replacing the battery.

    So the purchase of the electric car can be compared with buying a house, as its value should be maintained for a longer time - hopefully its value will only slowly degrade and remain for 20 years. :cool:

    Well we don't have so much experience there, there remains some speculation. In case of a financing through leasing, the banks still won't agree with me, as there is not much experience in this field.

    Felix
     
  13. Tdave

    Tdave Member

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    This is a good point. There's more reason for an automaker to use materials that don't rust -- at least not the major pieces such as frame, body, etc.
     
  14. vfx

    vfx Well-Known Member

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    #14 vfx, Jul 11, 2009
    Last edited: Jul 11, 2009
    Q
    a



    .
     
  15. Brent

    Brent Member

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    I think I wouldn't look at cost versus income, but instead ask whether I could possibly manage to pay the car off in three or four years after purchase. I'm not sure that longer payment plans for a depreciating asset make much financial sense.

    If we assume the car costs $48,000, you'd have to count on the ability to allocate at least $1,000 per month towards it. If that's too much, you might re-evaluate the purchase, or do it the old-fashioned way -- save now and buy later. For instance, $500 per month over the next 24 months (or until it comes out) would pay for about one-fourth of the car, and would lessen later payments.
     
  16. Cobos

    Cobos S60 owner since 2013

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    Oh that has always been my plan, I figure I will have about half of the expected Norwegian price around $60 000 when 2012 comes around, but I suppose I'll have to spend another 4 years paying it off unless I can get another/supplemental source of income. Hence my question if I'm beyond stupid over into the looney area :)

    Cobos
     
  17. Brent

    Brent Member

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    Yeah...I think the only time you need ask that question is when it comes to debt. Looney means that the debt you assume is so large that paying it off would severely restrict lifestyle or put you into bankruptcy. If you're not going into (too much) debt, then the car-price-to-buyer-income ratio isn't really interesting. What you're left with is a series of rational choices of how to spend your money. If you decide to allocate more on a car than your neighbors might ... well, welcome to Southern California.
     
  18. graham

    graham Active Member

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    As long as you are tipping into idiocy, one thing to consider specifically with the Model S is similar to what happened when I (first) purchased the Roadster. Because the car is at least 2 years out, you can somewhat pay for it on layaway. I paid for about half the Roadster in 2007. Then by 2009, it did not seem like it was that expensive to buy... and I financed part of that.

    Not saying that my way was in any sense a smart way to do it - but I doubt I would have ever bought a Roadster in one go at 2010 prices. But buying half in 2007 seemed to somehow make sense to me at the time.
     
  19. Palpatine

    Palpatine Banned

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    Getting in at $92,000 with the HPC and a fully loaded 2008 Roadster also was a bargain. The people who got in at $92,000 and also took delivery after January 1st got the $7,500 tax credit.

    However, I think the luckiest were those early Tesla Roadster buyers in the state of Washington.
    $92,000 purchase price for fully loaded Roadster
    $7,500 federal tax credit
    $0 state sales tax for EVs after 1/1/2009.
     
  20. Cobos

    Cobos S60 owner since 2013

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    I see your point, but my problem is that at around 2012 I will maybe have half of the cost of the Model S as a downpayment unless I get a lot of money somehow.
    So currently I can do the deposit for the non-signature edition without problem but not that much more than that. Hence the reason I'm curious about how crazy I am :)

    Cobos
     

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